Friday, 16 October 2009

$11 billion MMRCA order set to become larger; Mirage-2000 upgrade negotiations stagger towards failure


Photo: A Rafale fighter; Dassault's chances in the MMRCA contest could be seriously damaged by a breakdown in the Mirage-2000 upgrade negotiations with India


by Ajai Shukla
Business Standard, 16th Oct 09
New Delhi

The winner’s jackpot could soon become even bigger in what is already the world’s most lucrative fighter aircraft tender: India’s proposed purchase of 126 medium multi-role combat aircraft (MMRCA) for an estimated Rs 51,000 crore ($11 billion).

The reason: a breakdown in India’s long-running negotiations with French aircraft manufacturer, Dassault Aviation, for upgrading 51 Indian Air Force Mirage-2000 fighters. According to senior IAF sources, Dassault has flatly refused to reduce its quote of Rs 10,000 crores (US $2.1 billion) for extending the service life of the IAF’s Mirage-2000 fleet by fitting new radars and avionics. The Ministry of Defence (MoD) considers this price --- Rs 196 crores (US $41 million) per aircraft --- unacceptably high, given that the airframes and engines will not be changed.

In comparison, each of the 126 brand-new, next-generation MMRCAs will cost some Rs 400 crores (US $87 million) per aircraft. That includes the cost of technology transfers, as well as capital costs for setting up a manufacturing line in India. Once those costs are amortised, additional MMRCAs would be significantly cheaper.

Dassault’s India head, Posina V Rao has not returned multiple phone calls from Business Standard. MoD sources say that Rao is engaged in last-ditch attempts to salvage the deal.

But, the MoD is veering around to the viewpoint that the Mirage-2000 fleet should continue service in its current form. After six squadrons (126 aircraft) of MMRCAs have entered IAF service, an additional two squadrons of MMRCAs would be built to replace the 51 Mirage-2000 fighters. That amounts to a 40% rise in the MMRCA’s numbers.

Israeli aerospace companies have reportedly entered the fray, offering to upgrade the Mirage-2000 for half the price being quoted by Dassault. The MoD, however, is not inclined to accept that offer.

Price negotiations for the Mirage-2000 upgrade have travelled a rocky road over the last two years. Initially, Dassault quoted Rs 13,500 crores (US $2.9 billion), which it brought down to the current level of Rs 10,000 crores (US $2.1 billion) after the IAF diluted its upgrade requirements. But the MoD believes Dassault’s reduced bid only reflects the diluted requirements, rather than any flexibility on the part of Dassault.

The IAF, traditionally a staunch supporter of Dassault and the Mirage-2000 fighter, is apparently changing its views. Dassault, say pilots, has badly damaged its credibility during the recent negotiations by arm-twisting the IAF over the supply of spares for the Mirage-2000 fleet.

The Gwalior-based IAF squadrons that currently fly the Mirage-2000 are Number 1 squadron (Tigers) and Number 7 squadron (Battle Axes).

Five of the six contenders for the MMRCA contract --- Boeing, Lockheed Martin, Eurofighter, Gripen and RAC MiG --- know they could reap handsome gains, through larger fighter orders, if India chooses not to upgrade the Mirage-2000. The sixth contender, Dassault Aviation, realises that failure to negotiate the Mirage-2000 upgrade contract could seriously damage the chances of its Rafale fighter in the MMRCA contract.

The fighters in contention for the MMRCA contract are sequentially undergoing flight trials and evaluation, which the IAF expects to complete by April 2010. It will take another six months to finalise the trial report and submit that to India’s MoD. The MoD will then announce the winner of the contract.

25 comments:

Anonymous said...

So from the available option It was either Rafale or Mig-35. Now it can be changed to Gripen or Mig-35.

AK said...

This report is an eye opener for all those who keep on harping about the French systems. They are even worse than the Russis and Amrikis. What happened to the Scorpene deal? It is better to keep them at an arms length in future.

Anonymous said...

It's going to be delayed by 10 years or so, and there will be no jets, other than the LCA.

NJS said...

India is wasting so much time in this negotiation , it should be called quick tender / may divert this upgradation to Israel.
Even pak has offered F-16 upgrade package to Turkey . India seems to be maintaining dead end slow in taking decision on defense .

Shiv Aroor said...

There's also No. 9 Squadron, Ajai. The Wolfpack.

Broadsword said...

Thanks, Shiv. I stand corrected.

Kaushik said...

Hello Ajai:

Thanks for the report.

A quick questions: you mention that IAF/MOD is contemplating on the idea of 2 additional MRCA squadrons to add to the initial 126.

Are the 2 additional squadrons in addition to the options for 64 more (baked into the original RFP to avoid re-tendering in case the IAF needs more!) or has the earlier clause for the 64 options now stands redundant?

regards.

Anonymous said...

shall we call this as Gorshacow effect ! milking we indians by russians,the israelis and now thw french! Americans ! you are in queue! please wait~ Aap qatar mein hein!

abhiroop said...

i dont understand the fuss about IAF and MoD planners taking their time on the MMRCA trials and procurement.

closing a USD 11 billion order with vital implications is not as simple as buying vegetables from the market...

since the amount of corruption involved in defence deals is enormous,let the set procedures be followed meticulously.

the IAF should get the best equipment at the best price. any comparisions as to how pakistan gets its defence equipment is unnecessary in our context.

Broadsword said...

Kaushik,

Nobody is thinking about the nitty-gritty of how the contract will be structured, and so on. All that the MoD and the IAF are clear on is that the option for building additional MMRCAs means that Dassault's arm-twisting will not be accepted.

