Bangalore: Rising inflation across the world has hit the Indian Armed Forces, with British arms firm BAE Systems Plc. increasing by 50% the price of 57 Hawk advanced jet trainers that India’s air force and navy are looking to order, citing rising costs of aluminium and titanium used in these planes.
BAE has quoted a price of Rs135 crore for each Hawk plane, to be made under licence by Hindustan Aeronautics Ltd (HAL), India’s military plane maker in Bangalore.
In 2004, HAL had signed a nearly Rs8,000 crore contract for 66 Hawk trainers from BAE Systems. Under the deal, BAE would supply 24 Hawks in flyaway, or ready-to-fly conditions, with the remaining 42 aircraft to be made under a technology transfer licence in the Bangalore factory of HAL.
BAE Systems’ Hawk advanced jet trainer
The price for each plane was Rs90 crore, plus royalty, spares and expenditure to train nearly 75 pilots at the Royal Air Force’s centre in the UK.
A former HAL official, who was part of the team that negotiated the 2004 deal, said the cost of the new planes should not cross more than Rs100 crore, taking into account inflation in the last four years.
“They know that we need the machines. So they have jacked up the price,” said a person familiar with the matter, who did not wish to be identified.
That’s because HAL, in 2004, scrapped a project for a home-grown advanced jet trainer— called as “combat attack trainer”, or a trainer that doubles as a fighter—after it didn’t find favour with the Indian Air Force.
A spokesman for BAE Systems in the UK could not be reached for comment on Thursday.
HAL has invested more than Rs1,500 crore in a Bangalore facility to manufacture the 42 aircraft, which it has accounted for using a model of deferred revenue expenditure, where the investment will be recovered from Indian Air Force by adding it to the cost of the plane.
Around eight Hawk aircraft from BAE have already arrived in India, but on 29 April, one of the British-built Hawk planes crashed due to a pilot error at the Bidar air force base in northern Karnataka.
The first of the HAL-built Hawk flew on 7 May and the firm expects to be able to hand over the first jet to the air force by July. The deadline for delivering the 42 planes is 2011.
Meanwhile, the air force and the navy discovered they needed more trainers. The air force needs 40 additional trainers, while the navy has sought 17 trainers to train pilots before they fly supersonic fighters such as MiG-21 and Sukhoi 30MkI.
This is the second instance in recent times where a foreign arms supplier has increased the price of equipment sold to India. Last month, a Russian engine maker NPO Saturn demanded $60 million (Rs256 crore) to increase the life cycle of an engine it had developed for HAL’s intermediate jet trainer (IJT). The contract for a higher powered engine for IJT was awarded in 2002 to NPO Saturn for $40 million.
After two years of delay once it supplied the first engine that is being ground-tested on an IJT plane in India, the Russian firm asked for the additional money to increase the life of the engine to 300 hours from 100 hours earlier.