INDIA: Free-For-All On the Military Helo Market
(Source: ADIT; published March 06, 2015)
During the 10th edition of the Aero India show, held from Feb. 18 to 22 at the Yelahanka Air Force Station at Bengaluru, Defense Minister Manohar Parrikar reaffirmed that India’s defense will need about 1,000 additional helicopters by 2020. As elusive as it may be – experts and industry sources talk about fewer than 500 rotorcraft – this figure would be achieved by a combination of direct imports, licensed manufacture, local design & production, and JVs with foreign OEMs. And the ultimate Modi government motto, “Make in India”, was indeed the mantra of the Airshow...

Currently, 4 helicopter programs are still open to competition, covering a total of 434 helicopters, and 3 others have been completed… but foreign suppliers are still waiting for actual MoD contracts.

RELEASE ME, RELEASE MY MONEY!

India’s defense procurement process is renowned for being notoriously… slow and cumbersome. “There is an overall lack of clarity and planning in the MoD's approach,” the head of Indian Air Force – Air Marshal V. K. Bhatia - himself said. This is a factor that foreign companies are still uncomfortable with… This discomfort recently led Boeing to warn Indian authorities about an imminent price hike concerning a contract for 22 AH-64E Apaches and 15 CH-47F Chinooks, worth $2.5bn so far.

This offer, which had already been extended, is due to end on March 31, i.e. 5 years after the tender process was initially launched. Under pressure, the Indian Ministry of Defense is considering inking the final contract before this deadline. Alternatively, the FMS channel has proved to be a quite efficient way to make business in India. So the US will likely have their money, at least.

PRIVATE INDIAN COS: RESCUE ME!

Besides, the Ministry of Defense (MoD) “urgently” (sic) needs some 440 Reconnaissance and Surveillance Helicopters (RSH) for the Army Aviation Corps (AAC) and the Indian Air Force (IAF), to replace the quite decaying licence-built Chetak (Aerospatiale Alouette III) and Cheetah (Aerospatiale SA-315B). However, there are currently two separate “RSH” programs for the same procurement, going through 2 separate channels.

The first one, concerning 197 RSHs (133 for the Army and the rest for the Air Force), is intended for a foreign supplier partnering with local manufacturers. The Defense Acquisition Council (DAC) recently extended, for the 4th time in 10 years, the deadline for Indian manufacturers to respond to its RfI on those RSHs until March 31. Airbus will offer the previously-selected AS550 C3 Fennec as part of a joint venture (potentially with Reliance or Mahindra), Bell the Model 407GT, and Russian Helicopters the Ka-226T2 Sergei.

The second one, concerning 187 Light Utility Helicopters (which gives a new meaning to the concept of “clarity”, since LUH is the former name of the “197” program… Don’t even try to understand…), is dedicated to the State-owned monopoly manufacturer Hindustan Aeronautics Ltd. HAL will perform the first flight of its LUH later this year. K. M. Bhat, LUH’s Project Director, told IHS Jane’s that its development will be finished in 2017 (okay…, it is noted), followed by series production from 2018 (the plant still needs to be built, but… don’t worry!) and first deliveries in 2019, with an end of production planned in 2025 (actually, this is probably the most reliable deadline, …with room for anticipation!).

These LUHs will be first delivered to the AAC and then to the IAF. Other domestic companies involved may include: Bharat Forge, Dynamatics, Jubilant Bhartia Group, Larsen & Toubro, Mahindra Aerospace, Punj Lloyd, Reliance Defence & Aerospace, Taneja Aerospace and Tata Advanced Systems Limited (TASL).

OPTIMIZATION: A CONCEPT NOT FULLY GLOBALIZED YET…

But that’s not all! The selection of 14 Coast Guard Helicopters, for which the Airbus EC725 Caracal and the Sikorsky S-92 are competing, is nearing. The decision should be taken in the middle of this year (yes, count on that). Then, 123 Naval Utility Helicopters (NUH) are also expected to be requested this year, with the Bell 429 and Airbus AS565 Panther in the running.

Sikorsky will also offer the S-70B Seahawk, MH-60R or S-92 and Airbus the EC725 for the 123 Naval Multirole Helicopter (NMRH) requirements. To win the deal, the US company could offer to transfer its entire S-70B production line to India, where S-92 cabins are already manufactured, maybe in cooperation with Tata.

Already selected to provide the country with 16 Multi Role Helicopters (MRH) worth $1bn, Sikorsky may also sell VVIP transport helicopters, after the MoD cancelled a $770mn deal for 12 AW101 with AgustaWestland over suspected bribery issues. Russian Helicopters could bid for the same contract with Mi-17 and Airbus with the EC225.

‘MAKE IN INDIA’: HELLO MANTRA!

Indian law requires that foreign bidders partner with a local manufacturer (including JVs) to produce locally and under license. That is the basic condition to participate in a “Buy and Make (India)” public tender. Although increased by Prime Minister Modi, foreign ownership in defense industry’s JVs is limited to 49% (or more, if you share significant technologies).

But the only indigenous rotorcraft manufacturer, HAL, is already busy with its own programs (production of the ALH-Dhruv and development of LUH). Hence foreign suppliers are forced to look for other partners in the local aerospace industry, and if some of them may achieve excellence in the next decades, there is limited place for several companies in the long run, most observers think.

This could jeopardize the ability of the Indian market to raise skills, lower costs and reach a global scale, as wished by New Delhi planners and politicians…
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