India on Friday cleared the floating of its biggest ever global tender for purchasing 126 medium multi-role combat aircraft in a defence deal that could run up to a staggering Rs 42,000 crore (approximately $10 billion).
Ending almost six years of suspense since the Request for Information was circulated in 2001 among international manufacturers, an official announcement said the 'process for procurement of the fighters had been cleared.'
The Request for Proposals (RFP) will be issued by the first week of August, defence ministry spokesman Sithansu Kar said.
Under the deal, India will acquire 18 fighters in a flyaway condition and 118 will be manufactured under license in the country.
In a break from existing norms, the chosen manufacturer will have to spend 50 per cent as direct offsets on the aircraft or defence manufacturing industry in India, the official announcement said.
Under current rules, there is a 30 per cent offset clause in all defence deals worth over Rs 300 crore.
Though the official announcement did not not specify any timeframe for the supply and manufacture of the fighters, top defence ministry sources said the first of the jets were expected to be delivered within three years of the signing of the contract.
With few countries placing bulk orders for fighters, leading international defence aviation companies have for long been awaiting the floating of the Indian contract.
Six major firms -- American firm Lockheed Martin, the manufacturer of the F-16, the world's largest selling fighter, Boeing with its F-18/A Super Hornet, France's Dassault with its Rafale, Sweden's Saab with the JAS-39 Gripen, the Eurofighter Typhoon made by an European consortium and Russia's Mikoyan Design Bureau with its MiG-35 -- are expected to vie for the lucrative contract.
With the purchase of these new generation fighters, the Indian Air Force hopes to make up its fast depleting fighter squadron strength, which is expected to hit an all-time low of 29 squadrons by 2010 against the sanctioned strength of 45 squadrons.
The new fighters will replace the IAF's ageing MiG-21 jets, the bulk of which are expected to be phased out by 2009.
The new jets are also expected to fill the gap caused by repeated delays in the programme to develop the indigenous Light Combat Aircraft. The LCA was intended to replace the MiG-21s.
Defence ministry spokesman Kar said the new fighters were expected to be in service for 40 years.
"The vendors are required to provide life-time support and performance-based warranty for the fighters," he said.
The RFP for the jets was cleared at a meeting of the Defence Acquisition Council chaired by Defence Minister A K Antony.
The meeting was also attended by Minister of State for Defence Rao Inderjit Singh, Defence Secretary Shekhar Dutt, Secretary Defence Production K P Singh, Defence Finance Secretary V K Mishra, IAF chief Air Chief Marshal Fali Homi Major and naval chief Admiral Sureesh Mehta.
While clearing the issuance of the tender, Antony said India would be guided by three principles in this procurement. He listed them as 'meeting all operational requirements of the IAF, selection process being competative, fair and transparent so that the best value for money is realised, and Indian defence industries (getting) an opportunity to grow to global scales.'
The spokesman said the selected manufacturer would be required to undertake offset obilgations in India. It was expected that the transfer of technology and offset contracts would provide a 'technological boost to Indian industry.'
Global defence majors like Lockheed Martin, Boeing and Mikoyan Design Bureau, backed by the US and Russian governments, have been aggressively pitching their fighters to India in the past few years.
US firms have offered to supply the sophisticated active electronically scanned array (AESA) radar to strengthen their bid.
Noting that the RFP to be issued only to bidding companies would be a confidential document, the spokesman did not give key parameters of the fighters to be acquired by India, like their weight and whether the IAF is looking for single or twin engine jets.
However, sources said India would keep open the option for purchasing 50 to 60 more fighters, a step that could push up the cost of the deal to $12 billion.
After the circulation of the RFP to bidders in August, the manufacturers are expected to submit their technical and sealed commercial bids within six months.
This will be followed by negotiations, firming up of offset commitments and a technical evaluation of the competing jets by IAF experts.
The manufacturers are also expected to provide field trials of their fighters and allied systems, which will be followed up by air staff evaluation and shortlisting of bidders.
The sources said state-owned Hindustan Aeronautics Limited (HAL) would be the 'system integrator' under technology transfer and would build the fighters under licence. Sub-systems for the new jets would be open to bidding by defence PSUs and Raksha Udyog Ratnas.
In the run up to the finalisation of the RFP, the department of defence production drew up a list of 14 private companies that have been categorised as RURs, making them eligible for bidding for contracts for sub-systems.
