While G2G fast tracks procurements, they do not bring any learning to the indigenous defence industry
Smruti D
In January 2020, Brigadier Gavin Thompson, defence adviser (ministry of defence), British High Commission, New Delhi, said that the UK government had begun its work on a government-to-government (G2G) framework for future defence deals with India and this was due to India’s preference for such an arrangement.
This was a result of India and the UK in 2017 agreeing to cooperate in developing and advancing defence projects such as gas turbine engine and air defence missile systems. Rolls Royce and Defence Research and Development Organisation (DRDO) also explored the possibility of cooperation on jet engine technology in August 2019.
For the longest time, India has preferred G2G deals or what are also known as Foreign Military Sales (FMS) in the US, when it comes to defence equipment. In fact, most of India’s arms import have been done on a G2G basis because it fast-tracks the process of acquiring arms and eliminates the lengthy process of Request for Information (RFI), Request for Proposal (RFP), trials and negotiations.
Avnish Patnaik, defence industry analyst at an industry association says, “G2G deals are a good proposition to position its diplomatic standing with the respective country. We have seen it in the case of Russia and the US most recently which has strengthened our bilateral relationship. In the case of assault rifles procured recently from the US through the FMS route, it served to meet our immediate operational requirements as well as hold good stead with the US government.”
The other reasons for G2G deals are that they cut out corruption, act as a tool for strengthening government’s foreign policy towards friendly countries and allow integration and configuration of complex weapon systems. This may pose a problem when foreign vendors present tenders and only one vendor is favoured.
However, as G2G deals aim at lowering prices, they foreclose the option of multi-vendor competition. Moreover, the seller is not required to invest part of the sale in the Indian industry as offsets, which is mandatory under the Defence Procurement Procedure (DPP) for all competitive tendering. With the Indian government actively promoting ‘Make in India’, taking a dip in the offsets may not be sensible in view of indigenous defence production.
Patnaik disagrees on the point of compromise of technology. He says, “There are some niche technologies that India does not presently have but are required by the armed forces. Once the Indian industry develops such capability, import of these technologies will certainly reduce in the future.”
Historically, India’s trusted strategic ally was Russia. In the Seventies and Eighties, India bought its defence hardware from Russia which led to an era of modernisation. It was a G2G trade where cost consideration was a priority. This bilateral trade continues even today.
In May 1998, after Pokhran-II, the US banned all defence trade with India. This prompted India to seek Israeli defence equipment. But when the US lifted military sanctions in 2005, India started its trade once again by procuring Lockheed Martin C-130 J, Boeing C-17 Globemaster, P-8I maritime surveillance among others through G2G deals.
The US is the largest beneficiary of India’s G2G procurements in recent times. Indian purchases from the US have jumped a huge 569 per cent in just five years from 2013 to 2018. The arms purchase in February 2020 took the total amount to USD20 billion. Since 2017, India’s defence purchases from the US were USD17 billion.
Indian Air Force
In September 2016, India signed a 7.87-billion euro contract with France for 36 Rafale fighter jets for the initial 28 single seater jets and eight twin seaters for training. This was a direct G2G deal between the two countries. At that time, India faced a severe shortage of fighter jets and needed to revamp its Soviet-era fleet. In 2018, the government had withdrawn the multi-billion dollar tender for the 126 Medium Multi-Role Combat Aircraft (MMRCA) for which the Dassault Aviation was shortlisted in 2012.
Former defence minister Manohar Parrikar had said in a written reply to Rajya Sabha after talks for 36 Rafale jets had already begun: ‘The Request for Proposal (RFP) issued earlier for the procurement of 126 MMRCA has been withdrawn. In the multi-vendor procurement case, the Rafale aircraft met all the performance characteristics stipulated in the RFP during the evaluation conducted by the Indian Air Force.’
The RFP was issued to six vendors including Russian MiG-35, Swedish JAS-39 Gripen, French Dassault Rafale, European consortium’s Eurofighter Typhoon and American F-16 Falcon of Lockheed Martin and F/A-18 Super Hornet of Boeing.
In September 2015, when Prime Minister Modi visited the US, India and the US signed deals for the purchase of 22 attack AH 64D Apache and 15 heavy-lift Chinook helicopters for the IAF from the US-based aviation company Boeing. It was in 2009 that the RFP was floated. Besides Boeing, Rosoboronexport had also put on offer the newer version of what the IAF was already using, Mi35 and Mi26. UK-Italian AgustaWestland had offered the Mangusta attack helicopter. AgustaWestland was cancelled after AW101 VVIP helicopter scam in India in 2013 and the IAF chose the American helicopters over the Russian ones. While the Chinook deal was made directly with the manufacturer, a part of the Apache deal was signed with the company and another part with the US government under FMS.
