A Dassault Rafale fighter jet flies during a demonstration in France. Photographer: Antoine Antoniol/Bloomberg
Boeing's F/A-18 Super Hornet was "not selected for procurement" by the Indian Defense Ministry, the U.S. Embassy in New Dehli said. Source: Boeing
Lockheed's F-16 was "not selected for procurement" by the Indian Defense Ministry, the U.S. Embassy in New Dehli said. Source: Lockheed
Timothy J. Roemer, seen here as U.S. Ambassador-designate to India, giving an Indian greeting to media as he leaves the Indian External Affairs Ministry in New Delhi on July 17, 2009. Photographer: Manan Vatsyayana/AFP/Getty Images
India’s Defence Ministry opted for
European over American warplanes for the world’s biggest
fighter-jet aircraft order in 15 years, snubbing the lobbying
efforts by President Barack Obama.
The U.S. is “deeply disappointed” after India told it
this week that Boeing Co. (BA) and Lockheed Martin Corp. (LMT) “were not
selected for procurement” for the warplane, the American
embassy in New Delhi said in a statement, citing Ambassador
Timothy Roemer. India’s Defence Ministry will not comment on
reports it has shortlisted the aircraft of France’s Dassault
Aviation SA (AM) and the European Aeronautic, Defence & Space Co.,
ministry spokesman Sitanshu Kar said by phone today.
The contest for India’s order may not be over yet, with
approval by Prime Minister Manmohan Singh’s cabinet required
following the Defense Ministry’s final recommendation. Obama has
sought to strengthen ties with India, the world’s second-fastest
growing major economy, aiming to boost export and job growth as
the U.S. struggles to pull down an elevated unemployment rate.
“A remaining uncertainty is that the defining nature of
the U.S.-Indian strategic partnership might trump the purely
operational and technical considerations” that have given an
advantage to the European companies, said Kapil Kak, a retired
Indian air vice marshal who is a director of the Center for Air
Power Studies, a New Delhi think-tank.
Older Aircraft
Lockheed, based in the Washington suburb of Bethesda,
Maryland, has offered its F-16 fighter, while Chicago-based
Boeing aims to sell the F/A-18 Super Hornet. Those planes were
first designed in the 1970s and Lockheed’s F-22, the most
advanced and expensive fighter in the U.S. arsenal, was not
offered for the sale.
The ministry’s preference for the newer, European models
“is not a political choice,” said V.K. Kapoor, a retired
lieutenant general who monitors India’s military procurements.
“It was a by-the-book technical assessment that the American
F-16 and F/A-18, despite their upgrades, are not future-
generation aircraft,” Kapoor said by phone. “They can remain
current for another five or 10 years, but this deal is going to
determine the operational capacity of our air force for the next
30 years.”
Commercial Negotiations
The Defence Ministry will open talks with Dassault and EADS
“to see how to get the best overall deal out of the
companies,” Kak said, citing air force officials. “We can
expect that to begin in June and to take eight or nine months,”
he said.
Lockheed closed down 0.1 percent at $79.06 in New York
yesterday, when the Standard & Poor’s 500 Stock Index advanced
0.4 percent. Boeing gained 3.2 percent to $78.55 after Citigroup
Inc. raised its share-price estimate on the company.
The U.S. is “respectful of the procurement process” and
will continue to “develop our defense partnership with India,”
Roemer said in the statement.
Boeing said in a statement it was disappointed and will
request a debriefing from the Indian air force on the decision.
Sweden’s Saab AB (SAABB) said in a statement that its Gripen
fighter had been dropped from consideration for the planned
purchase of 126 jets, a deal that Kak said may expand to 200 or
more because of attrition among the Indian air force’s fleet of
MiG-21 aircraft, some of which were built in the 1970s.
Indian Spending
A spokesman for Russia’s state arms export agency,
Rosoboronexport, Vyacheslav Davidenko, declined in a phone
interview to comment on the reported exclusion of state-
controlled OAO United Aircraft Corp.
Foreign governments and companies struggling to recover
from global recession are competing to sell the $120 billion
worth of arms that India may buy from next year to 2017
according to an estimate last year by the Confederation of
Indian Industry and Deloitte Touche Tohmatsu India Pvt.
India has tripled its defense budget over the past decade
to $32 billion this year, the world’s 10th-largest, as it tries
to counter a quadrupling of spending in the same period by
neighboring China.
Obama led a delegation of CEOs, including Boeing’s Jim McNerney, on a November visit to India in which the president
urged increased trade between the two countries that he said
will support tens of thousands of U.S. jobs. French President
Nicolas Sarkozy arrived a month later with the CEOs of Dassault
and EADS, and Russia’s President Dmitri Medvedev followed to
lobby for military sales.
Short List
India’s Defence Ministry issued letters to EADS and
Dassault asking them to extend the validity of their bids for
the warplane contract, the Press Trust of India reported, citing
company sources it didn’t identify. The New Delhi-based military
affairs website Stratpost said the letters were issued April 27,
“effectively making up the shortlist” for the purchase.
“We’ve seen indications for nearly two months now that the
Indian air force seems inclined to shortlist the Eurofighter and
Rafale,” built respectively by EADS and Dassault, said Kak.
India’s air force can operate only about 30 of its desired 40
air squadrons because of the aging of its MiG-21s and Dassault
Mirage 2000s, he said.
Twenty-one air force MiGs crashed between 2007 and 2010,
Indian Defence Minister A.K. Antony told parliament last year.
India’s arms-buying has been slowed by officials’
sensitivities over corruption scandals in previous purchases,
including one that helped drive Singh’s Congress Party to defeat
in 1989 elections, say analysts such as Rahul Roy-Chaudhury,
senior fellow for South Asia at the International Institute for
Strategic Studies in London.
Since the 1980s, no Indian government has made an open-bid
arms purchase valued at as much as $100 million, or about 1
percent of the fighter deal’s size, Roy-Chaudhury and other
analysts say.
“I have been personally assured at the highest levels of
the Indian government that the procurement process for this
aircraft has been and will be transparent and fair,” Roemer
said yesterday. His statement was released by the U.S. Embassy
hours after it announced that he has offered his resignation for
“personal, professional and family reasons.”
To contact the reporter on this story:
James Rupert in New Delhi at
jrupert3@bloomberg.net
To contact the editor responsible for this story:
Peter Hirschberg in Hong Kong at
phirschberg@bloomberg.net