Bids open for fighter aircraft, likely to be a political call

India's largest international defence contract to purchase a new fleet of fighter aircraft is heading for a political decision after commercial bids of the two final contenders — Dassault's Rafale and EADS's Eurofighter — were opened amidst high secrecy at the Defence Ministry on Friday evening.

Defence Ministry officials said the commercials bids were opened in the presence of representatives of both companies and it would take close to two months to determine the winner given that complex calculations are required to calculate the life cycle costs as well as the value of technology transfer.

While the value of the contract was pegged at US $10 billion when the tender was floated in 2007, this is expected to almost double, given inflation and currency variations, besides plans to increase the order by 63 more fighters to meet deficiencies in the fighter fleet.

The ministry will also need to verify and cross-check the costs proposed by the companies against its own benchmark for the deal to procure 126 new fighters.

While the French Rafale came out to be slightly cheaper than the European Consortium's Eurofighter in terms of 'fly away cost' per unit, as expected, the difference was less than 5 per cent. This throws the competition open.

While till now the multi-billion contract strictly followed the technical procedure — four contenders including the American F-16 and F-18 were knocked out as they failed the flying trials — the narrow difference between the fly away costs will give Indian decision-makers the leeway to make a political decision on the purchase.

"We do not know the winner right now. Many things like the life cycle costs have to be calculated. It is expected that the exercise will finish in six-eight weeks," a Defence Ministry official said.

A final call on the winner will of course be made by the Cabinet Committee on Security, that will have the discretion of taking political, strategic and financial considerations into account.

... contd.

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