40.India eyes $11bn US fighter jets

Financial Times FT.com

 

Asia-Pacific

India eyes $11bn US fighter jets

By Lionel Barber and James Lamont in New Delhi

Published: October 24 2010 21:22 | Last updated: October 24 2010 21:22

India will turn increasingly to US defence products to secure its borders and wider interests, top Indian officials have said ahead of a visit by Barack Obama, US president, next month.

The desire for a closer defence partnership comes as New Delhi considers an $11bn deal to buy 126 multi-role combat fighter jets to rearm India’s out-of-date air force and boost defence capabilities against Pakistan and China.

Lockheed Martin and Boeing are among six foreign companies competing for the sale.

India is one of the world’s largest arms bazaars with a military budget of Rs1,420bn ($32bn). Mr Obama’s visit will be followed this year by those of Nicolas Sarkozy, France’s president, and Demetri Medvedev, Russia’s prime minister. Both would like to supply India.

The Indian army is the third largest in the world, with 1.1m soldiers in active service. India ranks third after Russia and China as one of the fastest growing defence spenders.

Top Indian officials say defence co-operation and the purchase of equipment is a key part of the strategic dialogue between New Delhi and Washington. They say their potential purchase of military equipment from the US is important for the American economy at a time when the administration needs to create jobs to overcome an unemployment crisis.

However, people familiar with the bidding process for the fighter jets say any decision is unlikely until mid-2011 and will in large part depend on sealed bids by the defence groups that will determine the price of any transaction.

In addition, the attractiveness of the US offers could be affected by India’s reluctance to sign technical agreements with the US that would allow transfer of navigation and targeting technology.

Some Indian officials have expressed misgivings about acquiring equipment that is “interoperable” with the US, for fear of aligning New Delhi too closely with Washington.

US defence sales to India have risen steadily, with Robert Gates, defence secretary, saying India’s decisions concern not just equipment but relations between the two countries.

Mr Obama is expected to conclude a deal to buy 10 C-17 transport aircraft from Boeing as part of a package worth as much as $3.5bn.

Last year, India agreed to buy eight long-range maritime reconnaissance aircraft from Boeing, its largest acquisition of military hardware from the US. The $2.1bn purchase of P-81 Poseidon aircraft highlighted the possibilities opened up by a civil nuclear deal that ended a cold war-era stand-off.

Additional reporting by Daniel Dombey in Washington and Jeremy Lemer in New York