Reuters/New Delhi
India has decided to acquire Boeing’s Chinook and Apache helicopters, an Indian defence ministry official said yesterday, in a deal valued at $2.5bn that could ease strained ties between New Delhi and Washington.
The new government of Prime Minister Narendra Modi has grand plans to vastly strengthen India’s military capability, in order to play its role as a regional power and meet challenges posed by a rising China and arch rival Pakistan.
“The Defence Acquisition Council has cleared the last hurdle for signing of the contract with the USA in respect of Apache and Chinook,” the official said, while declining to be named as he was not authorised to speak to media.
The deal topped the agenda during a visit by US Defence Secretary Chuck Hagel in August and is likely to help mend ties frayed by years of trade and diplomatic disputes. Modi is due to visit the US next month.
At a meeting on Friday, the government also approved the Indian Navy’s proposal to purchase 16 multi-role helicopters, the official said. The deal could potentially benefit Sikorsky Aircraft, a unit of United Technologies Corporation and European joint venture NHIndustries.
Defence Minister Arun Jaitley, however, cancelled a $991.65mn tender to buy 197 light-utility helicopters from foreign vendors and asked local manufacturers to produce them at home, the official said.
Eurocopter, a unit of aerospace and defence company EADS, and Russian Kamov had been participating in the tender.
The government also deferred a decision on a $2.5bn proposal to acquire Israeli Spike anti-tank guided missiles.
Analysts estimate that India, the world’s largest arms importer, will spend $250bn in the next decade to upgrade its Soviet-era military equipment and narrow the gap with China, which spends $120bn a year on defence.
India’s military modernisation plan includes a renewed push to develop a domestic weapons industry. India insists on “offsets” from foreign vendors to ensure technology is transferred or some of the deal’s value remains in the country.
The decision to scrap the troubled light helicopter tender comes weeks after Modi loosened the limit on foreign ownership in defence manufacturing to 49% from 26% to make “buy Indian” the default option for defence purchases.
“It has also been decided that the Indian Industry would be given the responsibility to produce nearly 400 Light Utility Helicopters (LUH) as per the requirement of the Indian Army and Air Force,” said the official.
A slew of kickback allegations, procurement delays and a recent spate of operational accidents have marred efforts to upgrade India’s armed forces.
A decision on the acquisition of light reconnaissance helicopters was deferred last year and tenders re-examined after Italian prosecutors alleged defence group Finmeccanica had paid bribes to Indian officials to win a separate $750mn deal to supply luxury helicopters for political VIPs.
New Delhi partially banned Finmeccanica this week from bidding for future contracts. Finmeccanica denies any wrongdoing.
Finmeccanica’s AgustaWestland unit has a 32% stake in NHIndustries, which is 62.5% owned by EADS’ helicopter unit Eurocopter, and Stork Fokker owns 5.5%.