Indian P-8 Controversy Threatens Follow-on Buy by Neelam Mathews

by Neelam Mathews

 - August 15, 2018, 12:26 

India's P-8I aircraft feature a magnetic anomaly detector in a tail boom. They replaced Tu-142s with Indian Naval Air Squadron 312. (photo: Boeing)

A desire of the Indian Navy to procure an additional 12 Boeing P-8I maritime patrol aircraft is lying in cold storage following a recent audit report by the Comptroller and Auditor General (CAG), an authority that audits all receipts and expenditure of the government. The report has reprimanded the then-Congress government for ordering an initial eight P-8Is, despite their being priced higher than the competing EADS-CASA (now Airbus Defence and Space) A319. India’s rules state that the lowest price (L-1) equipment has to be considered for procurement.

In 2016, under the present government, India exercised its options for four more P-8Is, the delivery of which starts in 2020. According to CAG, the financial bid was evaluated with EADS-CASA including a 20-year product support cost, while that for Boeing was not. The contract was concluded for eight P-8Is with Boeing in 2009 for $2.138 billion. “Later, Boeing offered product support under a separate negotiable contract,” said the audit.

An offset contract for $641.26 million (30 percent of the main contract value) signed with Boeing to be completed within seven years—by August 2016—has also not yet been fulfilled. Boeing declined to comment. A senior analyst said on condition of anonymity, “Honoring offsets is never considered seriously by foreign OEMs, many of whom have defaulted. Indian rules are very flexible on this. The government holds 15 percent of the bank guarantee of the contract and also charges a 5 percent penalty [on the cost of offsets]…so why go through the hassle?”

Some offsets were signed. Dynamatic Technologies signed a contract in 2010 with Boeing for the manufacture of cabinets to house critical power and mission equipment for the P-8I program. Boeing also entered into a contract with Tata Advanced Materials, a subsidiary of Tata Industries, in 2016 to source composite interior closeout panels for the P-8 that cover the interior wall structure of the aircraft. Bharat Electronics delivered Data Link II, a communications system, to Boeing for installation.

The discriminator against Boeing’s competitor was "the huge investment the U.S Navy is making…the tremendous range, speed, and the ability to patrol India's large coastline of more than 7,000 km [4,350 miles],” a Navy official told AIN. However, CAG said the critical role equipment Boeing offers is not fully meeting the needs of the Indian Navy. “Owing to capability limitations of radars installed onboard, the aircraft is not able to achieve the envisaged coverage area requirements.” EADS-CASA did not follow the development further following the loss of the contract.

There is concern that further procurement will be delayed and commonality will be lost, as has been the case in past military aviation buys. “The current audit system has become a roadblock to progress. Boeing’s P-8 is the world’s best maritime reconnaissance aircraft. By comparing it to CASA, the CAG once again demonstrated its ignorance and incompetence and affected defense preparedness,” said one OEM. Another called it “raising a stink” for no reason and said it is “time to jettison the idiotic notion of L-1 for judging the merits of complex weapon systems.”