India is trying to build a strong domestic defense-industrial base and become a major arms exporter, with the government setting an ambitious annual export target of $5 billion by 2025, ADA, the primary nodal aircraft design institute in the country will be seeking funds close to $5 billion for the development of 5th Generation AMCA, Deck-based TEDBF for Navy, Tejas Mk2 for the air force and Remote Strike attack vehicle and Futuristic Unmanned Fighter Aircraft (FUFA).

While Indian Air Force is keen on acquiring 114 jets under its Multi-Role Fighter Aircraft (MRFA) Tender with Dassault Rafale leading the race but procuring 114 jets in a single deal could mean IAF will have to max out its capital expenditure funds for the next 7-8 years with little or funds left to procure domestically manufactured jets or make payments for the previous purchase like for S-400 system and soon for C-295 purchase.

In the Recent budget, IAF has been allocated a Rs 53,215 crore, increase in the budget underlines IAF’s continuing burden of payments for the Rafale fighters it bought in 2016, the modernization of the Mirage 2000 fighter fleet, and manufacture of additional Sukhoi-30MKIs and recent order for 83 Tejas fighters from Hindustan Aeronautics (HAL).

Tejas Mk2 in Limbo

IAF that initiated the Tejas Mk2 program and supported it till 2019 is now having cold feet over earlier committed purchase order for 160 units since it is estimated it could require around $12 billion-plus when it enters production in 2028-29 and IAF also needs to factor in additional expenditure for procuring 110 units of AMCA when it goes into production in 2035 onwards.

IAF recently placed orders for 83 Tejas Mk1A and already has procured 40 Tejas Mk1 and is now arguing that orders placed for Mk1A were to go for the more capable Mk2 (re-engined Mk1) and its requirement remained at 126 units that now has been fulfilled with 83+40 orders. After Tejas, IAF had planned a transition to AMCA so it wants to stick to its original plans.

ADA has enough older funds given to it in 2009 for the Tejas Mk2 program to make the first two aircraft but to procure systems and components for 3rd and 4th aircraft it will soon be requesting fresh funds if approved by MoD it will mean that IAF finally is on board the program. IAF last November accepted the critical design review (CDR) report of the Tejas Mk2 program given by the ADA that indicates that the program is still on track and first aircraft rollout planned for December will happen on time even though there remains a chance that it will be pushed to March 2023 due to delays in supply of contracted components from the international vendor but for now rollout is planned December.

Rafale Negotiations

IAF has reportedly told Defense Ministry that it is ready to settle for 90 additional Rafale over 36 that have already has procured but if forced to chose any other new aircraft type then it wants 114 units that will be locally made in India after Transfer of Technology from the winning vendor. Defense Ministry had offered the option for procuring a second batch of Rafale which initially was agreed upon but later rejected.

People familiar with ongoing discussion have told that even making 90 Rafale in India will mean a minimum 30% cost per unit rise due to stringent Transfer of Technology requirements in the tender unless India agrees to settle for the completely knocked down (CKD) kit supplied by Dassault with only assembling taking place here in India.

Modernization plans Hit

Procurement of 21 Mig-29UPG was recently canceled and the deal to procure 12 additional Su-30MKI in CKD kit is also stuck due to price increase from the Russian side. IAF’s Super-Sukhoi program also has been stuck due to the lack of funds needed for complete modernization of the entire fleet due to which 100 older Su-30MKI might get only minor upgrades and the remaining fleet will get all major upgrades that will be planned in multiple phases with HAL and DRDO to enhance their present capabilities.

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