Government clears private sector entry into military transport aircraft project
The Defence Acquisition Council, which met for the first time after the formation of the new government, cleared projects worth Rs 21,000 crore, giving a strong signal that procurement of military assets would be accelerated.
The NDA government on Saturday cleared the decks for the first-ever production of a military transport aircraft by the private sector as it gave the green signal for replacing the Indian Air Force's ageing Avro aircraft fleet. The Defence Acquisition Council, which met for the first time after the formation of the new government, cleared projects worth Rs 21,000 crore, giving a strong signal that procurement of military assets would be accelerated.
The DAC, chaired by Defence Minister Arun Jaitley, met for a marathon three hours on the weekend and approved the acquisition of 56 transport aircraft to replace the Avros. It also approved the purchase of five fleet support ships for the Navy worth Rs 9,000 crore and the acquisition of five offshore patrol vessels for Rs 2,000 crores.
The Council further approved the purchase of 32 Advanced Light Helicopters (ALH) worth Rs 7,000 crore for the Navy and the Coast Guard. The Coast Guard will also get five fast patrol vessels for Rs 360 crore and as many offshore patrol vessels worth Rs 2,000 crore.
The IAF has been struggling to replace its Avro fleet, for which it opted for an aircraft assembled by the private sector, thus ending the monopoly of state-run Hindustan Aeronautics Limited. The Defence Ministry last year invited bids from companies to make a new transport aircraft but the UPA government developed cold feet following serious differences between its own ministries.
While then Defence Minister A.K. Antony first endorsed the IAF's move for privatisation, his cabinet colleague, Heavy Industries Minister Praful Patel, objected to the exclusion of public sector companies from the bidding process. The tussle stalled the Rs 12,000-crore programme.
With the change of government, the project was given a fresh lease of life after legal opinion upheld the bidding process. Experts said this would be a significant project in which the private sector would be the sole player. The move is aimed at building the capacity of the private sector.
Requests for proposal (RFP) or tenders were issued last year to global aircraft majors like Illyushin and Antonov of Russia and Ukraine, Alenia Aermacchi of Italy, SAAB of Sweden, Boeing and Lockheed Martin of the US and the European consortium EADS.
The foreign company selected through the bidding will have to choose an Indian Production Agent (IPA) to assemble the aircraft. This opens the door for private companies like Reliance, Tatas and Mahindra, which have aviation wings.
The IAF is looking to replace its Avros, which are more than five decades old. One of the sticking point for the private participation in the project was that it was too small a number for companies to start a manufacturing facility. But officials explained that the project would open the door for more orders, particularly from the civil aviation sector.
The DAC meeting was attended by the three service chiefs and top officers of the Defence Ministry. Most of the projects approved by it pertained to the Navy and Coast Guard. The Navy will get the five fleet support ships under the "buy Indian" category. With its fleet of warships expanding, the Navy's requirement for support vessels has gone up.