US declines to extend offer beyond July 31 deadline for Government-to-Government deal, programme pushed back to Square One

Photo Credit : Indian Navy,

The Indian Navy programme to acquire 6 more P8I Long Range Maritime Reconnaissance (LRMR) aircraft from the US under a multi-billion-dollar Government-to-Government deal has stalled after the expiry of the price offer by the US Government on July 31. 

Official sources confirmed to Businessworld that the US declined an Indian request for another extension of the price offer beyond July 31, reasoning that there’s “finite longevity” to a price offer. 

It is learnt that the offer had already been extended multiple times for over a year beyond the original deadline for the signing the Letter of Offer and Acceptance (LoA) or the contract under the Foreign Military Sales (FMS) format. The offer was made after intense price negotiations between the two sides. The last remaining stage was the signing of the LoA after approval by the Cabinet Committee on Security (CCS).

Under India’s Defence Acquisition Procedure (DAP), any revision of price by the seller forces a military procurement programme back on the drawing board, with the requisitioning Service (in this case, the Indian Navy) being compelled to make a fresh case and seek ab initio approval in the form of an Acceptance of Necessity by the Defence Acquisition Council (DAC). This effectively moves the case back to Stage 1 of the long-winded Acquisition Process. 

The US Government, too, would need to notify the US Congress of the revised price band under which the deal would be negotiated afresh with the Government of India, should the latter pursue the acquisition. This potentially sets the process back by years. 

Military observers view this as a setback to the Indian Navy’s capability programme, and more specifically, a blow to its plan to base more Boeing P8Is on the Western Seaboard. The Indian Navy operates 12 P8Is, of which 8 are based at INS Rajali in Arakonam on the Eastern Seaboard and 4 at INS Hansa in Goa on the West. “This clearly means that the Indian Navy’s basing plans for LRMR capability will not crystallise,” sources inferred.

The induction of the P8I since 2013 has often been hailed as a gamechanger for the Indian Navy’s long-range reconnaissance and anti-submarine warfare capabilities, giving it a clear edge over adversaries in the Indian Ocean Region. 

A big takeaway is the high availability rate of the P8I for missions, which is reported to be an impressive 85 per cent. This enables intense and sustained reconnaissance operations. “In the 9 years since 2013, the Indian Navy has done more flying on the P8I than it did on the Soviet-origin Tupolev-142 and Ilyushin-38 fleets combined for four decades,” informed sources revealed. The Soviet-origin Tu-142 and the Il-38 were the backbone of the Indian Navy maritime reconnaissance operations before the induction of the American P8I. 

“The Indian Navy needs this capability and there’s no indigenous or imported alternative on the horizon,” sources said, confirming the setback to naval plans. 

Observers also expressed surprise over the current impasse. In the past, the US kept extending the price offer for the Chinook and Apache helicopters for the Indian Air Force for years, finally clinching the landmark contracts in 2015. Both these iconic aircraft are also from the Boeing stable.