Defence deals worth $3 billion cleared ahead of Modi’s U.S. visit

Defence deals worth $3 billion cleared ahead of Modi's U.S. visit

A few hours before Prime Minister Narendra Modi left for the United States on Tuesday, the Union government approved two major defence deals between the two countries.

The move is expected to give a boost to bilateral defence ties. The deals, worth over $3 billion for buying two of the world’s most advanced helicopters, have been in cold storage for several years.

According to sources, the Cabinet Committee on Security cleared the purchase of 22 Apache attack helicopters and 15 Chinook heavy-lift helicopters from Boeing.

The deals have direct commercial contracts with Boeing as well as a direct government-to-government component between the two governments. There was no official statement from the government about the deal.

The deals will ensure that the U.S. remains among the top military suppliers for the Indian armed forces for some years to come.

It will also help in further advancing the nascent efforts by the Indian private sector to create an aerospace industrial base in India.

The 30 per cent offset clause in the deals will be executed in India through companies of leading private sector conglomerates such as Larsen & Toubro, Mahindra and Tata.

An official in the know said the purchase of Apache multi-role combat helicopters had two components — a foreign military sales (FMS) agreement between the two governments and a direct commercial sale deal with Boeing.

In the case of Chinook — heavy-lift helicopter with tandem rotor — the deal is a direct commercial deal that would be signed between Boeing and Indian side.

The contract would include a clause for follow-on orders for four more Chinooks and 11 more Apaches, officials said.

The U.S. side has been aggressively pushing for concluding the two deals at the earliest because New Delhi had been holding back for the past five years. This meant that the U.S. side had to keep extending commercial bids all these while.

The big ticket deals would boost the U.S.’ rapid climb in the Indian market as a major defence supplier. Once dominated by the Soviet Union, and later by Russia, the market is today open to various countries. And the U.S. and Israel have been making the most of the opportunity.

Estimates say that the U.S. has signed over $10 billion worth defence deals with India in the past decade. These include P-8I maritime surveillance planes, C-130J Super Hercules and C-17 Globemaster-III transport aircraft.