Why the Defence Ministry Prefers to Buy Weapons Through Inter-Governmental Agreements

Such contracts provide ‘psychological comfort’ to MoD’s civil and military bureaucracy.

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The Indian Navy is reportedly keen on forging an inter-governmental agreement (IGA) with the US or France to procure 26 fighter jets for its indigenous aircraft carrier, INS Vikrant, scheduled for imminent commissioning despite awaiting installation of its Aviation Flight Complex which is necessary for operating its combat air arm.

Boeing’s F/A-18E/F ‘Super Hornet’ and Dassault’s Rafale-M (Marine) fighters are in contention for the Navy’s requirement for 18 multi-role carrier borne fighters and eight twin-seat trainers to operate off Vikrant.

These requirements could eventually rise to a total of 57 platforms, in keeping with the Navy’s earlier projections.  

Both the US and French fighters had recently demonstrated their operational capabilities from the shore-based test facility at INS Hansa, the Navy’s air station in Goa. The Navy is currently evaluating their performances to determine their suitability, following which it will begin the formal tendering process to acquire the aircraft, possibly via an IGA, or some other analogous arrangement, for a variety of reasons detailed below.

What comes closest to an IGA for the US government are tenders concluded exclusively through its Foreign Military Sales (FMS) programme, which is administered by the Defence Security Cooperation Agency (DSCA) under the Pentagon’s overall aegis and advisement by the US State Department, as a means for furthering Washington’s diplomatic and strategic ambit worldwide.  

India’s Defence Acquisition Procedure 2020 (DAP2020) – and the manuals that preceded it- permits acquisition both via the IGA and the FMS on grounds of securing geo-strategic advantage or imperatives of strategic partnerships, or both. Military, technological, economic, diplomatic, and political benefits too are ‘principal factors’ for New Delhi forging such agreements for its military buys. As a matter of fact, IGAs and their variants like the FMS have been Delhi’s favoured mode of importing major military platforms and diverse weapon systems for several years. 

All procurements from the former Soviet Union, and subsequently Russia, since the mid-1960s have followed the IGA route, with India’s Ministry of Defence (MoD) dealing directly with Rosobornexport (ROE), Moscow’s sole state agency for materiel export and import of dual use defence products, technologies and services. For decades this arrangement worked well, despite periodic glitches, and was solely responsible for effectively building India’s arsenal and augmenting its war-waging capability.

The bulk of US defence acquisitions 2002 onwards, worth around $ 20 billion, too have been via the FMS route and more recently in 2016 the Indian Air Force (IAF) acquired 36 French Dassault Rafale fighters via an IGA, deliveries of which are nearing completion.  

The MoD officials as well as the armed forces are ‘comfortable’ adopting the IGA template, especially the FMS, for diverse reasons, of which expediency is the foremost. Ironically, even for them, the DAP2020 – and all its earlier manifestations – has always been far too convoluted in its processes, rendering them wary of taking decisions in the event of something going awry. Many corruption scandals in recent years involving MoD and military officials – some of which remain unproven – have centred on their questionable interpretation of the complex procurement regulations; pursuing the IGA route obviates such possibilities.  

The IGAs are also not required to follow standard multi-stage acquisition procedures or conform to the rigid contractual conditions envisaged in the DAP. Instead, they are negotiated on mutually agreed terms between the governments of both countries, allowing a greater degree of flexibility in finalising the deals and their eventual execution.

This compressed IGA – and FMS – procedure typically begins with the approval of the broad framework for the proposed agreement by the MoD’s Defence Acquisition Council headed by the Defence Minister. It is followed by negotiations between the foreign governmental agency and an MoD appointed inter-disciplinary committee which determines the overall terms and conditions of the purchase, including the cost, delivery schedules, maintenance support package, and any possible transfer of technology for local manufacture. 

The empowered committee is also authorised by the MoD to liaise directly with the original equipment manufacturer as part of the overarching inter-governmental negotiations. Once the draft terms and conditions of the purchase are mutually accepted, the IGA is signed with the approval of the Cabinet Committee on Security headed by the Indian Prime Minister. 

In almost all instances, an IGA compresses the total period for finalising a contract, from the time the proposal was initiated to when it is finally inked. The purchase of 36 Rafales, for example, was first announced by Prime Minister Narendra Modi in Paris in April 2015, and the Rs 59,000 crore contract for them was signed via an IGA 17 months later in September 2016, followed by commencement of deliveries in July 2020.  

Midair refuelling of one of the five Rafale jets, which took off from France on Monday, on its way to India. The Rafale aircrafts are covering a distance of nearly 7,000 km from France to India with a single stop in UAE. Photo: PTI

Procurement from the US under the FMS programme is even more alluring for MoD officials, despite the DSCA following its own set procedure, including the terms and conditions of sale. The MoD accepts this as a fait accompli, and its officials are content abiding by the FMS procedure as the DSCA assumes responsibility for the entire process, especially with regard to negotiating the cost – by far the most risk-prone aspect of defence procurements – with potential US vendors. 

Under the FMS process, the DSCA negotiates with the original equipment manufacturer as it would if the US military was acquiring the materiel and charges the MoD a standard ‘facilitation’ fee for its endeavours. With 189 countries and international organisations currently participating in it, the FMS process is widely considered transparent, reliable, and secure. This is further vindicated by the reality that no FMS deal between India and the US has so far come under any cloud.

India’s FMS purchases have included 22 ‘AH-64E(I)’ Apache Guardian and 15 Chinook CH-47F heavy lift helicopters for the IAF, 14 P-8I Neptune long-range maritime multi-mission aircraft and 24 Lockheed Martin/Sikorsky MH-60R multirole naval helicopters for the Indian Navy.

Six additional Apaches were on order for the Indian Army, while the IAF had also commissioned 12 Lockheed Martin C130J-30 and 11 Boeing C-17 Globemaster III transport aircraft. In 2016 the Indian Army had signed up for 145 BAE Systems M777 155mm/39 calibre lightweight howitzers – of which around 100 had been delivered – in addition to acquiring 72,400 SIG716 assault rifles from Sig Sauer in 2019.

To conclude, the IGA or FMS contracts provide ‘psychological comfort’ to MoD’s civil and military bureaucracy, as the responsibility for procurement deals concluded under it is borne collectively by the empowered committee on the Indian side and the concerned government, or its agency like the DSCA, on the other.

This minimises the risk for the officials of being questioned subsequently for their decisions and facing allegations of committing irregularities in the acquisition process which, in recent times, has been the bane of efficient decision-making and one that has adversely impacted the Indian military’s long-delayed modernisation.

Amit Cowshish retired from the Indian Defence Accounts Service in 2012.

A version of this article first appeared in The India Cable – a subscribers-only newsletter published by The Wire and Galileo Ideas. You can subscribe to The India Cable by clicking here.