New Delhi: Fighter jets manufactured in homegrown aircraft maker Hindustan Aeronautics Limited (HAL) are costlier than similar ones made by foreign companies, a defence ministry audit has found.
Su-30MKI – the mainstay fighters of the Indian Air Force (IAF) which is manufactured by HAL under licence from Russia – is about Rs 150 crore costlier than the ones made in Russia, according to the document, reported Hindustan Times.
“The aircraft produced at HAL comes at a significantly higher cost when compared to direct purchase from the OEM,” the document added.
The report comes at a time when the ruckus over Rafale fighter jet deal shook the government and divided public opinion over the wisdom of handing costly defence deals to private firms.
The department of defence production is studying the document, an officer aware of the development told Hindustan Times, not wanting to be identified.
A Su-30MKI made in Russia cost Rs 269.77 crore whereas one made by HAL in India costs Rs 417.69 crore, almost “Rs 150 crore” more per aircraft, the review said.
Similarly, there is a huge cost difference between the cost of the Hawk trainer aircraft manufactured by British Aerospace and those made HAL.
HAL disagrees with the interpretation of the report. Responding to queries, a spokesperson said “Cost escalation from 2005 (for the Hawk jet) is normal. We also need to take into account the life-cycle cost of each product against off the shelf purchase from overseas. The indigenous benefits, the ecosystem HAL creates for the larger benefit of the country should be factored in also.
Importantly, staggered or small orders deny economies of scale to HAL.” HAL also pointed to supply chain issues adding to cost.
“Given that multiple agencies get involved in our manufacturing process, kit cost from OEMs and other delays like raw material and spare part supply issues, which are also endemic to the aerospace industry in India, the increase in cost must be evaluated in the right spirit,” the spokesperson added.
The NDA’s decision to enter a USD 8.7-billion government-to-government deal with France to buy 36 Rafale warplanes made by Dassault was announced in April 2015, with an agreement signed a little over a year later. This replaced the UPA regime’s decision to buy 126 Rafale aircraft, 108 of which were to be made in India by the state-owned Hindustan Aeronautics Ltd.
The deal has become controversial with the Opposition claiming that the price at which India is buying Rafale aircraft now is Rs 1,670 crore for each, three times the Rs 526 crore, the initial bid by the company when the UPA was trying to buy the aircraft. It has also claimed the previous deal included a technology transfer agreement with HAL.
The NDA has not disclosed details of the price, but the UPA deal, struck in 2012, was not a viable one, former defence minister Manohar Parrikar has previously said, implying that it would have never been closed and that, therefore, any comparison is moot. Indeed, the UPA was not able to close the deal till 2014, largely over discussions related to pricing of items not included in the initial bid.
The NDA has said that the current deal also includes customised weaponry.