India Monday approved its biggest defence deal with the US for 10 Boeing C-17 strategic heavy-lift planes for $4.1 billion, in a major step to augment the capability of its air force to swiftly move troops and equipment over long distances.The cabinet committee on security, at a meeting here chaired by Prime Minister Manmohan Singh, gave its nod for the deal to equip the Indian Air Force (IAF) with the aircraft.
“The cabinet committee on security has today approved the C-17 deal at an approximate cost of $4.1 billion,” a senior defence ministry official said.
The clearance comes over six months after US President Barack Obama visited India and announced that the deal was through and less than two months after Boeing and Lockheed Martin lost out in the $10.4 billion deal for 126 combat jets for the IAF.
The US Congress had approved the sale of the fully loaded aircraft for $5.8 billion under the Foreign Military Sales government-to-government route last June. However, since India is yet to ink a key military pact with the US, the aircraft might come without some critical communications equipment.
India is yet to sign the Communication Interoperability and Security Memorandum of Agreement (CISMoA), a pact mandated by the US law for the transfer of hi-tech military equipment to friendly countries.
The final contract is expected to be signed within a couple of months after India issues a letter of acceptance to the US government. The contract entails an offset clause under which Boeing will reinvest nearly $1 billion back in the Indian defence, internal security, aviation and related training sectors.
“The offset clause under the Indian Defence Procurement Procedure mandates ploughing back of 30 percent of deals over Rs 300 crore ($65 million). Though the final cost of the 10 C-17s will be over $4 billion, it will include training and other add-on equipment costs too and hence, the offset percentage will be calculated on the basis of the basic price of the 10 aircraft will be slightly over $3 billion,” an official, familiar with the intricacies of the deal,said.
Obama, while addressing the media with Manmohan Singh in New Delhi last November, had said: “Today, I’m pleased to welcome India’s preliminary agreement to purchase 10 C-17 cargo planes, which will enhance Indian capabilities and support 22,000 jobs back in the US.”
The C-17 Globemaster III is capable of carrying a payload of 75 tonnes after taking off from a mere 7,000-feet airstrip. The four-engined aircraft can transport battle tanks and combat-ready troops over 2,400 nautical miles without refuelling.
“The aircraft’s purchase is in tune with India’s aim to have swift power-projection capabilities in a region spanning from the Persian Gulf to the Strait of Malacca, seen as the country’s primary area of geo-strategic interest,” a senior IAF officer said.
India is likely to opt for an additional six of the C-17s after the contract is signed for the first lot of 10 aircraft as the IAF is keen on increasing its heavy-lift capability, the officer added.
At present, the IAF has a dozen Soviet-era IL-76 ‘Gajraj’ aircraft for heavy-lift roles and a medium-lift fleet of over 100 AN-32 aircraft, also of Soviet origin.
The US Air Force, to showcase the C-17s capabilities, had flown Obama’s security paraphernalia, including armour-plated cars and helicopters, on the aircraft. It had also brought the aircraft for India-US Cope-India air exercise in 2009.
The biggest defence deal between India and US till date has been the $2.1 billion contract for eight P-8I Poseidon long-range maritime reconnaissance aircraft signed in January 2009.
The US had earlier bagged orders for six Lockheed Martin C-130J medium-lift aircraft for IAF for $950 million in 2008. The first of these aircraft was delivered in February. In January, India had placed a $647-million order with the US-based BAE for 145 M777 ultralight howitzers.
Boeing is also in contention for IAF’s requirement for 22 attack helicopters and another 15 heavylift helicopters. Both tenders are expected to be finalised by India this fiscal before March 31, 2012.