An Indian contract to buy 126 fighter jets from one of two European bidders could be worth more than $20bn, almost double the original estimate, according to government officials.
The defence ministry revised up its initial $11bn estimate after opening bids on Friday from the Eurofighter Typhoon consortium and France’s Dassault, the maker of the Rafale aircraft, a ministry official told the Financial Times.
Identifying the lowest bidder is likely to take up to eight weeks, the ministry said. Thereafter, the proposal would go to the finance ministry for review. The government will choose a lead bidder with whom it will then start negotiating a final price.
“Various parameters will be studied to arrive at the lowest bidder,” the ministry official said. “The most important parameter remains the life-cycle cost which is an individual criteria that is added to the total cost.”
When the tender to modernise India’s air force, one of the biggest military aviation orders by a single country, was launched more than four years ago, it was estimated at $11bn.
In April, India shortlisted Eurofighter and Rafale after eliminating Boeing’s F/A-18, Lockheed Martin’s F-16, Russia’s MiG-35 and Swedish Saab’s Gripen.
The defence official said adjustments were being made to the previous estimates of $11bn for the contract as it was based on 2007 figures and needed to reflect current prices.
“I suspect there hasn’t been a firm handle on the unit costs for quite a while,” said John Louth, a former RAF officer and deputy head of the Defence Industries and Society programme at the Royal United Services Institute.
Mr Louth said that the higher prices do not necessarily mean a jump in profit for the makers of whichever fighter is chosen. “If India is paying $20bn for just the physical aeroplanes, then that’s a fantastic deal [for Eurofighter or Dassault], but that’s not the reality. Much of this increase will be clawed back by the government through the support contracts to maintain the aircraft. There’s only so much money that exchequers can afford.”
The decision to choose one of the European aircraft has not prevented the US from making a last-ditch effort to sell advanced fighters to India. The Pentagon this week told the US Congress that it was prepared to provide information to India about the F-35 Lightning II, a fifth-generation fighter aircraft produced by Lockheed Martin.
European defence companies have expressed concern that the US might try to short-circuit the bidding process with a new, more attractive offer outside of the terms of the competition.
But Indian defence analysts say that the process to choose the multi-role combat aircraft is too far advanced for a U-turn. A sudden departure from the process would dent credibility, they say, at a time when the conduct of India’s bureaucracy is under greater public scrutiny after a number of high profile corruption scandals.
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