Tuesday, February 15, 2011

Top Guns Tussle For India Deal Defense firms seek new ways to win a massive fighter contract

Top Gun in India? The US defense giant Lockheed Martin Aeronautics has put Indian movie idol Shahid Kapoor in the co-pilot's seat of its deadly Super Viper combat aircraft, a specialized version of the F16 Fighting Falcon.

"It's a huge honor and privilege and, at the same time, probably the coolest thing I have done yet in life. I am super excited about it," Kapoor said ahead of becoming the first Bollywood star to fly in an F-16.

"It was unbelievable, the movie star said afterwards. "The experience could not be defined, it needs to be felt. We were on a mission." Shades of Tom Cruise in the 1986 thriller.

Lockheed Martin is well aware that in India, nothing sells like Bollywood. Kapoor is playing the role of a fighter pilot in a forthcoming film, titled Mausam. The movie star's flight is an example of the circus-like atmosphere surrounding the six aircraft manufacturers vying for India's largest ever defense deal, the US$12 billion contract to supply 126 medium multi-role combat aircraft to the India Air Force. The new fleet will replace the IAF's obsolete MiG-21 interceptors and fit between its more powerful Russian Sukhoi-30MKIs and the low-end indigenous Tejas lightweight fighter.

Nor were Lockheed and Kapoor alone. Other high-profile people riding pillion in fighter jets during the air show included the 73-year old Tata Group chairman Ratan Tata (in a Boeing F/A-18 Super Hornet), India's only cosmonaut Rakesh Sharma (Super Hornet), Olympic gold medalist Abhinav Bindra (F-16) and politician Navin Jindal (Dassault Rafale).

It was clearly the good looking 29-year old Kapoor who stole the show. The lead actor of the hit 2007 movie "Jab We Met" told reporters he had undergone a rigorous month of tests and training to be able take the flight during the AeroIndia 2011 military-civil aviation trade expo near Bangalore, in which defense contractors from 40 nations demonstrated their wares in hopes of winning chunks of India's massive US$100 billion defense modernization program.

Judging from the media focus on Kapoor, Lockheed managed to create the buzz around its jet though there obviously are other more serious parameters on which it will be judged. But Lockheed is going strong for public relations. Although the Indian Air Force said earlier that weapons testing for the shortlisted bidders would take place in the countries of origin for the six, Lockheed Martin is offering weapons testing in the Rajasthan desert in India.

The lobbying for the contract has been hugely intense. Military contracts, especially for aircraft, involve a plethora of other contracts, not just for the air frame but for individual avionics, weaponry, radar and many more involving a wide variety of defense companies. It has included visits by trade delegations led by several presidents including the US's Barack Obama, France's Nicolas Sarkozy and Russia's Dmitry Medvedev and others – all of whom were peddling more than just airplanes.

The negotiations are still in their adolescence in terms of contractual timings, with discussions over offset or technology transfer serving as the transparent demands for preference by the Indian buyers. The process is expected to take as long as two and a half years, with little chance that an Indian pilot would be in an aircraft before 2013.

Historically, such contracts have attracted middle men willing to pay massive kickbacks to politicians. India's defense procurement agencies have been riddled with scandal. But, said Gavin Greenwood, a specialist for the Hong Kong-based security firm Allen & Associates: "There is no evidence of corrupt payments or other inducements being on offer or demanded --and it would be surprising if there were at this stage, given that any entity proffering or accepting bribes would try and discover what other contenders are putting up before making their pitch. Further, it can take years before such corrupt practices come to light, invariably as the result of internal political maneuvering on either side of the deal."

The odds on the Russians winning the bid with their Mikoyan MiG-35 have lengthened following the Egyptian upheaval, Greenwood said, with governments now digesting the cost-benefit ratio between accepting US or western weapon systems at attractive prices and offset deals and the potential political risk it entails.

In the absence of hard details on how Washington exerted leverage on the Mubarak regime, it must be assumed the Egyptian army's near total dependence on key US arms - notably armor and artillery -- meant its generals were under no illusion that failure to comply with America's priorities would have resulted in the rapid loss of capability as spare parts and ammunition supplies faltered.

This consideration is evident elsewhere. Once Indonesia had been rehabilitated post-Timor by Washington and military contacts resumed, Jakarta purchased Russian rather US equipment. Thailand, traditionally the most stalwart US defence partner in Southeast Asia, is also purchasing European arms in preference to American-built weapons after the 2006 coup drew Washington's displeasure and led to a temporary severance of military sales and relations.

"India's defence planners are certain to factor such non-commercial metrics into their decision on which country to partner on the MMCRA project, as are those from many other countries wary of compromising short term advantages against existential threats to their long term political survival," Greenwood said.

Thus India's newfound amity with the United States is starting to come in handy for the defense contractors. Lockheed is just one among many American majors pushing to win defense deals with India. In a bid to sweeten future contracts, Washington cleared the road for high technology defense and aerospace exports to India in January by removing sanctions on Indian entities imposed following India's second nuclear weapons tests at Pokhran in 1998.

Nine important Indian state-owned defense and aerospace companies were allowed back onto the list of firms to which American companies could sell dual-use technology without official permission. Keen to diversify weapons procurement, India has been asking the US to ease its export control restrictions to allow high-end weapons technology tie-ups.

India signed another deal for eight Boeing P-8I planes for over US$2 billion in 2009 and has acquired the Airborne Early Warning Air Craft, Hawkeye E-2D, developed by the US firm Northrop Grumman. Earlier this month, India took delivery of six C130J Hercules turboprop transports, useful for landing on short runways and at night without light to drop troops hunting for insurgents. The government is also on the threshold of signing to buy US$4 billion worth of 10 C-17 Globemaster III giant strategic airlift aircraft. India's defense minister A K Antony said the transaction is in the "final stages."

In 2008, India also purchased the amphibious transport vessel USS Trenton (re-christened Jalashwa) for nearly $50 million. The Jalashwa is the first-ever warship acquired by the Indian Navy from the US and is the second-biggest that India now possesses. With the Americans also getting Bollywood into the picture, it is clear that they mean business.

Siddharth Srivastava New Delhi-based journalist. Asia Sentinel

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