India had signed a deal with Russia to procure five S-400 Triumf Air Defence Missile Systems during the 19th India-Russia bilateral summit in 2018. The contract was G2G. The S-400 is a versatile missile and engages in all types of aerodynamic targets and ballistic missiles, up to intermediate-range ballistic missiles. The S-400 missiles will be delivered to India by the end of 2021. The deal was worth USD5 billion and India had signed it despite warnings from the US that threatened of sanctions as part of the larger programme against Russia.
Earlier in 2013, the Indian government bought six Lockheed Martin C-130J Super Hercules aircraft from the US. These are stationed at Panagarh in West Bengal along the border with China.
Similarly, in 2018, India bought USD366.2 million worth of C-17 Globemaster from Boeing in a deal which included missile warning system, countermeasures dispensing system, Identification Friend or Foe (IFF) Transponder and precision navigation equipment.
Indian Navy
In November 2018, India and Russia decided to build two stealth frigates and signed a deal worth USD950 million. The agreement was signed between Goa Shipyard Limited (GSL) and Rosoboronexport to build the Grigorovich-class ‘Project 1135.6’ frigates with technology transfer from Russia. This is a part of the umbrella-deal where India would acquire four Grigorivich class frigates for the navy under a G2G agreement.
The Russian frigates, produced by the Yantar shipyard, are expected to be delivered by 2024. These will be equipped with BRAHMOS missiles. The ones under ‘Make in India’ category will be ready by 2027. These frigates will add to the Talwar-class frigates that are operational with the navy. They are designed to conduct operations against submarines, air targets and enemy surface ships. The government had initially decided to handover the production to the private sector but later it nominated GSL.
In February 2020, when US President Trump was on a visit to India, the two countries signed G2G deals worth USD3 billion. One of the deals that was cleared before Trump’s visit was the 24 multirole MH-60R Romeo Seahawk helicopters of the Indian Navy that would replace the British Westland Sea King helicopters operated by the navy since 1971. The Romeo Seahawks that India had decided to acquire will bolster the navy’s anti-surface and anti-submarine warfare (ASW) mission capabilities. They will be delivered to India by 2021. In August 2017, a high-priority global tender was floated for 24 multirole naval helicopters. The acquisition was done on an urgent basis due to increasing requirement. The tender, floated under the Strategic Partnership Model, pushed for indigenisation and had a larger project of 123 naval multirole helicopters. The foreign original equipment manufacturers (OEMs), who had approached India, were Lockheed Martin, Airbus Helicopters and Russian helicopters. The final deal with Lockheed Martin was made under US’ FMS policy.
P-8I Multi-mission Maritime Patrol aircraft by Boeing, too, was bought under FMS. The deal was for 10 P8I maritime patrol aircraft. The Indian Navy was already operating 12 of these which were first ordered in 2009 and additional four later in 2016. The new deal, signed in 2019, is worth USD3.1 billion and has a mandatory clause of 30 per cent offsets.
Indian Army
The Indian Army is set to manufacture the Kalashnikov AK 203 rifles at the Indo-Russia Rifles Private Limited, a joint venture between India and Russia at Amethi. This materialised after the central government approved a proposal to manufacture 7.5 lakh rifles. In March 2019, Russia and India inaugurated the plant at Korwa, Amethi. This facility is being set up between the Ordnance Factories Board (OFB), India and Rosoboronexport and Kalashnikov, Russia. The Indian Army will replace the indigenous Indian National Small Arms System (INSAS) rifle with AK 203. The ministry of defence (MoD) had approved the procurement in January 2018.
Interestingly, India had signed an inter-governmental deal with America to buy 72,400 assault rifles at a price of Rs 700 crore from the firm SiG-Sauer in February 2019. This again was done under the fast-track procurement procedure for the 7.62 mm rifles. India had started inducting the same in December 2019, especially for the troops deployed along the border with China.
