The government’s ambitious $3.4-billion plan to replace the old Avro military transport aircraft in the IAF fleet is in a limbo, with a joint venture between Airbus Defence and Space and Tata Advanced Systems emerging as the sole bidder for the project.
As the Defence Procurement Policy (DPP-13) bars the award of a project to a single bidder, the government is caught between diluting its own policy or scrapping the bidding process, which has already seen four extensions in 18 months.
According to sources in ministry of defence (MoD), while finance minister Arun Jaitley — who also holds the defence ministry portfolio — is likely to take up the issue soon, the government might be wary of getting embroiled in a controversy, and decide to scrap the bid altogether.
Airbus Defence and Space and Tata Advanced Systems have jointly offered the Airbus C295 medium transport to replace the fleet of 56 Avro aircraft. Trouble is, they are the only ones to respond to the government’s request for proposal (RfP).
Sources, however, said despite all these considerations, if the government was determined to promote private-sector competition, it would find a way out.
“The current situation is not conducive for getting the Avro development programme off the ground. Already, there has been a delay of over a year and the government still seems to be in two minds on how to take the process forward,” said a senior IAF officer.
Speaking on the condition of anonymity, an official said the IAF was pushing the government to ignore its practice of cancelling bids in a single-vendor situation and award the contract to the Airbus-Tata team. The European company started negotiations with the Tata Group a year back when the FDI cap in the defence sector was 26%.
As per the plan, India would take delivery of the first 16 planes from the original manufacturer. Then, the Indian partner would produce the other 40 planes under licence. According to the contract requirement, planes #17-32 would have 30% Indian content, and planes #33-56 would have 60% Indian content.
Multiple Indian players who were keen to participate in the multi-billion-dollar contract chose not to go ahead as a deal size of $3.4 billion was not seen as lucrative for supplying just 40 aircraft.