India’s Defence Ministry changed its procurement policy last year, paving way for leasing of military equipment. In the last few months, New Delhi has rented drones and naval guns from Washington.
India will equip its warships with three 127-mm medium calibre naval gun from the US navy. Last month, New Delhi also inducted two American Sea Guardian high-altitude, long endurance drones into its navy on lease.
What’s more, India’s Defence Ministry has confirmed that six Airbus A320 passenger jets – formerly operated by the country’s national airliner Air India – will be upgraded into early warning and control (AEW&C) aircraft. These planes detect aircraft, ships, and vehicles at long ranges.
These military upgrades come as part of the country’s Defence Procurement Plan, which came into effect in October 2020.
Experts see this change in policy as a short-term measure to plug gaps in India’s forces.
“I think the recent decision to lease some of the American weapons is driven more by the crisis at the eastern Ladakh and the need to plug the gaps in the operational preparedness,” says Laxman Kumar Behera, associate professor at the Special Centre for National Security Studies, Jawaharlal Nehru University.
Sputnik reported last year that India’s Defence Ministry is expected to cut its budget by over 30 percent in March 2021. “The government’s priority will undergo a major change…This is not limited to this year …Health will receive priority…Defence will take a severe hit,” an Indian government finance official told Sputnik.
India’s new defence acquisition programme describes leasing as a “means to possess and operate (a military) asset without owning the asset,” adding that it provides a useful way “to substitute huge initial capital outlays with periodical rental payments.” “Leasing provides a degree of cushion to acquire certain capabilities without having to own them through the life-cycle,” Behera continued, alluding to the limited defence budget due to the pandemic-induced economic slowdown.
India’s Air Force is also facing a shortage of air-to-air refuelling aircraft and is expected to lease more as as soon as possible. New Delhi is also expected to rent light utility helicopters and trainer aircraft. Deputy Chief of India’s Air Force Air Marshal Sandeep Singh confirmed in November 2020 that trainer jets can be procured for four to five years until the state-run Hindustan Aeronautics Limited completes its final trials of HTT-40 jets.
“As far as leasing is concerned, this option should be used only to assess a given platform prior to acquisition and for urgent induction avoiding ownership of untested systems,” Rahul K Bhonsle, defence analyst and retired Indian Army Brigadier, advised.
India previously leased a Russian Chakra nuclear sub as opposed to buying one, so it could afford to spend its money on other military upgrades. Indian Navy officials have confirmed ongoing efforts to get its hands on another nuclear-powered submarine from Moscow after India signed a $3 billion deal in 2019. The new submarine is expected to arrive by 2025.
“Leasing is not always financially beneficial in the long-term. Thus the military of major powers like India, which is investing in strategic capabilities, should rather go in for leasing as stop gap,” Bhonsle emphasised.
The Big Question?
Presently, the Indian Air Force is facing a shortage of around 200 fighter jets as its current fleet is down to 30 squadrons – way below the sanctioned strength of 42 squadrons (18 fighters in each squadron). A parliamentary panel estimates that India would need all 42 squadrons if war broke out on two fronts, namely with China and Pakistan. Despite efforts to address the shortfall, the Indian government has only concluded one tender in the past decade – buying 36 Rafale fighter jets from France in 2016.
In October 2020, the then US Defence Secretary Mark Esper said during a 2+2 ministerial level dialogue in New Delhi that the US planned to sell more fighter planes and drones to India, while India has shown interest in Boeing’s twin engine multi-role fighters F-15EX, contradicting America’s proposal of F-16 and F-18. Boeing Vice President Pratyush Kumar stated in February 2020 that the company was seeking a license to export the F-15EX to India.
Amit Cowshish, former finance advisor to the Indian Defence Ministry, agreed that leasing can help to overcome the increasing shortage of fighter aircraft in the Indian Air Force (IAF), but it depends on at least three factors.
The first factor is the availability of the requisite number of aircraft for dry lease with the leaser. Secondly, it’s extremely unlikely, if not impossible, that India’s Defence Ministry would go for a wet lease, which requires the leaser to provide both the aircraft and crew with the IAF retaining operational control; Cowshish explained.
“That being the case, the aircraft to be taken on dry lease for making up the shortage will have to be of a type that is already being flown by the IAF pilots, or with which they are familiar, so that they could operate them straight away without having to go through any training. This is also important from the point of maintaining the fleet of the leased aircraft,” Cowshish underlined.
Thirdly, while leasing does not entail large capital investment, like an outright acquisition, the lease amount and other associated expenditures on maintenance, for example, could add up to a substantial amount, depending on the number of aircraft taken on lease. Therefore, the affordability of exercising this option will also have to be assessed, the former finance advisor concluded.