MoD ignores IAF's view on acquisition

MoD ignores IAF's view on acquisition

The defence ministry’s recent decision to buy 68 basic trainer aircraft from Hindustan Aeronautics Limited not only flies in the face of Indian Air Force’s suggestions to reduce the inventory but also ignores higher price of the HAL-made trainer.

The Defence Acquisition Council (DAC) gave its consent to 38 more Pilatus basic trainer from Switzerland using the “option clause” of the 2012 contract to buy 75 aircraft. Under this clause, the price is frozen till 2017. In 2008, the IAF initiated a process of procuring 181 basic trainer aircraft.

As the defence ministry already contracted 75 PC-7 Mk II aircraft from Pilatus and agreed for 38 more, there was still a shortfall of 68 aircraft. The DAC gave the contract for 68 aircraft to the HAL, which is developing indigenous HTT-40.
The Bangalore-based public sector unit was assured of “adequate order” to make the trainer project commercially viable. A committee would monitor periodically the project’s progress.

Successive IAF chiefs advised the defence ministry to reduce the aircraft inventory because of the complication in maintenance. The MoD was also shown how the HAL product is more expensive. The contracted unit cost of the PC-7 Mk II is 6.09 million CHF (Swiss Francs), which is Rs 31 crore taking into account the exchange rate of May 2012, when the contract was inked.

HAL submitted its detailed project report for HTT-40 in May 2013 using the 2011 exchange rate. After correction and taking all costs into account, the unit price of HTT-40 comes to Rs 43.59 crore, which is approximately 40 per cent more expensive than PC-7 Mk II. The IAF did the calculations once again in 2013 and found that the aircraft is 25 per cent costlier.

While the priceof the PC-7 Mk II is frozen for deliveries up to 2017, the unit cost of HTT-40 would escalate at government-approved pricing policy review committee rate of 4.5 per cent every year and will be approximately Rs 62 crore at 2017 price level, says a note prepared by the IAF. This would make the indigenous trainer, 62 per cent more expensive from 2017 onward, which would be the period during which all deliveries of the HTT-40 are projected to be made.

Weeks before the DAC meeting, a document was leaked from the defence ministry suggesting the MoD underestimated Pilatus price. The document talks about a Rs 507 crore IAF proposal (CHF 72.95 million), for a “Follow On Support Contract” to cover repair and maintenance of PC-7 Mk-II over the five years that follow the initial two-year warranty period. It raised questions on how the life cycle cost was miscalculated for Pilatus.

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