Government may shelve Indian Air Force’s $2 billion Avro replacement project

[Armstrong]

you did not understand it.

I didn't even read it !

 

[sancho]

No money in the coffers during 2014-15. Had the real situation been make known, we would have had a ratings downgrade. The UPA government made an absolute mess of the finances. This government has pretty much cut everywhere, spending on social sector has been heftily cut. Why would you expect defence to be any different? The oil price drop has been a bonanza that saved the government's bacon. Things are looking quite a bit better now and with funding on all the UPA grandiose plans being cut left, right & centre, the finances for big defence buys will slowly start becoming available. Can expect a few in 2015-16 but more in the later part of the year if the economy continues firming up & probably much better in 2016-17.

Man, you couldn't be further away from the reality than this!

Fact 1) Economy since 2013 is in good shape, according to the figures of the NDA government 6.9 and 7+% growth, so please stop the nonsense that was spread during the elections.

Fact 2) UPA interim budget 2014/15 had a 10% increase of the defence budget, which the NDA even increase to 12%,. That counters your claim of not having money, especially when you add the fact that 6000 crores of the budget wasn't used and diverted back to the FM.

Fact 3) The UPA interim budget was higher than the NDA defence budget this year and that although the government is loaning more money than planned last year and the economic growth predictions are pretty good. So the NDA government is cutting defence budgets below UPA marks, on their own accord now and not because some inherited problems from the UPA, so let's sheelf that myth too.

Fact 4) The MoD scrapped deals not for defence related issues, but for their economic agenda, to prefer privat players over state owned companies. That's the only reason why the LUH and SSK deals were re-issued.

Fact 5) Even with plenty high ranking official meetings with US officials (twice between the PM and President Obama), not a single pending US arms deals (Javelin ATGM, M777 howitzer, Apache and Chinook helicopter) could be sealed last year. And the reasons were not costs, but offset / ToT issues mainly!

Fact 6) The reason for the Avro deal being in a single vendor situation, is the same that delayed it under the UPA government, keeping HAL out and failing to get more privat Indian players to commit themeselfs to the deal.


Bottom line is, the Government had the money and plenty of chances to seal deals or at least fast track them, but either was not able to do it, or worse, purposely delayed it for non defence related agendas!
The minimum they could had done last year was, selecting a winner in the much needed LUH tender and finalising the Apache and Chinook deals, but they didn't and that shows the poor job they did last year.

 

[Stephen Cohen]

@sancho

At least we can trust the current government
They will NOT let down the country

With the previous government ; there were serious allegations that they wanted to
keep India's defence capabilities in just a defensive mode ; the Maginot line mentality

This year 2015- 16 will be somewhat tight ; only necessary items will get cleared
next year will be better with the economy in a much better shape by next Fiscal year

 

[sancho]

I'm glad that avra replacement project was shelved.
We've C130J which're as good as work horses, and govt has plans to buy more of these. And it makes complete sense to maintain one fleet of planes as it becomes easier to maintain for spares etc.
And my not paying tax has nothing to do with it. Govt questioned IAF and made 'em accountable. Thats what matters!

The C130Js were bought for special ops, not fro basic logistic transports like the An32s. They are also far too costly for this purpose in procurement and operational costs (around $90 million each C130, while C295s are sold around $50 millions each + quad prop engine vs twin).
C130Js and C17s add specific advantages to the IAF, but are far too costly for bulk of the IAF logistic operations within India. That's why we can't afford to have a fleet of 100+ C130J/MTA class aircrafts, but need a workhorse in good numbers at the lower end, for basic operations. It's the same reason why we need LCAs at the lower end of IAFs fighter fleet too, because you simply don't need the high end aircrafts in all the missions.
Also, what MoD questioned, was how useful the replacement is, based on the fact that the "Avros" wasn't used that much. The flaw in that conclusion is, that they wasn't used by the lack of capability (no ramp loading possible to transport paletts, limited capabilities to land on difficult airstrips...), contrary to the An32. The C295 doesn't have these problems and is basically in the same class as the AN32, just more modern and capable. So even if you replace the Avros, you take over the operational capability of a part of the AN 32 fleet and that at lower costs than C130J / MTA. So from IAFs opertional as well as Tax Payers point of view, the C295 is a good addition, MoD just failled to make a proper tender out of it, that is interesting enough for Indian privat players.

