Defence Acquisition Procedure (DAP) 2020 that became effective last year, was meant to hasten the procurement process. It introduced for the first time the option for the armed forces to procure military equipment on lease. Given the resource crunch facing the Indian armed forces, the option of leasing would be a handy option for the forces. The Army, Navy, and the Air Force — will have the option of getting equipment on lease rather than buying them in one go. This could bring down the cost significantly and also do away with life cycle costs. Aircraft leasing, wet or dry, is an option routinely exercised by airline operators.
K-43 was a Charlie-class, nuclear-powered, cruise missile armed, submarine built between 1964 and 1967 and was commissioned into the Soviet navy on 5 November 1967. It was leased to India on 1 September 1987 and reached its base in Visakhapatnam on 3 February 1988 after a long journey. The Soviets said that the submarine was transferred for helping train the Indian Navy in operating nuclear submarines. During its service with India, it was partially manned by a Soviet crew, who reportedly did not allow Indians into the missile room and into the reactor compartment and this is believed to be a reason for the termination of the contract after 3 years. It served as INS Chakra in the Indian Navy from 1988 to 1991. The lease of Chakra reportedly helped India gain the first-hand experience in handling a nuclear submarine that helped them build its own Arihant class of nuclear submarines.
INS Chakra II
Russian “Nerpa”, renamed as INS Chakra in the Indian Navy service, is an 8,140-tonne, Akula-class, nuclear-powered attack submarine. Russia began construction of the Nerpa submarine in 1993 but was then suspended due to lack of funding. The Indian Navy sponsored the building and sea trials of the submarine provided it was given to the Indian Navy on lease for 10 years. It was launched as K-152 Nerpa in October 2008 and entered service with the Russian Navy in late 2009. K-152 Nerpa was leased for 10 years to India at an estimated cost of US$ 1 billion. The submarine was handed over to India on 30 December 2011, after extensive trials, and was formally commissioned into service as INS Chakra II at a ceremony in Visakhapatnam on 4 April 2012. The INS Chakra joined the Eastern Naval Command at Visakhapatnam. The lease would be extended by three more years.
INS Chakra III
In March 2019, India signed a $3 billion contract with Russia for the lease of the Akula-1 class, nuclear-powered, attack submarine, Chakra III for a period of 10 years. Under the pact, Russia will deliver the submarine, to the Indian Navy by 2025. It will be the third Russian nuclear attack submarine to be leased to the Indian Navy. The deal includes the refurbishment of the submarine with Indian communication and sensor systems, spares support, and training technical infrastructure for its operations. The INS Chakra III will not be equipped with long-range nuclear missiles because of international treaties and because it is not meant for deterrence patrols. Its armaments include conventional land-attack and anti-ship missiles and torpedoes.
Lease of Sea Guardian Drones
In November 2020, Indian Navy inducted two MQ-9B Sea Guardian drones on lease from U.S. The drones are on lease for one year. All planning, execution and operations will be with the Indian Navy. The Original Equipment Manufacturer (OEM) will play a support role for maintenance as laid down in the agreement. Earlier in June 2017, the US State Department approved the sale of 22 drones to India, costing around $2-3 billion. Currently, a deal to purchase 30 drones with 10 drones for each of the three Indian armed services, is awaiting a final go ahead. It could cost around $3 billion. Due budget constraints, the drone purchase will cut down the Indian Navy’s requirement of 10 additional P-8I maritime patrol aircraft to six.
The Sea Guardian is the maritime variant of the Predator MQ-9 Unmanned Aerial Vehicle (UAV), and has a maximum endurance of 40 hours and a maximum flying altitude of 40,000 feet. It has a 3600 maritime surveillance radar and an optional multimode maritime surface search radar. The drone can perform over-the-horizon long-endurance, medium-altitude Intelligence, Surveillance, and Reconnaissance (ISR) missions. The Indian Air Force (IAF) and Indian Army (IA) will get the Sky Guardian variant of the drone.
