Broadsword learns that the deal is likely to be closed at about US $1.8 billion. Thales is bringing down the price by involving Indian industry
by Ajai Shukla
Business Standard, 05 Nov 09
French President, Nikolas Sarkozy, has thrown his weight behind the the Rs 10,000 crore bid by French company, Thales, to upgrade the Indian Air Force Mirage-2000 fighter fleet. Sarkozy’s defence minister, Hervé Morin, in New Delhi for a day, made his pitch this morning to Defence Minister AK Antony, telling him that President Sarkozy is keen on signing the deal when he visits India early next year.
Addressing a press conference after his meetings in South Block, Mr Morin revealed that he discussed outstanding procurement cases, including the Mirage-2000 upgrade, with his Indian counterpart. Morin said, “We are hoping that some of the procurement cases that are under way between India and France are finalised by the time Sarkozy visits.”
Through two years of negotiations, French aerospace major, Thales, and the IAF have been unable to agree on a price for outfitting India’s 51 Mirage-2000s with new radars, avionics, electronic warfare systems and onboard computers, which will make the aircraft battle worthy for another 15 years. From an initial offer of Rs 13,500 crores (US $2.9 billion), Thales came down to Rs 10,000 crores (US $2.1 billion). But even that is exorbitant; the IAF has let it be known that, instead of spending Rs 196 crores (US $41 million) on each Mirage-2000, it would prefer to buy brand new fighters.
That hard bargaining, it seems, is working. Thales is looking to reduce its price by using Indian suppliers for a significant share of work and components for the upgrade. The IAF now believes that a deal could be close. A top IAF official, who is close to the negotiations, told Business Standard on condition of anonymity, “Thales is climbing down from its high horse and we will meet them halfway. The French president has given his officials a diktat that the Mirage-2000 upgrade deal must be buttoned up this year.”
That urgency is fully endorsed by French officials. One highly placed French industrial source asks rhetorically, “If the upgrade deal is not finalised, what else is there for Sarkozy to sign in Delhi?”
So far, during negotiations, Thales has argued that if India insisted on a cheaper upgrade for the Mirage-2000 fleet, it should be prepared to upgrade fewer systems. If, for example, the IAF was willing to upgrade only the weapons systems, the cost would be considerably cheaper. But the IAF insisted on a full upgrade.
Now, with Thales looking to source from India, there could be rich pickings for Indian avionics manufacturers like Samtel Thales Avionics, the joint venture that NCR-based Samtel Display Systems has set up with Thales. Components developed in France by Thales, will be manufactured cheaply in Samtel Thales Avionics’ high-tech facility near Ghaziabad, allowing Thales to lower its bid significantly.
Puneet Kaura, Executive Director, Samtel Display Systems, confirmed to Business Standard that, “Samtel Thales Avionics is going to be a major partner in the Mirage-2000 upgrade. We have negotiated with Thales for doing a number of work packages in the upgrade. This will also benefit Thales in meeting the offset liabilities that will arise out of this deal.”
For IAF planners the participation of Indian companies, including Samtel Thales Avionics, is a welcome prospect since they would be able to maintain and repair the upgraded avionics in India. The Indian companies would also handle “obsolescence management”, which involves redesigning avionics cards that need upgrading.
Thales was already on track to build avionics systems in Samtel Thales Avionics for a variety of Indian aircraft. These include the technologically advanced TopSight-I, the Helmet Mounted Sight Display (HMD) that Indian Navy MiG-29K pilots will use while operating from aircraft carriers.