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India's Tender for Private-Sector-Built Airlifter May Not Take Off

1 Potential Bidder So Far

Jul. 27, 2014 - 04:59PM   |  
Avro transport aircraft
Avro transport aircraft (Indian Air Force)
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NEW DELHI — Indiaís first attempt to operate a military aircraft-building program involving the domestic private sector appears to be a non-starter as only one potential foreign partner is likely to submit a bid, a Ministry of Defence source said.

With only Spain-based Airbus Defence and Space participating, the program would become a single-vendor contest, which MoD almost certainly would cancel.

On July 19, the Defense Acquisition Council (DAC), the MoDís top weapons decision-making body, extended the deadline for filing bids to Aug. 28.

DAC reiterated that Hindustan Aeronautics Ltd. (HAL), the state-owned company that has long held a monopoly on local military aircraft manufacturing, would not be given the tender or made the sole production partner.

The DAC initially approved the program in July 2012 and paved the way for floating a global tender.

In May 2013, after making changes in policy, MoD floated the $2.5 billion global tender to replace 56 Avro transport aircraft with the Indian Air Force fleet. The tender allowed, for the first time, foreign companies to choose their production partners from domestic private-sector defense companies ó a move that effectively breaks HALís monopoly.

The Air Force wants to replace its Avros, bought in the 1960s, and add to its transport fleet of Russian-made An-32, Il-76, US made C-130J and contracted C-17 transport aircraft.

The 2013 tender was not even sent to HAL, which sparked a protest by one of the ruling Cabinet ministers, thus stalling the whole program temporarily. Praful Patel, former minister for heavy industries and public enterprise, complained to former Defence Minister A.K. Antony against excluding HAL from the project and the program was put on hold.

At the July 19 meeting, DAC set aside Patelís objection and decided that HAL would not be given the tender.

Low Attendance

When the MoD decided to go ahead with the private-sector aircraft effort, only Airbus and Antonov participated in a pre-bid meeting in April, an MoD source said.

In May 2013, the global tender for procurement of 56 aircraft was sent to Airbus Defence and Space, Alenia Aeronautica, Boeing, Lockheed Martin, Antonov Design Bureau, Ilyushin Design Bureau and Embraer.

Ukraine-based Antonov informally informed MoD that it could not transfer aircraft technology because a majority of the systems are sourced from Russiaís Voronezh Aircraft Production Association. Moscow has stopped export of these technologies to the Ukrainian company.

Antonov had negotiated with domestic private-sector major Tata Advanced Systems for licensed production of its An-148 aircraft.

No executive of Antonov was available for comment.

That leaves Airbus as the sole overseas bidder likely to be in the fray. Airbus has already teamed with domestic private company Larsen & Toubro for licensed production of the Airbus C-295 aircraft.

However, domestic industry has labeled the program as too small.

An executive of the Federation of Indian Chambers of Commerce and Industry (FICCI), the lobbying agency of the domestic private sector, said it welcomes the govern≠mentís decision to allow private local companies as production partners. But because only 40 aircraft will be produced under license in India and the remaining 16 will be imported, the Avro replacement program is not economically viable for a private firm.

ďAn order for licensed production of at least 75 aircraft would be economically viable as the domestic company will have to set up production facilities worth over $500 million,Ē the FICCI executive said. ■


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