Thursday, February 06, 2014

Life Cycle Cost Snags & Broke Govt Stall MMRCA: Minister

Making official year-long speculation about delays in the $20-billion M-MRCA jet bid, in which India has negotiated for over two years with Dassault Aviation for 126 Rafales, Defence Minister A.K. Antony today said the deal was delayed not just by a complaint on life cycle cost calculations, but also because the government was short of funds. Both circumstances have been known for a while -- there was never a chance a deal was going to be signed this financial year. Antony did however say procurement activity would pick up starting April with the new fiscal year -- also, that negotiations would continue in tandem with an inquiry into the complaints of life cycle cost calculations at the commercial evaluation level.

Antony was speaking at his opening press conference at Defexpo 2014 today.

No funds for a budgeted purchase, you ask? Heh. Well, as you may have read in certain reports, there have been some drastic cut backs on capital budgetary allocations as a result of inflated revenue outflow requirements, as a result of which, India's weapons purchase war chest has gotten significantly smaller this year. Be that as it may, the diverted funds couldn't possibly have been for the initial payments on a single deal, pointing to poor planning starting approximately around the time the Rafale was chosen winner.

On the other hand, Antony's words appear to indicate that most of the negotiation process may actually be complete, if monetary considerations are a factor in slowing a final contract. That, at any rate, is what Dassault will take away from what the Minister has said. For the IAF, it's just a longer wait. Nothing they're not used to.

11 comments :

Abhiman said...

India must reduce the orders for the Rafale to half.

So, only 64 Rafales can be ordered. If Modi comes into picture next year, Reliance will get the order for their license assembly in India.

The Union Leader politics favoring HAL, personified by AK Antony will be gone. For good.

Anonymous said...

Shame, Shame , shame. IAF should have purchased Mirage 2005 outright

Anonymous said...

cmon guys wake up....rafale is not worth 20 billion ..... invest 2 billion into tejas mk2 and half a billion into setting up a new production line and speed up its production...

Rohit said...

India's poor fiscal planning has led to this. The only option now is to wait for the financial year to end and proceed to buy after.

Anonymous said...

This was my prediction from the day rafale and EF were short-listed. It's like someone deciding between a ford, GM, Hyundai, and BMW. They pick BMW as that is the latest tech. They negotiate the price with the dealer, and after a long drawn negotiation they realize the best possible price is beyond their ability to pay.

I know folks don't like to do business with the Americans, but the fact is, they mass produce their hardware, and therefore can offer a price that no other bidder can offer. Also, if the intent was to reject the US vendors, they should have never been invited to the competition. their hardware were battle test, and were into second generations of AESA when all others were scrambling to come-up with their first one at the time of submitting their bids. And, don't forget that these planes are to replace aging Mig-21 and such, yes these are going to be used for next 4 decades, and therefore need to have advance tech or capability to grow the platform to meet the future requirements. But the thought that the super bug cannot grow anymore, is also an half-baked. Someone above mentioned that if Modi come to power he will sign a deal with Rliance.... you may be right, but I feel he will push for Tejas in large numbers, he is about getting it done locally rather than begging to fulfull our needs.

ravi sharma said...

Right now the LCA is just a flying club aircraft. So any talk of the LCA becoming a frontline fighter is whistling in the dark. LCA is still a long way from being meeting the IAF's ASRs. And Mk2 wont happen till 2017.

Djxpress Bunjarah said...

@ Ravi Sharma:

Yes, the LCA may be a flying club aircraft but it sure would be better than the flying coffins you now have !!!

Anonymous said...

Spend $500 million, build the infra for LCA production, order 60 more LCA MKI and from 2017 order 126 MKII for $4-5 billion and call it done. Why spend bilions to improve another nations economy. With $20 billion we can build 10 lane freeway from Kashmir to Kanyakumari which will boost our economy a lot. Pakis and Chinese will not start a war as they know how dangerous it is to nuke and get nuked.

Anonymous said...

India paralysed under congi rule. Take 2 years to decide. What happened to the scam money looted in 2G, CWG, coalgate? Anybody buying this argument that MOD is broke

Anonymous said...

Correct the heading of the article.

victor raj said...

Good decision to hold back the Rafale deal, it has nothing to do with life cycle costs. Its the ever depreciating Rupee value, that skyrocketed the price, as well as 8% growth has dropped to 4%, so nothing can be done. We have to blame the corrupted UPA.

Just hold back the Rafale deal for the next 2 years. Once general elections are over and a stable government is formed, Rupee value will once again rise. We can sign the deal afterwards. I will say hold of all the big deals till then.