What India Must Watch Out for While Negotiating Defence Contracts With Foreign Vendors

Four countries – Russia, the US, France, and Israel – have emerged as India’s foremost defence equipment providers. But negotiation with them requires skills.

The numerous foreign delegations that frequently visit New Delhi to negotiate defence contracts and agreements present a study in contrast, as both sides wriggle through knotted procurement procedures to secure a share in the pie which India, as one of the world’s largest materiel importers, offers.

Groups of smartly dressed polyglots, spouting exotic languages, walk determinedly through the sombre and imposing corridors of the Ministry of Defence (MoD) in South Block and the adjoining Bhawans, populated by military establishments, to negotiate assorted deals worth thousands of crores.  

Principally, these delegations are from four countries – Russia, the US, France, and Israel – which have emerged as India’s foremost defence equipment providers. Their range of products includes combat and transport aircraft, attack and heavy-lift helicopters, maritime reconnaissance platforms, howitzers, warships, submarines, and minesweepers, alongside an assortment of missiles, ammunition and sundry kit and ordnance stores.

In their dealings the French display an appealing casual and Gallic charm that, over decades, has assured them a steady stream of orders for fighters, helicopters, and submarines. The Israelis are hard-headed, meticulous and determined negotiators.

The Russians, who have been supplying India defence equipment from 1964 are robust, often obdurate negotiators with a confidence that stems from familiarity. The Americans, however, are cautious, procedure-driven, and often amazed by India occasionally expressing a different and, at times, contrary point of view. In their negotiations they often seem to politely suggest: be reasonable, do it our way.

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Other than equipment deals, all four countries also have numerous joint venture programmes underway, with not only the government-owned Defence Research and Development Organisation and other state-run entities, but increasingly with private companies that are beginning to play a major role in augmenting India’s Defence Industrial Base.

However, dealing with vendors from each of these four countries is challenging, to say the least, necessitating eclectic skills and dexterity to stay ahead in the cat-and-mouse game of frugally equipping and modernising India’s military.  

Before the US emerged as India’s largest weapon provider, having sold it equipment worth over $20 billion since 2002, the Russians – and before them, the Soviet Union – monopolised this field. The bonhomie of the Indo-Soviet Treaty of Friendship and Cooperation in 1971 survived the Soviet Union’s disintegration in the early 1990s, and it was not uncommon to kick-off meetings by talking about the enduring bilateral ties or indulging in nostalgia before segueing into serious business which, at times, resulted in sharp exchanges.

Rajnath Singh attends Victory Day Parade at Red Square in Moscow. Photo: Twitter/@rajnathsingh

In recent years, however, such sentimentality has diminished in what can best be described as ‘cold comfort’ between Russian materiel vendors and their Indian buyers. Of late, Russian negotiators seem torn over whether to continue treating India as a ‘special and favoured customer’, like in the Soviet-era, or to let the relationship be dominated by commercial, ‘cash-and-carry’ considerations.

After all, India has acquired defence equipment worth over $46 billion since 1960s and their annual military commerce is now averaging $ 1 billion. But with India becoming more demanding and less restrained in expressing discomfort with unpredictable pricing, questionable product quality, erratic delivery schedules and problematic after-sales maintenance support, some of the earlier warmth has somewhat depreciated.

In negotiating with the Russians, language can be an impediment. 

Most Russian delegations, however, often include ‘sleepers’ fluent in English and possibly Hindi. These ‘minders’ often end up taking frequent tactical cigarette breaks with other delegation members, during which they seemed to contribute their valuable observations to ensure a favourable outcome for Russia.  

Underscoring India’s defence ties with Russia is the latter’s displeasure over Delhi sourcing its military requirements elsewhere. But despite these insecurities on Moscow’s part, it is a given that India’s dependence on Russia to sustain its in-service equipment will continue for decades.

A recent Stimson Centre study revealed that Soviet-Russian equipment in the army was 90%, Indian Navy, 41%, and IAF, 66%. It is also unimaginable that acquisition of major platforms and equipment from Russia will stop altogether.

Over 95% of the Indian Army’s fleet of around 2200-2500 main battle tanks (MBTs), for instance, are Russian T-72 and T-90 variants, directly imported in completed and in kit form for local assembly and license built, whilst its 2,000-odd Boyevaya Mashina Pekhoty (BMP)-1 and 2 were similarly sourced.     

By 2021-22 the Indian Air Force (IAF) will operate 272 twin-engine Sukhoi Su-30MKI’s multi-role fighters and upgraded MiG 29M combat aircraft, in addition to a range of smaller fighters like MIG-21BIS all of which constitute the backbone of its 30 fighter  squadrons. The IAF is also in advanced talks with Russia to acquire 21 additional second-hand MiG-29’s and 12 Su-30MKI’s.