 

[Bang Galore]

Man, you couldn't be further away from the reality than this!

Fact 1) Economy since 2013 is in good shape, according to the figures of the NDA government 6.9 and 7+% growth, so please stop the nonsense that was spread during the elections.

Fact 2) UPA interim budget 2014/15 had a 10% increase of the defence budget, which the NDA even increase to 12%,. That counters your claim of not having money, especially when you add the fact that 6000 crores of the budget wasn't used and diverted back to the FM.

Fact 3) The UPA interim budget was higher than the NDA defence budget this year and that although the government is loaning more money than planned last year and the economic growth predictions are pretty good. So the NDA government is cutting defence budgets below UPA marks, on their own accord now and not because some inherited problems from the UPA, so let's sheelf that myth too.

Fact 4) The MoD scrapped deals not for defence related issues, but for their economic agenda, to prefer privat players over state owned companies. That's the only reason why the LUH and SSK deals were re-issued.

Fact 5) Even with plenty high ranking official meetings with US officials (twice between the PM and President Obama), not a single pending US arms deals (Javelin ATGM, M777 howitzer, Apache and Chinook helicopter) could be sealed last year. And the reasons were not costs, but offset / ToT issues mainly!

Fact 6) The reason for the Avro deal being in a single vendor situation, is the same that delayed it under the UPA government, keeping HAL out and failing to get more privat Indian players to commit themeselfs to the deal.


Bottom line is, the Government had the money and plenty of chances to seal deals or at least fast track them, but either was not able to do it, or worse, purposely delayed it for non defence related agendas!
The minimum they could had done last year was, selecting a winner in the much needed LUH tender and finalising the Apache and Chinook deals, but they didn't and that shows the poor job they did last year.

It's funny what you like to believe. Fiscal deficit was way out of control. Maybe you should have paid attention to what Chidambaram himself said. He laid out a fiscal deficit target that was met by this government only with some incredible luck on the oil prices & some across the board cutting.Revised growth figures for the economy does not mean there was more money in the budget. UPA's grandiose schemes were simply a black hole swallowing everything while the rest of the budget was simply floundering. There is nothing that this government could have done in the 1st year because finances were so poor. The government pretty much stopped spending on all schemes. Had it not been for the very lucky break with oil prices, government finances would have been in the pits. It is not the defence budget alone, the government cut spending across all sectors.

Having already crossed the fiscal deficit target in November, Finance Minister Arun Jaitley on Friday hinted at more cuts in spending so as to contain it within limits for the current fiscal, saying he does not believe in living on borrowed money.

The additionally hinted spending cuts would be over and above 10 per cent that the government has already announced to meet the budgeted 4.1 per cent fiscal deficit target which was crossed in November itself, four months ahead of the end of the financial year on March 31.

The government is scrambling to contain the fiscal deficit at 4.1 percent of GDP in the fiscal year ending March, after a sharp shortfall in revenue that forced it to rein in spending.

The government even slashed spending on health when the government cut 20 % of its planned spend. Unlike what many here do, i have no interest in playing politics with the economy. If you are unable to see how the government was forced into slashing expenditure severely last year by cutting all areas of the budget, then the problem is not with the evidence. To imagine that the government would then have sanctioned large scale buys is a joke. Not like the government has gone bonkers & simply wanted to not make purchases, the truth is far more simpler. There is still not enough money but you are likely to see some purchases this year..

 

[sancho]

@sancho

At least we can trust the current government
They will NOT let down the country

You have to trust any elected Indian government, that they do the best in the interest of the country, no matter if you like them personaly or not. Just as an elected PM must be supported by the whole country, not only those who voted for him. BUT, that doesn't mean we have to be blind and silent on mistakes or even scams. UPA was rightfully trashed, because of the scams, but they didn't made that much of a bad job in all the fields, as the public perception and election PR of the BJP stated. And that's what I pointed to, since money was available and several deals already in final stages and DAC cleared, the new MoD just need to make a quick review if they want and then take a decision to finalise them. So they already let the country down, but not delivering what they promised, fast decision making and fast tracking defence modernisation and we can only hope they will make it better this year!

