Indian Defence Review

The IAF desperately needs to make good the numbers. Three squadrons of the ageing 1960s and 1970s vintage MiG-21 and MiG-27 fighter jets are being phased out in 2015. An additional squadron of the Su-30 MKI fighter aircraft is expected. After last month’s announcement that India’s LCA Tejas programme is encountering further delays, with Final Operational Clearance postponed to March 2016, the IAF may experience an additional setback in increasing its number of operational combat squadrons.

On September 01, 2015, the Defence Acquisition Council had given the go ahead for further negotiations for the purchase of 36 Rafale jets that had got stalled due to technical and commercial differences. It is reported that the negotiations continue at a ‘hectic’ pace and are likely to be wrapped up in another one month. India’s insistence on 50 per cent Offset clause, tweaking of weaponry technology and plans to set up two bases instead of one, were among the sticking points. On resolution, a Government-to-Government (G2G) agreement between India and France could be signed paving the way for the final contract.

In the meanwhile, sensing delays in negotiations, competitors have begun making counter offers. EADS, renamed as Airbus Defense and Space offered to support the Light Combat Aircraft (LCA) Tejas development in case the Eurofighter, was to be chosen even at this late stage. Boeing has offered to Make-in-India an updated version of the F-18 Hornet with full Transfer of Technology. Interestingly, both had earlier lost the race to the French Rafale.

India had initially decided to purchase 126 Rafale jets but the NDA government cut short the negotiations, annulled the Request for Proposal (RFP) and decided to buy 36 fighter planes through a government-supported order. In view of the IAF’s requirement of much larger numbers, a follow-on contract under Make-in-India category is most likely and rumoured. The 50 per cent Offsets plan is a sticking point. The French are more open to offer an attractive Make-in-India deal if the Offset percentage is reduced. The 50 per cent Offset clause was part of the original tender which has since been cancelled. The French point out that in India’s G2G deals with other countries, the Offset clause does not exist.

In the Make-in-India package, the French are offering options for making Falcon business jets in India or even the Rafale besides other projects. They further contend that the Offset clause will simply drive up the unit cost of aircraft. The Indian Air Force (IAF) is also keen on an option to procure Israeli Helmet Mounted Display System as also weapons from other countries. For security reasons, the IAF wants the assets to be spread over two separate bases. This would mean increase in cost owing to duplication of infrastructure and other ground systems. The French contend that Egypt and Qatar, the other buyers of the Rafale, have opted for single base operations.

Egypt and Qatar deals have set a benchmark price and cannot be significantly different. India has constituted a committee headed by the Deputy Chief of Air Staff at Air Headquarters and in-charge of new system’s procurements, to hold negotiations with the French. The offered price is the same as for the French Air Force. The French government has reportedly cleared full technology transfer of the Rafale to India, including that of the RBE2-AA AESA and also the transfer of software source code, which will allow Indian scientists to re-programme the radar or any sensitive equipment if needed. France has also clarified to subdue apprehensions that these jets will not be sold to their old friend and India’s adversary Pakistan. Reports indicate that a plan is being evolved to produce 90 Medium Multi-Role Combat Aircraft (MMRCA) in India. A Request for Proposal (RFP) for this project is expected to be drafted soon after the new Defence Procurement Procedure (DPP) is issued.

After a thorough and professional technical selection process, the Rafale had emerged a world-beater for India’s MMRCA tender, leaving contenders such as the Eurofighter Typhoon, Lockheed F-16IN, Boeing F/A-18E/F Super Hornet, Gripen JAS 39 NG (IN) and MiG-35 Fulcrum-F behind. As per the RFP, 18 aircraft were to be bought in fly-away condition and the remaining 108 were to be built in India by Hindustan Aeronautics Ltd (HAL). Negotiations with Dassault had been repeatedly stalled over three years due to dispute over costs and technology transfer. Dassault also remained unwilling to be held liable for the 108 Rafales to be manufactured under licence by HAL and had expressed doubts about the Indian defence industry’s capability to handle aspects of the sensitive technologies being supplied with the Rafale, including its electronically scanned AESA radar.

Due to the continued deadlock, Indian Defence Minister Parrikar stated on April 13, 2015, that the G2G route was better than the RFP path for acquisition of strategic platforms. It was thus clear that the MMRCA deal in its original ‘avatar’ was effectively dead. Parrikar confirmed that the 36 Rafale combat aircraft and associated systems and weapons would be delivered in the same configuration as had been tested and approved by the IAF but with a longer maintenance responsibility by France. Experts estimate that the new deal would be ten per cent cheaper than the original. How this will happen is still to emerge.

