While allegations continue to be made on the Rafale fighter deal with France, government-to-government deals have become the preferred route to conclude major defence contracts and will remain so in the face of unending delays in defence modernisation, officials say. Several deals are being lined up for likely conclusion through Inter-Governmental Agreements (IGA), some of which could be concluded this year.
“An Inter-Governmental Agreement (IGA) between two sovereign governments ensures transparency and avoids troubles later. It has become the only way now to conclude pending critical deals. Especially with elections close by, this is a safe bet,” an official source said.
The official stated that despite several efforts, the Defence Procurement Procedure (DPP) remains cumbersome and deals invariably get delayed. For instance, the Navy’s Multi-Role Helicopter (MRH) tender for 16 helicopters, which began in 2009, was stuck over cost negotiations with Sikorsky for over two years due to price escalation. The Navy cancelled the tender last year and a fresh tender for 24 MRH will be issued shortly.
The Navy, which is desperate to get new helicopters for its frontline warships, is keen to get the deal going as the much bigger deal for 123 naval MRHs, to be processed through a Strategic Partnership (SP), is a long way off.
“The possibility of an IGA is being looked into as the platform has already been tested. It will ensure delivery at the earliest,” one official said.
Similarly, the Army’s Spike Anti-Tank Guided Missile (ATGM) tender was cancelled last year after protracted negotiations. While the Defence Research and Development Organisation (DRDO) is developing an indigenous system, the Army is looking to import a small volume of ATGMs, likely through an IGA, as an interim measure.
Last month, the Defence Acquisition Council (DAC) cleared the procurement of 72,400 assault rifles and 93,895 Close Quarter Battle (CQB) Carbines for ₹3,547 crore on a fast-track basis. Both the deals have been repeatedly cancelled and officials said that as products have already been extensively tested, the possibility of a government-to-government route is being explored to quicken the process. “The deals for rifles and carbines will invariably go through IGAs. That is the only way to get them through,” another official said.
IGAs With Russia
India and Russia have a long history of IGAs. Most recently, in October 2015, the two countries signed three IGAs for the purchase of Kamov-226T utility helicopters, S-400 Triumph air defence systems and the construction of four follow-on stealth frigates. In an interview to The Hindu recently, Russia’s Ambassador to India Nikolay Kudashev expressed confidence that the deals would be concluded this year.
Of all the deals, the Kamov-226T deal is likely to be the first one to see closure. The two sides are currently engaged in negotiations on the Joint Venture and there are a few procedural issues to be sorted before the final deal can be inked. “The deal is in the final step. The commercial agreement is likely to be concluded in the first half of this year,” one official said.
In addition to the Rafale, other recent big ticket deals took the inter-government route. In November 2016, India and the US signed a $737 million deal for 145 M777 Ultra-Light Howitzers for the Army. This is the first new artillery deal for the Army since the Bofors guns were procured in the 1980s.
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