 

[Stephen Cohen]

You have to trust any elected Indian government, that they do the best in the interest of the country, no matter if you like them personaly or not. Just as an elected PM must be supported by the whole country, not only those who voted for him. BUT, that doesn't mean we have to be blind and silent on mistakes or even scams. UPA was rightfully trashed, because of the scams, but they didn't made that much of a bad job in all the fields, as the public perception and election PR of the BJP stated. And that's what I pointed to, since money was available and several deals already in final stages and DAC cleared, the new MoD just need to make a quick review if they want and then take a decision to finalise them. So they already let the country down, but not delivering what they promised, fast decision making and fast tracking defence modernisation and we can only hope they will make it better this year!

UPA ruined the economy ; it could have been much better if not for
Policy paralysis ; and total INACTION along with MALAFIDE action

We lost economic momentum and ended up with huge deficits

The scams and corruption are another story

Secondly on the defence front ; UPA was following the MMS pipe dream of peace at all costs

Even if it meant turning the other cheek repeatedly

MMS DID not want the Armed forces to have an
offensive POSTURE against Pakistan

SO he simply cut off their funds

 

[Bang Galore]

And that's what I pointed to, since money was available and several deals already in final stages and DAC cleared, the new MoD just need to make a quick review if they want and then take a decision to finalise them.

Yeah, money was available & they literally went into a government shutdown in expenditure for fun.

 

[Stephen Cohen]

@sancho

MMS and UPA also did not do anything for indigenisation
they just went for imports

WHY
There is a thing called " Chandigarh Cabal " ; it is a group of some Congressis
and EX Military guys who just wanted the IMPORT gravy train to run along

 

[sancho]

It's funny what you like to believe. Fiscal deficit was way out of control.

And the NDA government FOLLOWED the limits the UPA government set, not made more cuts!

Revised growth figures for the economy does not mean there was more money in the budget.

Of couse not, but it counters the myth of India being economical in a bad situation. However, since the NDA government allocated slightly more money than the UPA interim budget, there was also more money available, it just wasn't used!

 

[Stephen Cohen]

@sancho

Why did SAINT Antony keep Banning firms
at the drop of a hat ; even if it HURT the armed forces's capability

The current DM has had to clear the mess of this whimsical bans
and has said how such bans hurt India

 

[Bang Galore]

And the NDA government FOLLOWED the limits the UPA government set, not made more cuts!



Of couse not, but it counters the myth of India being economical in a bad situation. However, since the NDA government allocated slightly more money than the UPA interim budget, there was also more money available, it just wasn't used!

They made far deeper cuts. They had crossed the planned fiscal deficit for the full year in November 2014 itself. And all this with an oil bonanza of about $ 15-20 billion. The UPA cuts were a mirage. Don't go by allocated figures, go by the actual spending. That is an old government trick to balance the budget, return money as unspent. Health, education, the other social sectors - not one area was spared and you think defence could have somehow been an exception?

 

[Stephen Cohen]

The Basic problem of UPA was their INTENTION wrt to Indian defence
they were confused ; unsure ; unwilling ; lacking vision

basically living in LA LA land

@sancho @Bang Galore

Have you been following the LAND bill debate in India
UPA 's FOOLISHNESS can be gauged by the simple fact that the
previous land bill HAMPERED and obstructed Land acquisition for DEFENCE works

And to make matters worse ; the previous bill had a provision that
DEFENCE officials will have to DISCLOSE publically why they want the land ; what are they doing
what project is coming up

The PM made a statement in Parliament that it was akin to just giving all secret information to
the enemies on a PLATTER

That shows their sincerity; committment and vision to Indian Defence

 

[Bang Galore]

This article should be read. It is by S.Gurumurthy, certainly not an unbiased expert but still very informative. Dated july 6, 2014