The "additional 64" means little. Once there is an assembly line up and running, India can easily build (and the foreign vendor will unquestioningly licence) however many additional fighters the Indian MoD requests.

In fact, most of the MMRCA contenders are banking on India eventually buying in excess of 200 fighters, due to emergent needs in the future.

Sandy said...

Thanks Ajai ji good article. Our best choice is EFT. F-18SH is also good but with in months we have to face axe of American govts... I am 300% sure. What do you say about EFT?

Any pic of LCH?

openlight said...

I am avid reader of your post and would like to know about robotics application by DRDO, as US is moving very fast in this direction.

Check the link --
http://www.youtube.com/watch?v=LsTKAtBBkfU&feature=channel

Vincent the Great said...

For those in the know, French planes are overhyped anyway.

Do you know why your air force loved the M2000? because it is the first modern western plane you operated, it is totally different to clunky Russian designs.

If you think M2000 is the goat's nuts, however, wait till you see American fighter jets, which have higher thrust and more advanced avionics.

welcome to the 21st century, Indian air force.

Anonymous said...

Why do we automatically think that the French are doing the armtwisting. Logically, it would be the GOI, who would low ball the French, with the threat of exclusion from MRCA contest. It is also not wise to confuse "price" with "cost".

Anonymous said...

Hi Ajai,

The cost of upgrade is definitely too high! But do you think the French have some hidden motive or is the upgrade genuinely going to cost the French so much?
The Israelis are willing to do it at half the price but don't you think even 20+mil per fighter is quite high considering that we are only looking for an avionics upgrade?

Anonymous said...

If only the LCA / MCA were ready... then we wouldn't have to put up with arm-twisting. It makes India look weak... any weapons supplier can exploit us.

What does this mean? We need to be more determined to get the LCA / MCA to production, in time, in quality.

Anonymous said...

Wow ! I thought more the merrier, but we are left with very few choices..
a) The American planes while good in many aspects, may not fit our strategic goals given the fact that they have the habit of pulling the rug from under our feet whenever we get comfy.
See what happened to the Naval LCA project.

So F16/F18 are out.
http://ajaishukla.blogspot.com/2009/09/naval-lca-us-puts-lockheed-martin-off.html

b) The French...hmm what a disappointment, especially when the pilots loved the Mirage2000. There was no question about its performance. I think they will not be that stupid to jeopardize this deal. They might just back off in order to keep the Rafale in the fight But the damage has been done.

c) Mig -35 mebbe. A young and an adventerous spirit might seek change and not choose this option. Given our very traditional and defensive mindset we might just get the Migs.

d) Euro Fighter - too many countries to please and as most countries follow the American lead, we may never feel comfortable here.

e) Saab Grippen....seems to be the best bet.

In the end....I wont be surprised if our erstwhile Babus choose something that the IAF dont back ( that has been their trend) and if so, this deal is going to come back and bite us in the a** someday...

And just for the record.....Vincent the Idiot should just go pound sand. I read this buffoons post. Sorry. My fault.

Anonymous said...

typhoon is the only option now
no amercn arm twisting no russian junk no pricey frnch ...

Bala Vignesh said...

Mr Vincent, I am pretty sure that the IAF had flight tested a few other western aircraft's before we selected the m2k.. So i am sure that the plane lives upto its "hype", especially based on its performance in the Kargil war...

Ajai Sir and Shiv Aroor sir, If i am not mistaken its No.10 not No.9 that is the Wolfpacks...

As for the Upgrade deal, i say we try to negotiate further and also discuss the possibility of buying the UAE jets that are on offer.. It could help us in two very distinct and important ways, first it could sweeten the deal for dassult and also help us get our squadron numbers up to atleast a decent number ( considering we buy 30-40 aircrafts )...

Anonymous said...

why burn $2+ Billion on some vintage mirage 2000's, why not spend that money on R&D in India by some private companies and establish the technology locally. Alternatively we can allow 100% fdi and allow those companies to export as well.

Anonymous said...

The time line that we are talking about here ..wont the PAK-FA be in our production line by then???
The LCA Mark 2 can also serve the purpose by then..
So why look outside and why does all the third generation aircrafts around us make us insecure(may be except J10).Build up the numbers first induct more lower end cheaper to maintain indigenous aircrafts(LCA Mark 1,Mark 2).
If China has 3 times the number of aircrafts that we have then we have narrow that down first and indigenous development is the way forward.
Think Big...We can only be big if we are a big player in big things
and aviation industry definitely a big thing.

Anonymous said...

At a time when numbers are dwindling, it makes sense to buy more numbers of aircraft even if their capability is the same as current M2K with the same money! Or for that much money buy more gripens.
Only India can have dilemma in such an obvious situation. It's not that they are upgrading it into some F-22.

Kartik said...

Bala Vignesh, it IS the No.9 Wolfpack. If you want to confirm, just check BR's page on the IAF's squadrons.

Pranab said...

Ajai Ji,
Any specific reason why the Israeli offer of upgrading at half rates is not being considered?
We all know how good they are!!
Thanks,
Pranab.

Anonymous said...

One of the options would be to select the EJ200 for the LCA Mk2 and buy the Eurofighters if we can afford them.If Mirage 2000's would have to replaced in a decade then obviously the MMRCA requirement would be around 200 .IAF wont have peace of mind as far as F-16's and F-18's are concerned unless complete ToT is ensured.