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Similarly, a large proportion of the India Navy’s (IN’s) surface and sub-surface platforms are Russian in origin. But above all, Russia’s willingness to provide India assistance in sensitive and classified projects like indigenously designing and building nuclear-powered ballistic submarines or SSBNs to strengthen the sea-leg of its three-tier strategic deterrence, is inestimable.

The dialogue, meanwhile, with US delegations is not so much about negotiating individual deals in consonance with India’s procurement procedures, as it is about complying with the procedural formalities of the non-competitive US government mandated Foreign Military Sales (FMS) programme. The Pentagon-controlled FMS is the principal route through which India imports US materiel and is one that leaves little or no scope for negotiation, as its manual covers all possible eventualities that could or may arise.

Consequently, India’s negotiations with the US during these sessions is more about larger strategic issues, which generally boil down to New Delhi complying with Washington’s worldview and conforming to its regulatory framework through enabling frameworks.

And, though diplomatically restrained in expressing frustration over the slow pace at which things move at the MoD, the underlying message in all conversations with US delegations is not lost on their Indian counterparts. It is also not uncommon in this jousting to discern the invariable ‘hint’ that the US could help India in improving its systems and procedures in the military arena. 

India’s relations with France in the field of military commerce have been free from such vicissitudes and studied seriousness. Over decades since 1953, France has provided the IAF fighters like the MD 450 Ouragan, nicknamed ‘Toofani’, followed by the Mystere. These two fighters were succeeded by the Anglo-French SEPECAT Jaguar’s in the late 1970s and then the Mirage 2000H (Hindustan) in the late 1980s.

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The most recent IAF buy are 36 Rafale multi-role fighters, five of which joined IAF squadron service last month. France also supplied the IAF with helicopters – still in service – and the Indian Navy, six conventional diesel-electric submarines in 2004-05. France was also one of the few countries not to condemn India after its 1998 Shakti nuclear tests, a stand that earned it Delhi’s goodwill at a time when the US and the UK had sanctioned India.   

Generally uncomplaining, French armament companies come across as pragmatic, easy going, but professional; they also display humour in their interactions with MoD officials, a diminishing commodity in bureaucratic parleys and one that eventually pays dividends. Though proud, to the point of arrogance of their rich linguistic heritage, they display no hesitation in speaking English, in addition to their enthusiasm for Indian cuisine.

French equipment is no doubt expensive, but its vendors are flexible and more than ready to negotiate to the satisfaction of both sides. French companies also appear to enjoy wide political backing of their government and, unlike their competitors they operate sanguinely, willing to accommodate the multiple complexities of Indian rules and procedures. They are rarely patronising and seldom talk down to their Indian interlocuters, and over years have earned a reputation with India’s military for their swift responses in providing back-up support for their platforms.  

A file image showing Prime Minister Narendra Modi with Israeli Defence Minister Moshe Ya’alon in New Delhi. Photo: Israeli MoD

Dealing with Israeli defence vendors is largely not very different from the French experience. But of all vendors from the three aforementioned countries, Israel’s are the most meticulous and business-like negotiators, albeit somewhat dour. Offering competitive prices, they invariably emerge as the lowest or L1 bidders, but in the Indian system it does not generally provide an escape from the Contract Negotiations Committees which are programmed to try and extract a still better bargain, not always an easy tasks with the Israeli negotiators.  

Israel does not deal in major military platforms like fighters, tanks, warships or submarines, but has repeatedly proven its worth in providing India a raft of critical tactical equipment and systems like small arms, including sniper rifles and varied unmanned aerial vehicles (UAVs), all of which are widely employed at the operational levels by all three services.

The Israelis are also reputed for timely equipment deliveries and after-sales maintenance support, but above all, they have no qualms about integrating their products onto other platforms. Numerous Russian MiG fighter variants, the IAF’s S-30MKIs, the indigenously developed Tejas light combat aircraft and even the Rafales, for instance, are fitted with Israeli avionics, weaponry, and related systems. Similarly, India’s locally designed helicopters and tanks too are equipped with multiple Israeli force multipliers.   

In conclusion, even though their styles may differ, all four foreign vendors remain commercially enticed by India’s vast military needs. But all of them seemingly follow American entrepreneur and TV presenter Victor Kiam’s advice on negotiators combining the investigative skills of Sherlock Holmes and psychological talents of Sigmund Freud to succeed.

Amit Cowshish is former financial advisor (acquisitions), Ministry of Defence.