India Downgrades Vendor Status of IAI and RAFAEL
On Oct 14/08, India’s Election Commission announced dates for assembly polls in 5 key batleground states of Delhi, Madhya Pradesh, Rajasthan, Chhattisgarh, and Mizoram. The announcement begins the countdown to national Parliamentary elections in 2009, and political positioning has begun. One offshoot of that has hit the defense sector, as DNAIndia reports a new order that changes the status of Israeli firms IAI and RAFAEL within India.
Recent months had seen important progress in India for the 2 Israeli defense firms. In February 2008, RAFAEL signed a long-term joint venture contract with Bharat Electronics Ltd. (BEL) in Bangalore. In August 2008, India’s MoD got fresh “vigilance clearance” to go ahead with the Barak-derived medium-range naval defense missile and land-based MR-SAM program, despite ongoing political allegations and a CBI investigation asking if bribery was involved in the original 1999-2000 Barak missile deal. Meanwhile, the short range IAI/RAFAEL Barak anti-air missile system now equips a number of Indian Navy ships, and the Navy is looking to replenish its stocks. Earlier in October, India’s government had also contracted to buy Spyder air defense systems for the Indian Air Force.
No indictments have been issued in these matters; nevertheless, under the new government guidance, DNA India reports that the Indian Navy may not purchase additional Barak missiles for the fleet until the new guidance is repealed. The effect on the Spyder deal is less certain, but it is also likely to remain in limbo until the political situation in India sorts itself out after the 2009 elections. Beyond that, the new guidelines specify that neither RAFAEL nor IAI can receive single-vendor RFPs until the cabinet committee on security takes a final decision. Multi-vendor competitions can still issue RFPs to these firms, but eligibility would be withdrawn if the CBI files a chargesheet showing “incriminating evidence” against the companies in the Barak case. A fresh “vigilance approval” will also be required if IAI and/or RAFAEL should win a multi-vendor competition. Existing contracts like MR-SAM will continue, but with their status under periodic review for cancellation if the CBI investigation bears fruit.
UPDATE: A Nov 9/08 India Times article clarifies, noting that the Spyder air defense system purchase is going ahead.