India has reportedly pressed pause on a $3.6 billion deal to procure Boeing jets from the US following the imposition of 50% tariffs. The original deal for six additional Boeing P-8I maritime patrol aircraft was approved by the US State Department in 2021 for $2.42 billion. The price has soared in the ensuing years due to supply chain disruptions, inflation, and the tariffs imposed by US President Donald Trump.
According to reports citing defence sources, the decision was taken due to a nearly 50% hike in project costs. The sharp spike in price has been driven in part by the 25% tariffs imposed by Trump at the beginning of August — which made parts and components related to the aircraft procurement significantly more expensive for Boeing. These costs have since been passed down to the buyers (in this case the Indian government).
Multiple reports suggest that the Ministry of Defence has therefore chosen to pause the acquisition and conduct a strategic reassessment. Factors such as rising costs, evolving geopolitical dynamics, and strategic autonomy are likely to play into the final decision. It is, however, pertinent to note that there has been no official confirmation from the Indian government about the deal or its suspension.
Why have prices risen by 50%?
The supply chain for the planes involves Indian exports or Indian-produced parts that now face a tariff when imported into the US or incorporated into the final product. This tariff hence raises the overall cost for Boeing, which passes the increased cost on to the Indian buyer.
Air India Boeing retrofitting
The developments came even as Air India began sending its legacy Boeing 787-8 Dreamliners for retrofitting in the US. Sources told PTI that the first revamped jet was likely to join the fleet by year-end. There are a total of 33 Dreamliners with Air India — 26 legacy Boeing 787-8s and 7 Boeing 787-9s.
The first legacy Dreamliner has gone for retrofit at a Boeing facility in the US and there will be various certification processes. The retrofitted plane, which will also be the template for the remaining ones, is expected to join the fleet by the end of this year. Once that is done, the airline aims to send two legacy Dreamliners every month for retrofitting, the sources said.
These retrofitted planes will have a three-class configuration each comprising 20 Business Class, 25 Premium Economy and 205 Economy class seats.
(With inputs from agencies)