In March 2020, the Indian Army required Light Machine Guns (LMGs) on an urgent basis. Under the government’s Rs 880 crore modernisation plan, the Acquisition Wing of the MoD inked a contract with Israel Weapons Industries (IWI) for the state-of-the-art 16,479 LMGs. The Negev 7.62X51 mm LMG was chosen for lethality. Three companies including Bulgaria’s Arsenal, IWI and South Korea’s S&T Motiv were visited before the deal was finalised. This deal was sealed under the fast-track procedure.
In December 2016, India signed a USD750 million worth contract for importing 145 M777 lightweight howitzers manufactured by the BAE Systems from the US.
India also signed a contract to procure 245 Stringer air-to-air missiles by National Advanced Surface-to-Air Missile System or NASAMS II from Raytheon, US. This missile system is useful in shooting down aircraft, drones and cruise missiles.
In 2018, the government signed a contract with the Delhi-based firm SMPP Pvt Ltd, which will provide the army with bulletproof jackets. It was signed under the government’s ‘Make in India’ programme. By 2020, 1.86 lakh bulletproof jackets will be procured.
Pending Deals
As of 2019, a number of international companies have submitted their proposals to the Indian Navy for its plan of buying short-range surface-to-air missile (SRSAM) systems to replace the Israeli Barak-I air defence systems on the Kamorta class corvettes. The navy has issued an RFP under the Buy Global category. The SRSAM systems have a command and control system, a two-way data link and a launcher. The Swedish firm SAAB, European major MBDA, IAI, Rafael Advanced Defense Systems, Israel, and Samsung, South Korea had submitted RFPs. However, nothing more has happened with respect to this deal so far.
In June 2019, the Indian government scrapped the Medium-Range Anti-Tank Guided Missile (ATGM) deal with Israel which in April they had approved as ‘emergency purchase’. India scrapped that deal twice, first by reducing the tender that Rafael had won for more than 8000 missiles to 210 and then cancelling it altogether.
In February 2020, for the indigenous production of Kamov Ka-226T helicopters Indo-Russian Helicopters Limited (IRHL) and Russian Holding Company signed a memorandum of understanding (MoU). Kamov is a light-weight utility helicopter and has a twin-rotor system. The signing of the contract between the two countries continues to be delayed because of the differences over transfer of technology and indigenous content. It has been four years since an inter-governmental deal was signed in October 2016 and a production facility found in Tumakuru, Bangalore. The helicopter would be a replacement of the single-engine Cheetah/ Chetak helicopters.
The army has been waiting for the closed-quarter-battle carbines (CQBs), a deal which comes under the fast-track procurement from the UAE-based Caracal. In September 2018, the Caracal International LLC finished as ‘L-1’ or the lowest bidder in a contract estimated to cost USD553.33 million. The company has been through the Commercial Negotiating Committee (CNC) and also meets all the specifications. Yet, the decision is pending.
For almost 15 years now, the IAF has been trying to procure new fighter jets. The MMRCA deal with Dassault Aviation was eventually for 126 fighters with an option of 63 additional units. All of these except 18 were to be assembled in India by the Hindustan Aeronautics Limited (HAL). Since the two governments could not agree on localised production, only 36 of them were ordered.
The IAF has been trying to acquire flight refuelling aircraft too. Since 2006, there have been three attempts at acquiring these but the processes have always been cancelled. In 2018, the IAF started the process of procurement all over again. The current requirement is being fulfilled by the IL-78s which were procured in 2003. However, they face maintenance issues. In 2018, the IAF issued RFI for six FRAs. The previous deals were cancelled due to price issues; Airbus A330 multi-role tanker transport (MRTT) and Ilyushin’s II-78 had competed in the past two tenders.
The ambitious plan to procure 111 Naval Utility Helicopters has been put on the backburner since November 2019 when the deal entered its last stage and the Defence Acquisition Council (DAC) gave a go-ahead in selection of local and foreign manufacturers. P-75 Scorpene Class submarines, a project worth USD7 billion, has also been slower than expected. It was in January 2020 that India announced the selection of domestic and foreign defence companies. The two projects are delayed due to lack of funds.
For Indian defence sector modernisation, experts say, it is important for Indian defence to have a larger share in the budget and improve its domestic defence industry. For the current year, India’s defence budget stands at USD73.65 billion.
“The forces are seeking indigenous equipment which is inherently brewing competitiveness in the Indian industry. As this competitiveness increases and we start to produce full platforms and not just be system integrators, the import bill and reliance on G2G deals will surely come down. However, up until that moment, G2G deals are the way forward to meet demands that the industry cannot produce,” points out Patnaik.