Monday, 11 April 2011

Tatas bag record deal to modernise air force bases


In a project that is called the Modernisation of Airfield Infrastructure (MAFI), Tata Power SED will be paid Rs 1094 crore to upgrade 30 strategic airfields like this one on the Sino-Indian border


by Ajai Shukla
Business Standard, 11th Apr 11

A Tata company has won the largest-ever defence contract awarded to an Indian private sector company through a competitive global tender. On March 16, the Ministry of Defence signed a Rs 1,094-crore contract with Tata Power’s Strategic Electronics Division (Tata Power SED) for modernising 30 Indian Air Force (IAF) airbases across the country. Tata Power SED has 42 months to execute this strategically vital contract, officially called Modernization of Airfield Infrastructure, or MAFI.

Starting with the Bathinda airbase in Punjab, Tata Power SED will refurbish and modernise airfield infrastructure so that the IAF can operate its next generation of modern combat aircraft from there. State-of-the-art Air Traffic Management systems will be installed, along with Category-2 airfield lighting systems and hi-tech navigational aids that will permit flying operations at night and in adverse weather.

The 30 IAF airbases that will be modernised under MAFI include eight key airfields along the Sino-Indian border such as Chabua, Tezpur and Hashimara. The IAF has already begun deploying frontline Sukhoi-30MKI fighters to the Tezpur air base in concert with the army’s raising of two new divisions to strengthen defences along the Sino-Indian border.

This will be followed by the MAFI Phase II contract for refurbishing another 28 airbases. The current contract has an option clause, which allows the ministry to invite Tata Power SED to execute the Phase II of MAFI at a pre-determined rate.

The ministry has not yet announced the award of this contract. Approached for comments, Tata Power SED declined comment until an official announcement was made.

India’s private sector defence companies view this as a major milestone in their protracted struggle to enter the defence sector on equal terms with defence public sector undertakings and foreign companies. On January 13, the ministry released the first-ever Defence Production Policy that explicitly encourages the private sector to enter defence production.

The MAFI contract has been bitterly contested, with Italian giant Selex Sistemi Integrati petitioning the Delhi High Court after its price bid of Rs 1,141 crore narrowly lost by Rs 47 crore to Tata Power SED’s winning quote (figures from Selex Sistemi Integrati’s petition to the Delhi High Court). Despite legal delays — in which the Delhi High Court and then the Supreme Court rejected Selex’s contention that the Tata consortium did not have the technical capability and experience to upgrade the 30 IAF airfields — the ministry managed to finalise the MAFI contract in just over three years.

The Defence Procurement Policy stipulates two-three years to finalise a contract.

Tenders for the MAFI contract were issued on January 4, 2008, and vendors submitted bids within six months. After a technical evaluation of the vendors’ proposals, the ministry opened their commercial bids on August 2009. Selex went to the court in November 2009 but, on November 24, 2010, the Supreme Court rejected its petition, declaring, “This court is not a Robin Hood… do you want us to stop the modernisation of the airfields?”

Selex Sistemi Integrati has executed several major contracts to modernise airfields in Pakistan and China over recent years. This fact, along with the legal challenge that it threw at the ministry, has seriously damaged its prospects of winning future defence contracts, say senior ministry officials involved in procurement.

Notwithstanding the courts’ relatively speedy rejection of Selex’s plea that the MAFI contract had been improperly awarded, the Italian company’s petition spun off a broader legal question —- whether foreign companies are entitled to the protection of Article 19 of the Constitution of India. This article, which Selex cited in its petition, provides citizens of India (note, not foreign nationals) freedoms such as those of movement, speech, assembly, formation of unions, etc.

The two-judge Delhi High Court Bench that considered Selex’s petition referred the question to a higher Bench, noting, “Almost all large tenders today are being challenged in writ proceedings before the Court and are coming up for judicial scrutiny. It is thus necessary to settle the legal issue in question.”

The Supreme Court is expected to pronounce a verdict on this question on May 19.

10 comments:

Anonymous said...

This might seem naive... how does section 19 come into play...someone pls explain

Anonymous said...

Waiting for people to cite this as the reason to hand over future a/c R&D to tata...

Anonymous said...

Ajay,

Which is that airfield which you have shown in the article..Looks very interesting

DEVASIS said...

The time frame required to finalize high value projects are too long.
I think tender formalities should be simpler and more focused.
The MOD needs to get out of the 18 century mindset it exhibits at times.

Mr. Ra said...

If they get the order it will be excellent.

The Native Opinion said...

Hey Broadsword, nice to see that the pvt defence industry is getting some air in its sails.
Was curious about the legal aspects of the case especially the application of fundamental rights to private non-residential corporation. Could you please upload-provide any case notes or judgement or petition that you might be in possession of. Alternatively you could point me towards sources where the same are available.

Mike.

Shrini said...

The airbase shown is Leh in Ladakh region of J&K. The picture is interesting as it doesn't match with the picture in Google Earth. One of the bases which have been upgraded already and hence not part of MAFI.

Heberian said...

Col. Shukla, I wonder if the Chinese would want foreign companies suing them for giving contracts to Chinese companies? Would they ever get a chance to business in China again?

Anonymous said...

To Heberian: Read this: http://trishul-trident.blogspot.com/2011/04/contradicting-verdicts-dpp-mess.html

P.K.Chaudhuri said...

Sir.
Please inform the nation about the operations carried out by Hasan Ali with Saudi Arms dealer, Adnan Khashoggi. Which arms procurement did they influence. Which are the indigenous developmental efforts against which they created obstacles with their enormous (eight billion dollar in swiss banks) money power.
Who were the defence ministers and Prime Ministers during which period these people were operational.
Please inform the nation the details.
P.K.Chaudhuri.