In a major loss of face for the IAF headquarters, the Manohar Parrikar led Ministry of Defence has ordered Hindustan Aeronautics Ltd to produce 68 Basic Trainer Aircraft for the IAF, earlier rejected by the then IAF Chief Air Chief Marshal N A K Browne on the grounds of high cost and feared delay in production schedule. Along with this approval, the Defence Acquisition Council permitted the IAF to acquire 38 Pilatus PC-7 Mk-II subject to assessment of life cycle costs. The IAF was till three years ago using HAL made Kiran Basic trainers (HTT-32) and suddenly grounded on the orders of ACM Browne after a series of air crashes. The then IAF Chief used this as an excuse to force MoD to hurriedly negotiate with the Swiss company Pilatus, which was placed on L-1 after defeating the Korean trainers made by the Korean Aerospace Industries.
Life cycle cost
Now three years after the deal the Finance department of the MoD has expressed apprehensions that many relevant parameters were not taken into account while calculating the life cycle cost. Now when the DAC of the MoD gave clearance for the purchase of additional 38 Pilatus, it advised the relevant department to decide after examining the life cycle cost issues.
The MoD also found an excuse to promote the Make In India initiative of the Prime Minister Narendra Modi by telling the HAL to produce its own designed HTT-40 BTA, which was in contention from the very beginning but IAF ignored its claim on the grounds of high cost. In fact , in an unprecedented manner, the IAF headquarters had gone to the media for explaining the reasons of not selecting the HAL made BTA on the grounds of costs. It almost looked like an IAF vs HAL war in the media over the choice of the BTA.
The IAF had signed a Rs 2,800 crore agreement with the Swiss Pilatus in 2012. Pilatus had then claimed in a release that, “Pilatus Aircraft Ltd is proud to announce that IAF has entered today into a contract in excess of 500 million Swiss Francs to procure a fleet of 75 PC-7 Mk-II turboprop aircraft”.
IAF officials had then said that the aircraft was being acquired along with an integrated ground based training system and a comprehensive logistics support package. According to Pilatus. “The contract also contains an option clause for extending the scope of this contract within three years from initial signature and we are optimistic that this will indeed be executed. Pilatus has also entered into a separate offset contract with the Government of India for 30 per cent of the value of this contract and we view this as a major opportunity,” the company said.
HAL had repudiated the IAF claim, and tried to convince the MoD that each HTT-40 would cost Rs 38.5 crore, compared to Rs 39.5 crore (Swiss France 6.09 million) of the Pilatus. HAL had also claimed that after considering the life cycle costs, it’s HTT-40 would prove to be much cheaper over 35-40 years of service. But ACM Browne had claimed that the HTT-40 would actually cost Rs 43.59 crores. The then IAF Chief Browne had in fact written a five page letter to the then Defence Minister A K Antony in July 2013 urging him to move forward with the deal as IAF flying training was suffering. Browne had written in his letter to Antony that HAL has in fact projected a less amount to influence the MoD in taking a decision in its favor.
It is understood that the Pilatus agreement had fixed the price for the next 38 trainers under the Options Clause, but the final tranche of 68 aircraft was to be renegotiated on the basis of the current production costs and inflation. Hence, the MoD decided to rely on its own indigenous BTA i.e. the HTT-40.
HAL is already in advanced stage of its production of BTA and is reported to have invested Rs 300 crores from own kitty which is likely to take to the skies this year, with the possibility of entering into service by 2017-18. HAL officials claim that if IAF had encouraged HAL to develop and produce the aircraft for them, the aircraft would have rolled out much earlier.
The IAF headquarters had urged defence minister Antony, “To meet the immediate flying training requirements of the IAF the ‘Option Clause’ be exercised to procure 38 PC-7 Mk II from M/s Pilatus Aircraft Ltd, as directed by (the MoD) on 29 September, 2009. The subsequent requirement of 68 BTA could be met through Repeat Procurement.”
Now the MoD under the new government has exercised the option clause of 38 aircrafts but with a rider that life cycle costs should be taken into account and added a new twist to the entire saga of BTA acquisition by asking HAL to produce 68 of the rest BTA, required by the IAF.