Rafale – a Regional Game Changer Platform

In 2001, the IAF had projected a requirement of 126 aircraft with the option for another 63 to replace the MiG-27 and Jaguar, which were to retire by 2015 and 2020 respectively. By early 2012, the Rafale had been declared a winner. The MMRCA is to fill the gap between India’s still-to-be-ready Light Combat Aircraft and the in-service Sukhoi SU-30 MKI air superiority fighter.

The Rafale, a twin-engine, delta-wing, 4th plus generation fighter, has semi-stealth capabilities. It is an agile aircraft and capable of simultaneously packaging air superiority, interdiction, reconnaissance and airborne nuclear deterrent missions. The aircraft has digital fly-by-wire flight controls. The aircraft is designed for reduced Radar Cross-Section (RCS) and Infra-Red (IR) signature. There is extensive use of composite materials. The glass cockpit is designed around the principle of data fusion. A central computer prioritises information to display to pilots for simpler command and control.

The Rafale also features an advanced avionics suite. The aircraft’s RBE2 AA Active Electronically Scanned Array (AESA) radar has been tested operationally. The Rafale makes extensive use of Radar-Absorbent Material (RAM). Its SPECTRA active jamming system uses phased-array antennas and is among the best in the world. A host of latest weapons would also get inducted. The Rafale is being produced for both the French Air Force and for carrier-based operations by the French Navy. It has been used in combat in Afghanistan, Libya, Mali and more recently, in strikes against the ISIS in Syria. The aircraft will bring new levels of technology. It would help India dominate the Indian Ocean Region. Based on the Mirage-2000 experience it is likely to have a much higher serviceability, low turn-around time and high mission accomplishment rate than the SU-30 MKI.

Contract Options and Numbers

The intention to purchase 36 Rafale jets has already been announced and this G2G deal is likely to be around $7 billion including initial technical infrastructure and ground support systems for one airbase. This two-squadron strength, with no reserves, is an unrealistic fleet size and unlikely to be the final figure. The high cost is bothering the government for funding. “We know that the IAF’s needs far exceed 36 planes,” Dassault Chief Executive Eric Trappier said.

If the Make-in-India was not to work out, procuring 60 aircraft would be an operationally viable number. It would mean three squadrons plus war wastage reserve. This would thus be somewhat like the Mirage 2000 fleet. It would mean massive technical infrastructure at a single airbase with some additional technical equipment to move to select forward locations. Such an arrangement would mean that like the Foreign Military Sales (FMS) with USA, the ‘Make in India’, ‘Offsets clause’ and ‘Technology Transfer’ options may have to be diluted. Initial aircraft could now come by 2019 only.

Also, it would mean that India would be dependent on Dassault Aviation in the next four decades for sustenance, upgrade and obsolescence management. Such an arrangement also upsets the induction numbers that IAF had planned to make good for its depleting assets. The more likely scenario as is emerging is initial ‘fly-in’ 36 to get assets quickly. The remaining 90 aircraft will still be built in India. As the French are not willing to take responsibility for production quality control by HAL, they could create a private joint-venture with a major Indian corporate house. This will ensure Dassault takes full responsibility of production and follow-on maintenance and spares back up. The technologies will actually get transferred.

Also, the initially funding would be raised by the joint venture postponing the funding liability of the government. If the aircraft and the deal work well, the final numbers could then increase as per option clause by 63 to 153 ‘Made in India’. In a single stroke of action, the Indian industry would come in a big way into aircraft building, something which has been dithering since it was opened in 2001. The Indian industry would benefit with technology for decades thereon; it could be a ‘win-win’ arrangement for all.

On February 16, 2015, Egypt became the Rafale’s first international customer when it officially ordered 24 Rafale jets with an option to buy additional 12 aircraft at a contract price of $5.9 billion. On July 20, 2015, the official ceremony, marking the acceptance by Egypt of its first three two-seat version Rafale, was held at the Dassault Aviation flight test centre in Istres, South France.

