Wednesday, 30 March 2011

Aircraft deal with US in trouble after India questions price

According to the latest info with us the defense deal with USA for purchasing C 17 Globemaster III for the IAF might be in trouble because MoD has asked USA to give the comparative cost quoted to other nations for the same aircraft. This was done in light of several complaints that the USA was fleecing us.
It must be noted that the contract is in final stage with Boeing for this aircraft, which is being purchased by the Foreign Military Sales (FMS) route. FMS is the US Department of Defense’s government-to-government method of selling US defence equipment, services and training.

“We have to ensure that we are getting the aircraft at the right price. The ministry has written to the US government for the price at which the aircraft has been sold to other countries. This has been done to get a fair assessment of the deal and put all speculation at rest,” a Defence Ministry official said.

The value of the deal — a highlight of President Barack Obama’s visit to India — has been pegged at $4.1 billion by the White House, and at $5.8 billion in the official notification before the US Congress. At either price — $410 million or $580 million each — the aircraft would be the most expensive ever purchased by India.

In a notification to Congress earlier this month, the US Defence Security Cooperation Agency, which coordinates all FMS sales, declared a C 17 Globemaster III aircraft is being sold to Australia for $300 million.

Also, under the FMS programme, the US is supposed to sell the aircraft to India at the price at which the US government purchases it from the manufacturer, plus an additional facilitation fee. The US government buys the C 17 from Boeing at around $200 million per aircraft. This price, however, does not include spares and services.

Boeing says the price depends on the services and package required by the IAF. “The end price will vary depending on what the Indian government requires as part of the final package. That final price will be a matter for the two governments to communicate at the appropriate time,” the company said in a statement in November. It declined to comment on current negotiations.

The company had said that the $4.1-billion tag quoted by the White House did not include the cost of engines, spares and support. “$5.8 billion is an umbrella figure that includes everything that could be ordered,” a senior Boeing executive had said.

The IAF did not expect the aircraft deal to cost very much over $3 billion, and was taken aback by the price quoted by Washington. As first reported by The Indian Express, a tussle had broken out over the price after the IAF made it clear that it was unhappy over the “unrealistic” estimate of the deal.