Foreign players unhappy over rules on aviation deals

India’s twin plans of replacing its vintage Avro carriers for the air force and opening up the military aviation sector for private companies appear to have hit a roadblock.

In May, the Defence Ministry issued a global tender for a Rs 12,000-crore programme to acquire 56 carriers for replacing Indian Air Force's vintage Avros fleet. While the first 16 aircraft will be delivered by a foreign manufacturer in flyaway conditions, the remaining 40 will be made in an Indian production facility, be it in the public or private sector. The underlying aim was to open up military aviation for private companies.

But foreign vendors are now raising red-flags. They are showing their discomfort to tie up with an Indian company and start a production facility only for the sake of producing 40 aircraft.

“It will be not be easy because the aircraft to be produced are not so many,” officials from one of the companies participating in the tender process told Deccan Herald.
The competitors are Illyushin of Russia, Antonov of Ukraine, European EADS, Italy's Alenia Aemacchi, Brazilian Embraer, Swedish Saab and US major Lockheed Martin. All of them have another three months to respond to the request for proposal.

Another company said it was evaluating “all options” but refused to specify them as the tender process was going on.

Five months given

Instead of normal time frame of three months given in military tenders, the foreign companies were given five months to establish the Indian link. But many of them were cagey about this condition.

Going by the tender conditions, the first batch of 16 aircraft, to be made in India, will have 30 per cent indigenous component. The quantum of indigenous systems would subsequently be increased to 60 per cent in the final 24 aircraft.
The Indian partner would obtain the transfer of technology for maintenance for life-time product support at the depot level.

Many of these conditions, the foreign vendors feel, are “compromises” which will transform a “good deal into an expensive and ineffective solution”.

Not only foreign companies, even Indian private firms need to invest heavily in setting the production line and may have to acquire land for the same. They too would be looking at long term opportunities in aviation.

The Prime Minister’s Office, in fact, was looking at the entire aviation sector to resolve several critical issues in order to provide an east entry point for companies like Tata, Mahindra and Reliance.

The Avro replacement programme and the 90-seater civilian aircraft are being seen as the two projects for creating an aviation manufacturing base in the private sector. Hindustan Aeronautics Limited is India’s only aircraft manufacturer at the moment.