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Egypt’s total 24-plane order is for eight single-seat models and 16 two-seat ones. Qatar too signed the 24 Rafale deal with an option to buy additional 12 aircraft at $7.02 billion on May 04, 2015. These two deals have somewhat set the benchmark price. The Rafale price could be substantially cheaper since Dassault is no longer obligated to build the planes in India. The price at which they now supply the Rafale could be at least 30 to 35 per cent lower than the price with ‘Make-in-India’, an analyst explained.

Dassault Scouting for Big Private Partner

Any private joint venture would require an Indian company with big financial muscle. Depending on the final contract, the Indian partner would have to raise funds, set up infrastructure, train and employ a large workforce. It will have to absorb technology and do Offsets accounting. The $100 billion Mukesh Ambani Company, Reliance Industries (RIL) had initially invested heavily in the aviation industry. Within two weeks after Dassault Rafale emerged as the lowest bidder, in February 2012, RIL and Dassault Aviation tied up to incorporate Reliance Aerospace Technologies (P) Limited with interest in the MMRCA deal. Dassault found RIL a good contender and offered to help Reliance create the Rs 1,500-crore factory in Bengaluru to produce the wings of the aircraft.

Anil Ambani’s Reliance Defence Ltd. is vying for aircraft manufacture (fixed wing, helicopters and UAVs), aerospace structures, engines and Maintenance, Repair and Overhaul (MRO). Group company Reliance Infra announced on November 05, 2015, that it was exiting cement and road business to monetise and concentrate on defence. It had earlier acquired controlling stake in Pipavav Defence. There are other big players that will benefit from the deal. A cooperation agreement between IAI and Tata Advanced Systems Ltd (TASL) covers defence and aerospace products, including missiles, Unmanned Aerial Vehicles (UAVs), radars, Electronic Warfare (EW) systems and homeland security systems.

Honeywell Aerospace has a licenced manufacture agreement with Tata Power’s Strategic Engineering Division (SED) to produce Honeywell’s Tactical Advanced Land Inertial Navigator (TALIN) in India as a commitment to the Make-in-India initiative. TASL also has a joint-venture with Sikorsky Aircraft Corporation to manufacture the Sikorsky S-92 helicopters in India for the domestic and international civil and military markets. Over 40 S-92 cabins have been delivered till date. The joint-venture has expanded to include development of aerospace components for other OEMs. TASL also has 74:26 joint-ventures with Lockheed Martin since February 2011, to build aero-structures for the C-130 Hercules in India.

From 2016 onwards, structures for the Pilatus PC-12 NG will also be produced at TASL. It can be seen that the Tata group is into military aviation in a big way. Larsen & Toubro (L&T) has been in a big way into shipbuilding, submarines, missile components, radars and the multi-barrel rocket launcher ‘Pinaka’. It has extensive experience in mechanical, hydraulic, electrical, electronic and pneumatic systems. It was the first private sector company to have an exclusive unit for defence manufacturing. L&T is also playing an important role in India’s nuclear submarine project, the Advanced Technology Vessel (ATV). L&T is among the top five fabrication companies in the world.

The Mahindra Aerospace division was created in 2007 to expand the existing automotive design and manufacturing expertise to the growing aerospace industry. It acquired several small companies with design and manufacturing experience. Mahindra-manufactured small four to six seat aircraft are already flying in the Middle East and Australia. Mahindra Aerospace also supplies components for the Boeing 737, the Gulfstream G150 and the Lockheed F-35 Joint Strike Fighter. Among their flying aircraft is the C-NM5 in partnership with CSIR lab National Aerospace Laboratory (NAL), the GA8 Airvan and the GA200C. Mahindra has been supplying the Armed Forces and Police with vehicles since the Willys Jeep of 1947.

France – an All-Weather Friend

Paris and New Delhi have had warm and business friendly relations from the very beginning. France supported India during the Cold War and extended tacit support to India as a nuclear power. It also supported the space program. Even during the various US arms embargoes, starting with the 1965 India-Pakistan War, France continued to provide aircraft and other military spares for French equipment. India and France signed a strategic partnership agreement in January 1998. Delhi considers France as the most reliable Western “friend”.

The French have been pioneers of world aviation. One real solid pillar in the Indo-French relationship since the early fifties has been that of military aviation. Among the French aircraft India has operated is the Dassault Ouragans (Toofani) till 1965. Dassault Mystere IVA joined the IAF in 1957, 104 of which were procured. 12 Breguet Alize carrier-based anti-submarine warfare aircraft were acquired by the Indian Navy and operated from aircraft carrier Vikrant.