How to Handle UPA's Financial Landmines?
By S Gurumurthy

Published: 06th July 2014

Some chartered accountants who attest corporate accounts bear uncomplimentary reputation for fudging accounts as the last resort to balance the books.* The last resort of such chartered accountants seem to have become the first option of finance ministers. Look at the way the numbers have been fudged and other financial landmines have been concealed in Budget 2013-14 and the Interim Budget for 2014-15. Take the fiscal deficit figures for 2013-14. Former finance minister P Chidambaram has taken credit for containing the deficit at 4.6 per cent of the GDP. It is crude fudging. Chartered accountants are definitely more subtle. Chidambaram has fudged the deficit for 2013-14 on three counts. One, he got the banks to deposit the tax deducted at source payable after 31.3.2014 in advance, to include it as his collection in 2013-14, thus stealing a revenue of Rs 20,000 crore which his successor Arun Jaitley would have collected. Two, short fall of Rs 15,000 crore in the revenues in the Revised Estimate given by Chidambaram for 2013-14 has been kept in wraps. Third, the petroleum subsidy has been short provided by Rs 10,000 crore in 2014-15–Jaitley has to fund this in his Budget. These three items will push the fiscal deficit for 2013-14 from 4.6 per cent to 5 per cent. This is the beginning, not the end, of the story.


Stopping development to cut deficit

The Fiscal Policy Strategy Statement attached to the 2014-15 Budget says the actual fiscal deficit had reached 94 per cent of the budgeted deficit in November 2013 itself, but it was maintained at the same level till March 2014–meaning that, in the last four months to March 2014, the deficit was very little. How did Chidambaram achieve this miracle? By “austerity measures”, non-plan spend was cut by 10 per cent and plan expenditure was “rationalised” –says the Strategy Statement. True? The story of a cut in non-plan spending is a half-truth–it finally vaulted over the budgeted figure by Rs 6,000 cr. It is the plan spending–read development spending–that has been cut by Rs 80,000 crore. Had the development spend been as budgeted, the deficit would have vaulted by further 0.7 per cent to 5.7 per cent. See the irony. Chidambaram proudly raised his voice to announce a 34 per cent [Rs 1.41 lakh crore] rise in development spend in his Budget speech in February 2013 and got encomiums. In February 2014, he announced a cut back of the very same spend by 58 per cent and got credit for reducing the fiscal deficit! There is not even a remote sense of remorse for cutting two-fifths of the development spend
Fudging 2014-15 accounts

Now come to the Interim Budget for 2014-15. By stealing revenues of Rs 20,000 and short providing petroleum subsidy of Rs 10,000 crore, Chidambaram has already caused a Rs 30,000-crore hole in the final Budget that Jaitley will present. See further. Chidambaram has claimed to have fixed the fiscal deficit for 2014-15 at 4.1 per cent–a parting lie that again won for him the credit for lowering the deficit! Besides, he has concealed many financial landmines which can booby-trap Jaitley’s Budget. And also the nation’s economy, unless detected and addressed in time. Chidambaram has projected the nominal GDP growth at 13.4 per cent but a higher revenue rise at 19.2 per cent for 2014-15. How could revenues rise more than growth? Economists call the extra revenue over growth the buoyancy ratio. The buoyancy ratio assumed by Chidambaram for 2014-15 is 43 per cent over the GDP growth. For 2013-14, he had projected a nominal GDP growth rate of 13.4 per cent and got a lower revenue rise of 13 per cent rise– that is negative buoyancy ratio. That the projected buoyancy of 43 per cent for 2013-14 is just a mirage is corroborated by the budgeted rise of customs revenue by 15 per cent in 2014-15 against just 6 per cent in 2013-14–one and half times the rise in 2013-14. Similarly, Chidambaram projects excise to rise by 11.7 per cent in 2014-15 against 1.6 per cent in 2013-14–by more than seven times the previous year’s rise. If the revenues rise in 2014-15 is like 2013-14 only, the deficit will be higher by Rs 48,000 cr. More. Chidambaram had projected disinvestment receipts of Rs 54,000 crore in 2013-14, but ended up with `19,000 crore. Still he has projected a disinvestment income of Rs 52,000 cr for 2014-15. Here too if the 2013-14 numbers are repeated, the deficit will go up by Rs 33,000 crore. Again, Chidambaram has estimated non-plan spending to rise by some 8 per cent in 2014-15 but it had risen by some 17 per cent in 2013-14. Increase in interest outgo and normal rise in salaries alone would exhaust the rise in non-plan expenditure projected. If the non-plan spend rises in 2014-15, like in the previous year, the deficit would be up by Rs 1 lakh crore. Also, Chidambaram’s Budget does not recognise the Pay Commission arrears of Rs 40,000 crore for which a bill is waiting to be presented to Parliament. This will add Rs 40,000 crore to non-plan expenditure each year in 2017-18 and 2018-19. These add up to Rs 1,81 lakh crore to the deficit over Chidambaram’s number. Jaitley has to handle this in 2015-15 and later. This is besides the transfer of the deficit of `30,000 crore from Chidambaram’s 2013-14 account to Jaitley’s 2014-15 account.
More boobytraps

