India fighter contract 'may top $20bn'

photo Sirpa Air

07 November 2011 - defencemanagement.com

India's Medium Multi-Role Combat Aircraft procurement may be worth up to $20bn, almost double the $11bn initial estimates of the deal's value, it has been reported.

The revised costs were suggested to the Financial Times by an official in India's defence ministry, who said that the previous estimate was based on prices in 2007, when bids to produce the 126 aircraft were first invited.

Jon Louth, deputy head of the Defence Industries and Society programme at RUSI, said he suspected there hadn't been a "firm handle on the unit cost" for "quite a while".

He also told the newspaper that the higher contract estimate did not necessarily mean bigger profits for the defence companies involved.

"Much of this increase will be clawed back by the government through the support contracts to maintain the aircraft. There's only so much money that exchequers can afford," he said.

Earlier this year it was revealed that only the Eurofighter and Dassault Rafale remained in the running for the competition.

Now, Indian officials have opened bids from the two aircraft manufacturers and will assess which is the least expensive, a process set to be completed by the end of 2011.

India's Ministry of Defence will pass details of the lowest bidder on to the government for approval and final negotiations before the deal is completed.

The lowest bidder will be determined by balancing the purchase cost of each bid along with the life-cycle cost and technology transfer value.

British Eurofighter Consortium member BAE Systems said that recent job cuts at its military aircraft production facilities would not be reversed, even if India proceeded to order the Eurofighter.