(This was originally posted in Financial Express by HUMA SIDDIQUI)
The US aerospace Boeing Company is open to leasing KC-46tanker, a derivative of the Boeing 767 passenger aircraft to the Indian Air Force (IAF), which is seeking quotes for mid-air refuellers. Confirming this to Financial Express Online, in an exclusive interaction with Financial Express Online, Torbjorn Sjogren, VP, International Government & Defence, Boeing Global Services, said “We are in talks with the IAF for KC-46tanker. There is a requirement for air-to-air refueling and we are working through certain issues. We are open to leasing these tankers. We already lease commercial aircraft to various domestic airlines in India; we understand there is provision for leasing military platforms in the Defence Acquisition Procedure (DAP).”
KC-46 Tanker Vs Airbus
Comparing Boeing’s KC46 with the European aerospace major Airbus’ A330 Multi Role Tanker Transport (MRTT), Mr Sjogren, said, “There is a need for mid-air refuellers in India. What we are offering can operate out of both big and small airports. This means that operational cost will be less compared to others. Boeing’s KC-46 is more of a combat tanker.”
Interestingly, Japan Air Self-Defense Force (JASDF) will soon be having KC-46 tanker in service. Japan, part of the Quad grouping which is meeting for the first Leaders summit virtually on Friday, is the KC-46 program’s first international customer.
Unlike the Airbus’ MRTT which is a derivative of the twin-engine A330 passenger aircraft of Airbus, the KC-46 tanker has the ability to carry cargo and passengers and can be used in humanitarian relief efforts. The KC-46 refuelling certification encompasses US Air Force, Navy, Marine Corps and JASDF aircraft.
IAF which is facing a critical shortage of mid-refuellers is keen to lease at least two platforms to plug the gap. And for this it has sought financial quotes from Boeing and the European aerospace major Airbus. Leasing of two platforms is besides the IAF’s plan to acquire six mid-air refuellers.
The tanker being offered by Boeing has been designed to operate in nuclear and bio environments. And because of its size, the tanker in a war like situation can land and take off from over more than 100 airstrips.
Current status on the refuellers
Speaking on condition of anonymity, a senior officer confirmed that “Discussions are going on with both the Airbus as well as the Boeing Company. Due to the continued standoff between India and China along the Line of Actual Control, there have been several military drills involving the Quad (India, the US, Japan and Australia). Japan is soon going to get the KC-46.”
The leasing of defence systems may be a new option that has been introduced by the Defence Acquisition Procedure (DAP) of 2020.
Expert View about Leasing of Military Platforms
A new provision made in the Defence Acquisition Procedure-2020 (DAP-2020) would enable the Ministry of Defence (MoD) in future to acquire and operate military assets -equipment and platforms- by taking them on lease from the Indian and foreign sources, without owning them.
“Outright purchase of assets requires the entire capital cost -quite substantial in most cases- to be paid during the delivery period of the contract. This initial cost would get staggered, in the event it is found viable to take the asset on lease, as rental payment will be spread over the entire period of the lease, making it a more viable option for the MoD which has been facing acute budgetary constraints,” Amit Cowshish, former Financial Advisor (Acquisition), Ministry of Defence, tells Financial Express Online.
According to him, “The MoD may consider taking an asset on lease if outright procurement is not feasible due to constraint of time, if it is needed in limited numbers for a specific period, or the asset may remain underutilised if procured. An asset may also be taken on lease for gaining operational experience or to meet any other operational exigency. It could be an operating or a finance lease. Typically, the ownership of the asset is retained during and after the lease term by the lessor under an operating lease agreement, whereas under a finance lease agreement, the asset is transferred to the lessee when the lease ends.”
“An operating lease could be a dry lease in which only the asset is transferred to the lessee, or a wet lease which requires the lessor to provide not only the asset but also the operating crew, maintenance support, etc. Recognising that quite often lessors are independent third parties, operating in partnership with the Original Equipment Manufacturers (OEMs), DAP-2020 provides that the lease agreement may require coordination between a leasing firm, financiers, OEM, and the country concerned,” Mr Cowshish adds.
In conclusion he says, “An elaborate and flexible procedure has been laid down which, among other things, envisages finalisation of terms and conditions peculiar to leasing of assets, such as insurance, title and risk, modification and re-modification of the asset, payment of commitment fee to the lessors, and limitation of liability.”