Information hidden in different places in the government discloses further financial landmine. As the plan spend till now is very poor, the plan spend for 2015-16 and 2016-17 is projected to rise by 20 per cent. But even with such increased allocation, Gross Budgetary Support for the 12th Plan will be only Rs 29.10 lakh crore. It will be short by Rs 6.58 lakh crore against Rs 35.68 lakh crore reckoned in the 12th Plan. It is clearly bound to affect growth. On the revenue side, even assuming that the General Sales Tax and Direct Tax Code become operative in 2015-2016 and up the GDP by 1 per cent and consequent rise in revenue, still the final resource gap will remain negative until 2016-17. To manage this gap, Tax-GDP ratio has been revised to 11.25 per cent from the projected 10.72 per cent in 2015-16, to 12 per cent from 11.20 per cent in 2016-17, to 13 per cent from 11.79 per cent in 2017-18 and to 14 per cent from 12.52 per cent in 2018-19. The revisions are just statistical hope. Yet, these hidden landmines can blast the economy out of control. And more. By transferring centrally-sponsored schemes to states in 2014-15 – resulting in a further transfer of Rs 1.19 lakh crore to states–Chidambaram has made Jaitley’s job more difficult as that much amount could have been churned by the central government for its new schemes. Here is some more hidden information. The public debt situation is grave. The dreaded debt-trap–where the government will be borrowing to pay only interest–is in sight by 2015-16. Proceeding from where Chidambaram has left the economy, the net government borrowing after repayment of debts will be Rs 4.20 lakh crore in 2016-17, but the interest burden of Rs 5.12 lakh crore for that year will exceed the borrowing by Rs 92,000 crore. This figure is likely to rise further and not go down till 2019-20. If he looks at these numbers, Jaitley will lose sleep. Unless, like diesel price rise, some harsh steps are taken this year and next, the nation may risk downgrade of its credit rating.

What should be done?

The UPA regime had only spent and never attempted to raise revenue for a decade. The result is the present financial mess. If this government has to start undoing the damage, it has to go for innovative, bold and fresh resource mobilisation. First, the annual tax giveaways of Rs 5.50 lakh crore have to be withdrawn, as suggested in the Economic Survey 2013-13. If it is withdrawn by one-fifth this year, it will yield a revenue of Rs 1.10 crore to government. Next there is need to tax the non-delivered forex, financial and equity derivatives. A tax of 10 paise per Rs 100 [at 0.1 per cent] will yield revenues of over `60,000 crore. Economist John Maynard Keynes had suggested this tax to contain speculation. In a paper [July 26, 2000], the Center for Economic and Policy Research noted that in most of the West such tax is levied on equity derivatives and the rate varies between 0.5 per cent and 1.6 per cent. Only in the US, the tax rate is low at 0.004 per cent. Most derivative transactions are speculative. The suggested tax is desirable even to contain volatility in markets. Also, new sources of revenue will emerge. These two measures will yield an additional revenue of Rs 1.70 lakh crore which can handle the financial landmines hidden in the files of government. Unless such bold steps are taken to raise revenues the status quo will continue. And it does not need a seer to say what the financial land mines left by UPA will do to the country.

How to Handle UPA's Financial Landmines? -The New Indian Express

Social sector funds slashed
Puja Mehra


To meet the fiscal deficit target for this year, the Central government is brutally slashing social sector allocations but is keeping expenditure cuts for the physical infrastructure sectors at a minimum.

This re-aligning of plan outlays across sectors by the Finance Ministry is in line with the government’s priorities. The Narendra Modi government views infrastructure spending as growth-enhancing and an essential element of its plans for reviving the economy.

The Finance Ministry is currently in the process of revising the budget estimates for allocations for 2014-15 across heads of expenditures and ministries. In the revised estimates plan, expenditure on education is proposed to be cut by Rs. 11,000 crore. Departments of Panchayati Raj, Rural Development and Sanitation are facing average cuts of about 25 per cent.

