India to buy Boeing's military helicopters for $2.5 billion

The new nationalist-led government of Prime Minister Narendra Modi has grand plans to vastly strengthen India's military capability, in order to play its role as a regional power and meet challenges posed by a rising China and arch rival Pakistan.

hidden August 31, 2014 10:16:30 IST
India to buy Boeing's military helicopters for $2.5 billion

New Delhi: India has decided to acquire Boeing's Chinook and Apache helicopters, a defence ministry official said on Saturday, in a deal valued at $2.5 billion that could ease strained ties between New Delhi and Washington.

The new nationalist-led government of Prime Minister Narendra Modi has grand plans to vastly strengthen India's military capability, in order to play its role as a regional power and meet challenges posed by a rising China and arch rival Pakistan.

"The defence aquisition council has cleared the last hurdle for signing of the contract with the USA in respect of Apache and Chinook," the official told Reuters, while declining to be named as he was not authorised to speak to media.

The deal topped the agenda during a visit by U.S. Defence Secretary Chuck Hagel in August and is likely to help mend ties frayed by years of trade and diplomatic disputes. Modi is due to visit the United States next month.

At a meeting on Friday, the government also approved the Indian Navy's proposal to purchase 16 multi-role helicopters, the official said. The deal could potentially benefit Sikorsky Aircraft, a unit of United Technologies Corp and European joint venture NHIndustries.

Jaitley, however, cancelled a $991.65 million tender to buy 197 light-utility helicopters from foreign vendors and asked local manufacturers to produce them at home, the official said.

Eurocopter, a unit of aerospace and defense company EADS, and Russian Kamov had been participating in the tender.

The government also deferred a decision on a $2.5 billion proposal to acquire Israeli Spike anti-tank guided missiles.

Analysts estimate that India, the world's largest arms importer, will spend $250 billion in the next decade to upgrade its Soviet-era military equipment and narrow the gap with China, which spends $120 billion a year on defence.

India's military modernization plan includes a renewed push to develop a domestic weapons industry. India insists on "offsets" from foreign vendors to ensure technology is transferred or some of the deal's value remains in the country.

The decision to scrap the troubled light helicopter tender comes weeks after Modi loosened the limit on foreign ownership in defence manufacturing to 49 percent from 26 percent to make "buy Indian" the default option for defence purchases.

"It has also been decided that the Indian Industry would be given the responsibility to produce nearly 400 Light Utility Helicopters (LUH) as per the requirement of the Indian Army and Air Force," said the official.

A slew of kickback allegations, procurement delays and a recent spate of operational accidents have marred efforts to upgrade India's armed forces.

A decision on the acquisition of light reconnaissance helicopters was deferred last year and tenders re-examined after Italian prosecutors alleged defence group Finmeccanica had paid bribes to Indian officials to win a separate $750 million deal to supply luxury helicopters for political VIPs.

New Delhi partially banned Finmeccanica this week from bidding for future contracts. Finmeccanica denies any wrongdoing.

Finmeccanica's AgustaWestland unit has a 32 percent stake in NHIndustries, which is 62.5 percent owned by EADS' helicopter unit Eurocopter, and Stork Fokker owns 5.5 percent.

Reuters

Updated Date:

Subscribe to Moneycontrol Pro at ₹499 for the first year. Use code PRO499. Limited period offer. *T&C apply

also read

Boeing's Starliner test flight postponed again due to unprecedented weather in Texas, US
science

Boeing's Starliner test flight postponed again due to unprecedented weather in Texas, US

he Starliner's first crewed flight is currently scheduled for September.

'PM never hides true self': Congress leader Ghulam Nabi Azad praises Narendra Modi
Politics

'PM never hides true self': Congress leader Ghulam Nabi Azad praises Narendra Modi

Azad's remarks come a day after he and other 'G-23' Congress leaders, pressing for a leadership change and organisational overhaul, at an event in Jammu said the party is 'weakening'

US democracy watchdog relegates India's status from 'free' to 'partly free' nation in 2021 report
India

US democracy watchdog relegates India's status from 'free' to 'partly free' nation in 2021 report

The report painted an overall grim picture for the principles of democracy across the world, but the alleged downturn in India's democratic values meant that now only 20 percent of the world’s population lives in a liberal democracy