The Aerospatiale Alouette III a single-engine, French Light Utility Helicopter was manufactured under license by HAL as ‘Chetak’. Two more versions, lighter ‘Cheetah’ and the re-engined ‘Cheetal’ were later developed for high altitude operations such as the Siachen glacier. Over 300 were built and many are still in service in the Indian Armed Forces and the Indian Coast Guard. The IAF purchased the Anglo-French Jaguar Deep Penetration Strike Aircraft (DPSA) in the seventies and the Dassault Mirage 2000s in the 1980s.

The Mirage 2000 was the first fly-by-wire controlled aircraft of the sub-continent. The Mirage 2000 performed exceedingly well in the 1999 Kargil conflict. The aircraft are now under upgrade to Mirage 2000-5 Mk 2 standards. Airbus beat Russian competition and became the preferred bidder to supply six A330 aerial refuelling tankers to India. A significant part of India’s civil airline fleet is composed of Airbus series of aircraft. The Airbus engineering centre in Bangalore is a flagship site in India with 1,800 employees. Airbus R&D focus in India is on high-end engineering and design activities that include flight physics, structures, systems and testing.

Implications of Delay and the Future

With the IAF down to 34 Squadrons, its edge over the Pakistan Air Force (PAF) has reduced from 3:1 to a pitiable 1.5:1. The MiG-21s are being extended at the cost of safety. The LCA is way behind schedule. The gap between the IAF and the People’s Liberation Army Air Force (PLAAF) of China is widening. Prime Minister Narendra Modi took direct charge of the dilly-dallying bureaucratic Rafale negotiations and took the bold decision of a direct G2G contract. G2G also reduces risk of corruption and bribes.

Meanwhile, Dassault had got a respite after it received the Egyptian and Qatar orders for Rafale and gave new life to the Dassault manufacturing line but the Indian contract remains the lynchpin. However, the IAF’s inventory is still heavily sourced from Russia and even the Fifth Generation Fighter Aircraft (FGFA) is being developed in collaboration with the Russians. The Rafale would put at least some eggs outside the Russian basket.

Unlike the Eurofighter, the Rafale is a single country venture and would have lesser follow-on complications. This deal at the political level is also likely to open hitherto unavailable technologies in nuclear and space fields as a complimentary side effect. It would be a win-win for the private sector either through a JV route or Offsets. One of the Ambani brothers is likely to be partner. There is much more action that will unfold soon in this ‘Mother of all Deals’.

The IAF desperately needs to make good the numbers. Three squadrons of the ageing 1960s and 1970s vintage MiG-21 and MiG-27 fighter jets are being phased out in 2015. An additional squadron of the Su-30 MKI fighter aircraft is expected. After last month’s announcement that India’s LCA Tejas programme is encountering further delays, with Final Operational Clearance postponed to March 2016, the IAF may experience an additional setback in increasing its number of operational combat squadrons.

With the continued phasing out of the old fleet of MiG-21s and MiG 27s, delays in the induction of the LCA Tejas and cost escalation in the FGFA programme, even if the Rafale deal is signed today, the IAF will reach its authorised strength of 42 squadrons not earlier than 2030. The IAF is pushing for at least 20 additional Rafale jets over the 36 decided during the Modi – Hollande summit in Paris in April 2015. In view of Egypt and Qatar orders, India’s delivery is bound to get delayed. Dassault Aviation is raising Rafale fighter jet production in anticipation of further export orders, as Egypt becomes the first country outside France to take delivery of the plane. Dassault is in talks with sub-contractors and suppliers to step up production from one to three planes per month in 2018 or 2019 should India place an additional order for more planes with the aircraft manufacturer.

The IAF also wanted some avionics and weapon systems in the Rafale ‘modified and reconfigured’ to enable the eventual installation of indigenously developed and commercial-off-the-shelf systems and weapons. This could include India’s 80-km Astra beyond-visual-range-air-to-air missile which is under development. This could also add to delivery timelines. With two very unfriendly nuclear-armed neighbours, the IAF’s actual operational requirement is closer to 50 squadrons to cater for a two-front war. While India finds its place under the sun in the comity of nations, security would have to get the priority it deserves. Additional funds would have to be allocated. A defence budget of three per cent of Gross Domestic Product (GDP) would make it possible. Funding of the Rafale deal would alternatively have to be outside the IAF annual budget allotments. The time to act is now lest it becomes too late.