Pandemic shadow on defence industry deals

It could be argued that despite the coronavirus pandemic, building India’s sinews of war cannot wait, and, hence, deferment of materiel tenders is not an option. Bolstering this thesis is the argument that many of these deals have been in the pipeline for long, reaching fruition at this dreadful juncture. But in light of the impending apocalypse, it is appropriate to question whether such procurements worth billions of dollars can be postponed and the funds be committed more purposefully to figh

To defer or not? The MoD confirmed some materiel contracts recently.

Rahul Bedi

Rahul Bedi
Senior journalist

The mounting anxiety and steadfast focus on the proliferating coronavirus pandemic has clearly eclipsed the assortment of material contracts that India’s Ministry of Defence (MoD) has confirmed over the past fortnight, alongside numerous others which are imminent.

Starting in late February, when the corona contagion was incipient, the MoD inked a $2.1-billion tender with TAIS, a consortium of five Turkish shipbuilders, to design and build five 45,000-tonne fleet support vessels (FSV) for the Indian Navy in collaboration with the state-owned Hindustan Shipbuilders Limited (HSL).

The unanticipated and somewhat intriguing deal followed months of tension between India and Turkey over diplomatic support Ankara had offered to Islamabad in opposing Delhi’s revocation of Article 370 in Kashmir last August. Furthermore, the MoD’s Vigilance Department too had objected to HSL’s collaborative agreement with TAIS on ‘security considerations’.

It had maintained that some of TAIS’ associates were engaged in warship-building programmes for the Pakistan navy, like corvettes, and support for its submarine fleet. The MoD also asserted that in the event of TAIS being awarded the FSV tender, its personnel would be based at HSL’s shipyard in Vishakhapatnam that neighbours the classified Ship Building Centre where the Indian Navy’s nuclear submarines programme is located, thereby posing a ‘grave’ security threat.

But the FSV contract was inexplicably signed following clearances, not only by the Ministry of External Affairs but also the MoD’s vigilance department. One explanation, albeit feeble, that is being offered in military circles for the FSV deal is that the Indian Navy had managed to ‘neutralise’ both these trepidations.

It had reportedly argued that if its already deferred FSV programme were to be delayed further, its future plans to sustain platforms deployed in the strategically critical Indian Ocean region would be operationally jeopardised, as it would be unable to provide them essentials like fuel, supplies and repair facilities. An advance 15 per cent payment of the around $31 million to TAIS is due within the mandated 45 days of the deal being inked or around mid-April.

Thereafter, on March 18, the MoD approved the $5.25-billion procurement of 83 indigenously designed Mk1A upgraded Tejas Light Combat Aircraft (LCA) for the Indian Air Force (IAF). Official sources said the tender for 73 Mk1A single-seat fighters and 10 dual-seat trainers, designed by the Aeronautical Development Agency and manufactured by Hindustan Aeronautics Limited in Bengaluru, would be signed imminently.

The following day — March 19 — the MoD signed a $117.3-million contract with Israel Weapon Industries (IWI) for 16,749 Negev NG-7 7.62x51m light machine guns for the Indian Army under its Fast Track Procedure. Like the earlier FSV deal, this one too entails a $1.75-million transfer to IWI by early May.

Around the same time, the MoD also concluded negotiations with the Ordnance Factory Board (OFB) to acquire 118 upgraded variants of the indigenously developed Arjun Mk1A main battle tank (MBT) for the Indian Army for an estimated $889.9 million. Official sources said that placing the ‘order of intent’ with the OFB's Heavy Vehicles Factory at Avadi for the Mk1A MBTs that feature 72 improvements, including 14 major ones, over the Mk1 model, would be ‘concluded imminently’ by the MoD.

Alongside, the MoD is currently poised to sign the $550-million deal with Abu Dhabi’s Caracal International for 93,895 CAR 816 5.56mm close quarter battle carbines that has been in the pipeline since late 2018. This too would mean an advance of $82.5 million to the UAE company sometime soon.

The MoD is also fast-tracking the $480.5-million purchase of 10 additional Russian Kamov Ka-31 Helix airborne early warning and control (AEW&C) helicopters to coincide with the commissioning of INS Vikrant, the Indian Navy’s indigenously designed aircraft carrier in 2021.

Dmitry Shugaev, Director of the Russian Federal Service for Military Technical Co-operation (FSVTS), confirmed the Indian Navy’s intentions to the Interfax news agency on March 19, when he said that Moscow had received an ‘appeal’ from India for the Ka-31s, but declined to elaborate.

The proposed Ka-31 acquisition would be a ‘follow-on’ order to at least 12 similar platforms that have been in the Indian Navy service for some time. Only cost and delivery schedule negotiations and final project clearance by India’s Cabinet Committee on Security remain to be completed before the deal is signed.

It could be argued that despite the coronavirus pandemic, building India’s sinews of war cannot wait, and, hence, postponement or deferment of materiel tenders is not an option. Bolstering this thesis in military circles is the argument that many of these deals have been in the pipeline for long, reaching fruition only at the present, dreadful juncture.

But in light of the impending apocalypse, it is only appropriate to question whether such procurements worth billions of dollars are downright egregious at this juncture, or could they not have been postponed and the large amounts involved, committed more purposefully to fighting the pandemic. In short, such financial profligacy in acquiring military kit presently is simply appalling and undoubtedly distressing.

Meanwhile, like all other industrial, commercial and financial activity worldwide, the defence industry too will be battered by the virus. Writing recently in The Diplomat, the online international news magazine, defence consultant Arjun Sreekumar warned that global defence manufacturing facilities and supply chains and business development plans could well be negatively affected, as demand for materiel and related services diminished. He writes that defence budgets of most countries would be adversely hit as they shored up their healthcare spending. Consequently, with demand declining, defence companies would need to determine whether they trimmed their workforces at the risk of losing capable staff, or diverted their research and development budgets to paying salaries, thereby losing their technological edge.

“Defence companies must work on future-proofing themselves and must be prepared with answers to such questions in order to deal with the uncertainties stemming from shocks caused by the pandemic,” Sreekumar added.