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July 26, 2011

Package, not just bid price, to decide $10.4-bn dogfight winner

New Delhi: With commercial bids for the country’s $10.4-billion order for 126 multi-role combat jets likely to be opened by this month end, the stage is set for a showdown between two multi-role European fighters as both try to prove economically-efficient option by including offers like the lifecycle and maintenance costs. Both the aircraft — Eurofighter Typhoon and Dassault’s Rafale — are being deployed in policing the no-fly zone over Libya and both are seeking export sales to compensate for defence-spending cuts at home. However, the declaration of the successful bidder will take a while. According to the outgoing IAF chief, Air chief marshal PV Naik, “Once the commercial bids are opened, the final decision would still take a couple of months as it is not just the price but the package in terms of direct costs, support programmes, training, offsets and lifecycle costs which would determine the winner.”
It may be noted that according to industry insiders, Rafale had quoted a price of $85 million per aircraft and Eurofighter $100 million per piece in flyaway condition in the recent Brazilian competition. For the Indian Air Force (IAF), the Rafale and Eurofighter quote is anybody’s guess, but according to the the industry the machines should cost anywhere between $75 million and $80 million per aircraft in flyaway condition.
The IAF will arrive at a final cost for the two aircraft based on various other factors like the lifecycle cost, maintenance cost, transfer of technology and cost of spare parts. Also, 50% of the total cost of the deal has to be invested in the Indian industry under the offsets obligation.
The two contenders have a long competitive history. France had pulled out of the early stages of the Eurofighter project 30 years ago and opted to build its own fighter plane, the Rafale, as a successor to the Mirage. Presently, Rafale is still looking for its first foreign customer, while the Eurofighter programme is facing various cutbacks home.
According to Eurofighter officials, 280 Typhoons have already been delivered out of the 707 on contract to Germany, Italy, Spain, the UK, Austria and Saudi Arabia. Asked if Eurofighter is willing to “give away” its unique selling \propositions, including source codes of radars and design, for the “sake of 126 units”, the consortium said it would not be an issue if India becomes a partner of the Eurofighter programme.
Rafale so far has sold just 180 aircraft to its own French air force at a cost of 142.3 million euros each, including material costs, investments made and the variables. The French Court of Auditors Annual Public Report 2010 has pointed out that the French air force had initially placed an order for 320 aircraft, but the defence ministry downsized it to 280. Sources in the Indian government said, “The European consortium, to give an edge to its offer, has invited India to become a partner for the Typhoon programme and also offered to establish a production line in India. The Rafale has the advantage of being logistically and operationally similar to the Mirage 2000, which the IAF is presently operating. The Rafale’s inclusion would require fewer changes in the existing infrastructure.”
According to the French audit report, in early 2000, sharp rise in material costs had created a cash crisis for the Rafale programme. Also, with no foreign buyers the price tag per piece of the aircraft is likely to go up. On the other hand, Germany, Italy, Spain and the UK, which partner the development and production of the Eurofighter Typhoon, are willing to put “everything on the table” under the technology transfer commitments if they win the contract to supply these aircraft to the IAF.

(The Financial Express)

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