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IAF to split $20 billion MRFA procurement into two phases ; to opt for early AON for Phase-1 from DAC and aims to issue RFP by year end

Source : Business World

IAF to split $20 billion MRFA Fighter Jet procurement into two program ; to opt for early AON for Phase-1 from DAC and ais to issue RFP by year end
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The Indian Air Force (IAF) Multi-Role Fighter Aircraft (MRFA) programme is being split into two parts under different procurement models to address the stated requirement of 114 jets, high-level military sources told BW Businessworld. 

Under the revised procurement concept, the first part or phase of MRFA will involve the procurement of 54 foreign jets under the Buy Global (Manufacture in India) category of the Defence Acquisition Procedure (DAP), with the contract being awarded to a foreign OEM. Of these, 18 will be procured in a flyaway condition from the OEM while 36 will be manufactured in India by a local partner selected by the OEM. This partner will be from the private sector.

The IAF is pushing for an early Acceptance of Necessity (AON) for Phase-I from the Defence Acquisition Council, and aims at issuing an RFP by the end of 2022. 

Part-II of MRFA is not yet a programme but a concept, sources disclosed. It involves procurement of 60 jets from the Indian production partner selected by the OEM for Part-I. The Part-II procurement model will be Buy Indian, with the Indian production agency being the prime for the issuance of contract. 

“Part-II is a concept which may translate into a programme after seven-or-eight years,” official sources said, acknowledging the uncertainty and ambiguity which such a time lag could impose on the project. 

The IAF has bounced the revised plan off global OEMs interested in the acquisition. Boeing and Lockheed Martin of the US, Dassault of France, the Eurofighter consortium of Europe, Saab of Sweden and Sukhoi and MiG of Russia are in the IAF’s selection pool which involves eight fighter aircraft types. 

OEMs which BW Businessworld spoke with have taken a dim view. “There’s no certainty of Phase-II. Which means that costs of setting up an assembly line in India will have to be amortized over just 54 aircraft (instead of 114), only 36 of which will be manufactured in India. This will push up costs significantly and make the MRFA very expensive for India,” said a senior executive of an OEM. “Business assurance is only from Phase-I, and we need to rework our business case for 54 fighters instead of 114,” he elaborated. 

The other significant shift in the MRFA programme is the rejection of the Strategic Partnership (SP) Model by the IAF. “This is mainly on account of the unsatisfactory experience in the abortive Naval Utility Helicopter (NUH) programme, and the Project 75 (I) submarine project under the SP Model,” official sources explained. 

NUH crashed after prolonged indecision by the Government on whether or not to allow the public sector in a model intended to create an alternate private sector complex in end-to-end manufacturing of a military platform. In Project 75(I), deep reservations were expressed by OEMs on fulfilling deep Transfer of Technology requirements to the Indian Strategic Partner and their relegation as junior associates in the programme.

“The IAF is struggling to define its requirement. It has also struggled to finalise its operating model. This creates uncertainties for creating a business model,” observed an executive from another OEM. 

By splitting the requirement, and with ambiguity after Phase-I, India could end up paying many times over for aircraft, reasoned another. 

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