The health sector plan expenditure revised estimate is proposed to be Rs. 7,000 crore lower than originally envisaged in the budget.

In contrast, infrastructure sectors such as roads and highways allocations remain more or less the same.

“The new government’s spending priorities are different from the previous one… Prime Minister Narendra Modi’s instructions are that social expenditure can be cut but expenditure on physical infrastructure must be protected as far as possible and so these sectors will face only minor cuts in spending if at all,” said a top source at the Infrastructure Ministry.

The new order of spending priorities is likely be maintained in the next budget due in February too.

May hurt social sector

The latest round of spending cuts is expected to hurt the social sector as the budget estimates were pegged 15 per cent lower than the previous year. This is because the UPA government had built into the interim budget’s estimates 15 per cent across-the-board plan spending cuts. Union Finance Minister Arun Jaitley had retained most of these cuts in the budget he presented on July 10.

In the budget, Mr. Jaitley provided Rs. 80,043 crore as central plan outlay for rural development. For school education and literacy it provided Rs. 51,828 crore. In addition, secondary education was to receive Rs. 8,579 crore and higher education Rs. 16,900 crore. The budget had allocated plan outlay of Rs. 30,645 crore to the Department of Health and Family Welfare.

Mr. Jaitley had set himself a fiscal deficit target of 4.1 per cent of Gross Domestic Product (GDP) for the year in the budget. The calculations had assumed a 13.4 per cent growth in the ‘nominal’ GDP.

Both inflation and GDP growth this year are likely to be lower than expected at the time of budget-making. The Ministry has projected that tax collections will miss the budget target. To keep the fiscal deficit within target the government needs to curb expenditure and raise non-tax revenue such as from disinvestment proceeds.

Social sector funds slashed - The Hindu


2015 budget:

Humongous Cut in Government Social Sector Spending
Humongous Cut in Government Social Sector Spending -The New Indian Express

 

[Levina]

The C130Js were bought for special ops, not fro basic logistic transports like the An32s. They are also far too costly for this purpose in procurement and operational costs (around $90 million each C130, while C295s are sold around $50 millions each + quad prop engine vs twin).
C130Js and C17s add specific advantages to the IAF, but are far too costly for bulk of the IAF logistic operations within India. That's why we can't afford to have a fleet of 100+ C130J/MTA class aircrafts, but need a workhorse in good numbers at the lower end, for basic operations. It's the same reason why we need LCAs at the lower end of IAFs fighter fleet too, because you simply don't need the high end aircrafts in all the missions.
Also, what MoD questioned, was how useful the replacement is, based on the fact that the "Avros" wasn't used that much. The flaw in that conclusion is, that they wasn't used by the lack of capability (no ramp loading possible to transport paletts, limited capabilities to land on difficult airstrips...), contrary to the An32. The C295 doesn't have these problems and is basically in the same class as the AN32, just more modern and capable. So even if you replace the Avros, you take over the operational capability of a part of the AN 32 fleet and that at lower costs than C130J / MTA. So from IAFs opertional as well as Tax Payers point of view, the C295 is a good addition, MoD just failled to make a proper tender out of it, that is interesting enough for Indian privat players.

C130J is one of a handful of aircraft in the world that has flown for its original purchaser for more than 50 years
I know that both Airbus and Lockheed Martin 're highly capable international companies with long histories.
I heard there's a wide variation between the Avro's specifications and those of the C295 aircraft that has been offered, and India and Russia are already developing and building MTA (Multi-role Transport Aircraft)which would overlap with the "Avro replacement aircraft". Add to it that HAL has offered to replace its current Rolls Royce Dart engines with modern, fuel-efficient engines, it makes sense because the airframes have 1000s of hours of life left (you were right that they used less, about 350hrs in a yr). Now add to it that due to rupee's decline, the project cost would currently be closer to Rs 14K Cr. Lets not forget how desperate TASL is to desperate to seal this deal, as it wanted to expand on the back of C295s, so far they 've managed only small orders like helicopter cabins for Sikorsky and C-130J parts for Lockheed Martin.
So I support MoD's decision.

12 four-engined C-130J-30s meant for Special Operations are neither intended to pick up the slack from the 50-odd fleet of Avros once they are retired nor are they able to.

I am sorry I missed this post earlier.