The election is over — it’s been almost a month since the Modi government returned to power with a resounding majority. Although the Supreme Court still has to decide whether it will review its order in the Public Interest Litigation (PIL) over the Indian Air Force (IAF) order for 36 Rafale fighters, there is still additional fighter acquisition on the cards. The IAF is expected to invite Expressions of Interest from foreign manufacturers for 110 fighter aircraft before MMRCA 2.0 finally gets underway. This new contest is the successor to the failed IAF tender for 126 Medium Multi Role Combat Aircraft (MMRCA). But, again, there are problems that are likely to emerge along the way, that have the potential to significantly delay, if not derail the process entirely.

Unilateral Offers

India’s government-owned Hindustan Aeronautics Limited (HAL) has offered to build an additional 40 BrahMos-configured Sukhoi 30 MKI aircraft. The Russians have offered 20 MiG-29 fighters. The U.S. is finally putting out feelers of an offer of the F-35 Lightning II Joint Strike Fighter, contingent to India dropping the idea of acquiring the Russian S-400 Triumf air defence system during the visit of Secretary of State Mike Pompeo — though it is probably too late to offer such an inducement (more on this in a separate piece). And the French would dearly love a follow-on order for more Rafale fighters. This is something for which the CEOs of all seven competing aircraft manufacturers would give up their annual bonus. Well, perhaps not. The British have thrown the idea of collaboration on their sixth-generation Tempest fighter concept on the table. The other contenders are also pondering government-to-government offers, given the Modi government’s preference for that format of acquisition. All of these can, and are intended to, preclude an MMRCA 2.0. Any of these offers, if even taken under consideration will invariably delay the progress of the proposed fighter contest.

Strategic Partnerships

The second part of the problem is the application of the new Strategic Partnership model mandated by Chapter VII of the Defence Procurement Procedure (DPP). This chapter requires the manufacturing of four acquisition programs — fighter aircraft, helicopters, armoured vehicles and submarines — to be done in collaboration with a domestic partner company in India.

Although Chapter VII allows foreign manufacturers to identify and form arrangements with potential Indian strategic partner companies prior to the competition, just as the final decision on the selected platform will be made by the concerned service and the defence ministry, the final word on the selection of the respective Indian partner companies will also be that of the defence ministry.

So far so good, but Chapter VII raises a number of difficulties. It mandates the Indian strategic partner to be the prime bidder and contractor, as well as, owning a stake over 49 percent in any entity set up to manufacture the platforms/aircraft domestically and deliver them to the IAF. But the burden of performance guarantees in terms of quality and timely deliveries is placed on the foreign manufacturer, not to mention, a requirement to transfer Intellectual Property (IP). Readers will remember a similar requirement was part of the reason for the failure of the first MMRCA contest.

There is also little clarity on how exactly the industrial partnership between a foreign manufacturer and an Indian strategic partner is to be set up, or even who is responsible for creating the model, even as foreign manufacturers are expected to express their interest, without knowing what they’re getting into.

Rafale

Finally, there is the matter of the participation by the Dassault Rafale in the new contest. Potential competitors are cognisant of the prevailing perception that the IAF is bound to place a follow-on order for Rafale aircraft in addition to the 36 already on order. Even this perception were misguided, perception is what matters and no amount of debate will convince competitors otherwise. Keeping this in mind, any participation by Dassault allowed by the IAF would appear a sham and pretext meant to justify the selection of the Rafale in the first MMRCA contest in the backdrop of the controversy over the decision to order the 36 aircraft even though the aircraft was not L1.

This perception of an undue preference for the French aircraft has been confirmed by a careful reading of the report of the Comptroller and Auditor General (CAG) of India, published in February.

Potential competitors have also pointed out that besides the issue of an evident bias, any French bid would have a significant advantage because many of the one-time infrastructure costs are also assumed in the order for 36 Rafale fighters. As it is, foreign manufacturers are wary of the expense of a second contest, given the CAG’s play-by-play narration of the first MMRCA. They have little interest in spending money on a contest again, if it is only meant to justify the selection of the Rafale, the last time.

If the Rafale has already been ordered, why would the IAF want it to participate in the new contest, they ask.

As mentioned earlier, all of these issues have the potential to delay, if not derail, movement on MMRCA 2.0. At any rate, a result that is better than the first MMRCA will require a resolution of these issues by the IAF and the defence ministry.

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