The Telegraph
Since 1st March, 1999
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Defence chip marshalled in plane deal
- Ministerial panel to leverage planned military equipment purchases in talks with Airbus

New Delhi, Sept. 4: The empowered panel appointed by the Prime Minister to negotiate aircraft prices with Airbus Industrie is likely to leverage planned big-ticket defence purchases.

Indian Airlines has selected Airbus to supply a mix of A-319s, A-320s and A-321s for a combined price-tag of over $2 billion.

The empowered group of ministers has been asked to renegotiate the price, after a group of MPs wrote to Prime Minister Manmohan Singh alleging that Indian Airlines is paying a higher price for 43 Airbus aircraft compared with what its rivals had shelled out for similar carriers.

It would buy 19 A-319s, four A-320s and 20 A-321s. About 70 per cent of the order will replace ageing planes, while the rest will augment IA’s fleet.

Indian Airlines will phase out 11 Boeing 737s that make up the Alliance Air fleet, 15 A-320s, which are on lease, and three A-300s.

Senior officials said as the aircraft manufacturer and the type of plane have been chosen, there is “little room for the government to negotiate the price, except using other purchase levers”.

The empowered panel is led by finance minister P. Chidambaram. Other members include Oscar Fernandes, minister for programme implementation and civil aviation minister Praful Patel. Other ministries could be used as channels to assist the group.

India plans to buy six Scorpene submarines at close to $2 billion. This deal is also being renegotiated.

It also plans to buy around 126 multi-role fighter aircraft at $5 billion. Leading the race for this contract is the Mirage 2000-5 aircraft. Lockheed Martin’s F-16 and Boeing’s F-18 aircraft are also in the running.

France is the favoured destination for the government in its plan to buy anti-ship missiles.

After the lifting of nuclear sanctions by the US, the government wants to purchase nuclear power plants from abroad. France, a key player in the business, is keen on this order, too. “In the past, India has leveraged brewing deals to get something else ... sometimes, it has benefited economically, sometimes politically. There is nothing wrong with it,” officials said.

The Prime Minister is scheduled to visit France soon, which has lent an edge to the back-room negotiation process.

Though companies supplying the defence products are different and the French government’s stake in them varies, the fact is that in defence and aviation contracts, diplomacy and cross-deals are often used.

“India is seen as a big buyer of both civilian aircraft and defence products in the coming years. When it asks for a price-cut, it is taken seriously,” the official said, reacting to questions whether cross leveraging would work at all.

It is projected that India will buy up to 500 civilian transport aircraft over the next 15 years. It has also emerged as a key purchaser of military hardware. In 2004, it was the world’s single-largestbuyer of military hardware, spending nearly $5.7 billion.

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