US-INDIA $3.5 billion defence deal

The largest-ever defence deal between India and the US — acquisition of 10 C-17 Globemaster transport aircraft by the Indian Air Force for $3.5 billion, nearly Rs 16,100 crore at current exchange rates, — is likely to be inked during US President Barack Obama’s planned visit to India this November. 

Negotiations have reached the final stage and each of the giant transport aircraft, which can carry helicopters too, would be priced at around $300 million. After spares and maintenance are included, the final deal size would be around $3.5 billion, making it the biggest defence deal between the two countries. 

The C-17, also known as Hercules C-17, was deployed by the US in Iraq as well as Afghanistan. It is utilised for air dropping paratroopers and supplies, emergency evacuation and carrying heavy equipment like tanks. 

Interestingly, a C-17 accompanies the US President when he flies on the Air Force One, carrying the Presidential limousine and security apparatus. The C-17 is manufactured by Boeing and the IAF deal is being concluded through government-to-government negotiations under the US’ Foreign Military Sales programme. The IAF wants the C-17 to replace its Russian Ilyushin IL-76 fleet that now acts as its primary transport aircraft. The IL-76 fleet is ageing and the C-17 is likely to provide IAF with much stronger transport capabilities. 

Having a modern transport aircraft will also help in relief operations during natural calamities. 

While the deal would be finalised at the government level, Boeing will handle its implementation as well as the offsets. Mark Kronenberg, vice-president for international business development at Boeing’s defence, space and security division, said India would have the largest C-17 fleet outside the US once the deal is successfully concluded. Currently, UK has the largest C-17 fleet outside the US with eight aircraft, followed by Qatar and Australia. Without going into the deal’s timing or its value, he said that Boeing would come into the picture after the two governments complete their negotiations. 

The C-17 acquisition will be bigger than the $2-billion deal for eight P-81 maritime reconnaissance planes signed in 2009, highly-placed government sources said. It is a major agreement between the two governments, they said on condition of anonymity. This huge order will come in handy for the Obama administration to highlight as one of the steps it has taken to rev up the US economy and create employment. Indian companies will also benefit since the government’s offset policy mandates that 30% of the deal value flows back as offset business. The offset business for this deal is estimated to be around $1 billion. 

The C-17 can carry a payload of around 77,500 kg and has a range of more than 5,200 km. It can land even on runways that are just 3,500 ft long and 90 ft wide. The cruise speed of this heavy-lift transport aircraft is around 853 km/hour. The IAF had conducted a trial with the C-17 in June. 

Ever since the two countries entered into a strategic alliance, India has been buying American defence equipment. In 2009, for example, a $1-billion deal for six C-130 J ‘Super Herculus’ aircraft was inked and earlier this year 24 Harpoon Block III anti-ship missiles were bought for $170 million. The government also bought special VVIP aircraft from the US — also Boeing made —for use by the Prime Minister and the President. 

The US President is likely to visit Delhi, Mumbai and Amritsar in November, the sources added. Obama is likely to stay at the Taj in Mumbai, which was attacked by terrorists in 2008, as a sign of solidarity with India’s fight against cross-border terrorism. He is also likely to visit the Chhatrapati Shivaji Terminus, another site of the deadly terrorist attack.

Courtest:The Economic Times

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