Why India's 2.5-Billion-Dollar Chopper Deal With Boeing Could Shoot up in Costs

File photo of Chinook heavy-lift chopper

Ahead of Aero India, touted as Asia's biggest air show, aviation major Boeing has made it clear that it cannot wait indefinitely for the government to sign a deal for Apache attack helicopters and Chinook heavy lift choppers.

According to Pratyush Kumar, Boeing India president, "We are inching closer to a situation where our ability to hold prices will not be there." In other words, there is a possibility that India would need to re-negotiate the commercial aspects of the $2.5 billion (over rupees 15,000 crores) deal and end up paying more for helicopters that the armed forces urgently require.  

Cost negotiations with Boeing ended 18 months ago; since then the company has agreed to extend the validity of negotiated prices twice with the latest six-month extension being granted in October 2014.   

Sources in the Defence Ministry have indicated that the Cabinet Committee on Security may approve the purchase of 22 AH-64E Apache and 15 CH-47F Chinook helicopters before this financial year closes, but there are still no clear indicators of when that will happen.

File photo of 22 AH-64E Apache attack helicopter

India operates a Russian-built fleet of ageing Mi-35 attack helicopters that urgently need to be replaced by more modern choppers with better sensors and missiles.  

The Apache, deployed widely during the first and second Gulf War, is considered by experts to be the world's premier anti-tank attack helicopter. In its flight evaluation trials, the Indian Air Force had picked the Apache ahead of the Russian Mi-28N Night Hunter.

Similarly, the IAF had concluded that the Chinook heavy lift chopper had lower life-cycle costs than the Russian Mi-26 helicopter and was therefore the lowest bidder in the competition.   

Over the last few years, American aviation firms have won several deals in India totalling more than $8 billion. The Indian Air Force has acquired 10 Boeing C-17 Globemaster III strategic airlifters, eight Boeing P-8I maritime reconnaissance aircraft and six Lockheed Martin C-130J transport aircraft.