Minesweepers from South Korea
India also discussed the leasing of minesweeper vessels from South Korea, a longstanding demand of the Indian Navy, during the visit of the South Korean defence minister Suh Wook in March 2021. South Korea, Russia, and the US are seen as the three countries having minesweepers that are key to keeping sea lanes and harbours safe from floating or underwater mines. Decision has still to be taken.
Airbus A330 Multi Role Tanker Transport (MRTT)
IAF is leasing one A330 MRTT Flight Refueller Aircraft (FRA) from France for training. The A330 refuellers of France and UAE air force were used for flight refuelling of Rafale aircraft during ferries from Merignac-Bordeaux air base to India. The IAF has approached the French government to lease one Airbus A330 aircraft for training purposes as a precursor to lease five more mid-air refuellers for increasing the combat capability and radius of its multi-role fighters. It will be a government-to-government deal. The IAF has already issued a request for information (RFI) for a single aircraft. A detailed request for proposal (RFP) will be issued for the additional five refuellers on lease. It could also be an outright purchase. The IAF already has six Russian IL-78 M FRA. These aircraft have had serviceability issues and high cost to maintain. IAF has been looking to acquire six FRA for over a decade, and earlier attempts got mired in cost and technical issues. The A330 can not only carry fuel load but also carry troops and weapon pay-load on roll-on-roll-off basis. Unlike the IL-78 M, A330 would also be able to operate with higher payload from high altitude airbases like in Leh and Thoise. The A330 also has a large ferry range of 14,800 kilometres. The leasing route works out much faster and is likely to work out cheaper with low initial capital outlay.
Leasing Opens Further Options
The deliberated action of including the leasing option in the DAP will open much greater options. IAF and Indian Army are looking at more systems to lease. While IAF will need light utility helicopters and trainer aircraft till the time indigenous systems are inducted. The IA is looking at armoured mobility vehicles.
Challenges and advantages of Leasing
While leasing is a welcome step, it could also have its challenges. The competitive procurement could be difficult. It would invariably be single vendor situation. It should be best be applied selectively. Currently single-vendor is considered a taboo. Just because of single-vendor so many purchases in the past were delayed as fresh process had to be started. There could also be allegations of nepotism. As a nation we must take calls on this aspect. Could leasing be a means of backdoor entry for influential big military vendors or major powers to push through their equipment?
Undoubtedly, the armed forces mostly welcome any approach that can hasten procurements to meet urgent operational requirements. Leasing is one such approach. Will leasing of a few items pre-decide procurement of larger quantities of the same item? After all, you cannot select a different item when small numbers are involved. Will the leasing delay the otherwise important larger order, are issues that will evolve in times to come. Leasing can at best act as a cushion. Since leasing has worked well for civil airlines, it is hoped that in the long-term it will settle down as a reasonable option for military purchases.
Header Image Credit: Indian Air Force
4 thoughts on “Leasing Defence Equipment – Faster, Cheaper, and Effective”
Backdoor entry for the equipment. Get it into service, if happy, continue the process to eventually acquire the equipment. This may “fast-track” the process. Have no knowledge of what the financial implications would be. I sincerely hope it works out for the A330 MRTT. Quite apart from the discussion, the A330 is a wonderful airplane to fly (personal experience).
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Yes, Sir, I presume that cost-effectiveness would have been looked into. We started this first time with the ‘Chakra’ nuclear submarine. Of course, that was a different case. The lease will perhaps help evaluate the systems operationally and see how they fit into the ecosystem. This provision was especially brought into the DAP 2020.
Why not buy one A330 MRTT? On G to G basis? Like we have, for our 36 Rafales?
Leasing might not be as cost effective as would appear on first glance; there are hidden costs of Insurance, Maintenance & Training involved.
For the remainder of our requirements, it’s much better to go through the full drill as laid down in our DAP. To avoid long drawn political conflagration over such procurements.
Yes. I agree. Maybe that is what will happen. I am not sure though. The FRA purchase has been long-delayed and needs hastening