Modifying Tata’s Boeing-Airbus deal with co-production at its core is an opportunity for institutional course correction.
In a podcast the other day, External Affairs Minister S. Jaishankar boasted that the Bharatiya Janata Party government of Narendra Modi is the most “strategic” of any the country has had. One may have expected then that, in the context of India’s requirement in the years ahead of 1,500-1,700 commercial aircraft, according to the Centre for Asia Pacific Aviation, and keeping the Aatmanirbharata (self-sufficiency) objective, the massive outgo of foreign exchange, and inherent economies of scale in mind, New Delhi would have helped configure the Tata deal for 400 single aisle and wide-body aircraft differently, premising it principally on co-production.
It would have laid down the principle of private sector companies consulting with the government while negotiating for capital acquisitions, and a template for aviation purchases generally, starting with the $115 billion contract Tata & Sons have signed with Boeing Company of the United States and the European Airbus consortium based in France. This deal is so big President Joe Biden crowed about it creating one million new jobs in America.
India’s belated insistence on co-production may upset Boeing and Airbus calculations. But they will concede the economic logic of making India a second production hub with converging global supply chains for their popular Boeing 737 and Airbus A-320 medium haulers as a cost-effective means of satisfying the burgeoning Indian and international demand for them, which Seattle and Toulouse by themselves will be hard-pressed to meet. Also, Washington and Paris can be expected to appreciate the strategic logic of thus firming up a partnership with India as a pillar for their Indo-Pacific policies.
In any case, New Delhi’s attitude should be clear and firm: co-production—that’s the deal, take it or leave it. What choice does either company have other than to take it? The customer is, after all, king.
Moreover, while Tata may sign the cheque, it is the country’s wealth being shipped out and the government has to have a say. Tata have so far only communicated an intent to buy aircraft; detailed contracts are still to be finalized. The Modi government, albeit belatedly, ought to ensure that clauses for co-production and system integration of these aircraft in India are central to the deal.
All these years, like the rest of the technology and common sense-challenged agencies of the Indian government when it comes to capital acquisitions, the Civil Aviation Ministry too acted as a “middleman” facilitating commercial deals with Boeing and Airbus and permitted politicians and babus to pocket millions of dollars in pelf. The Central Bureau of Investigation and the Enforcement Directorate are currently investigating decisions by the Congress regime of Manmohan Singh regarding the Air India-Indian Airlines merger and the subsequent order for 111 Airbus aircraft for Rs 70,000 crores.
Corruption apart, the Indian government had habitually played fast and loose with the country’s monies by letting airlines buy civilian planes that get the country little else in terms of substantial technological and manufacturing benefits. In return for the tens of billions in hard currency expended on buying planes of all kinds, a Boeing official revealed his company annually buys aviation goods and services from India worth a billion dollars. Is that a joke?
Now consider India’s main adversary—China, and how it has managed over the years to build up its civil aviation industry such that today most of its civil and military aviation needs are met by Chinese companies, such as the Commercial Aircraft Corporation of China (COMAC). It still buys long haul aircraft from Boeing and Airbus but that’s expected to end soon. The first of the COMAC models was the 100-seater ARJ-21, a flawed product Beijing peddles in Africa for half the cost of Boeing/Airbus aircraft. Its second model, the 170-seat C-919, however, is a medium range plane in the same class as Boeing 737 MAX and Airbus A-320 Neo that Air India is buying.
The first thing the strategic-minded Chinese leadership did was exploit the opening to the US via the Richard Nixon-era “ping pong diplomacy”. It prioritized procurement of aviation technologies by fair means and foul. The very year (1972) Nixon met with Mao Zedong in Beijing, the Chinese Aviation Company of Shanghai bought a single Boeing 707 and promptly reverse-engineered it into the passenger aircraft, Y-10. Helped by President Ronald Reagan’s “Orient Pearl” tech-transfer programme, the Chinese air force likewise rapidly modernized its frontline F-7 (MiG-21) fighter aircraft fleet with advanced US avionics.
Simultaneously, Beijing began a decade-long negotiations with McDonnell-Douglas that fetched in 1985 a deal to co-produce the MD-80 passenger aircraft for both the Chinese and international markets. In time, the American company’s entire assembly line and production wherewithal, including computer-assisted design, etc. were bought out. Despite assurances to Washington, the metal-bending machines meant for the MD-80, for instance, were immediately employed in Chinese combat aircraft production. China paid $1.2 billion for the whole transaction. It was, perhaps, big money at the time but it obtained for China the technological know-how, know-why, and the latest aircraft manufacturing and management techniques that it has since utilized to produce modern civilian and military aircraft, assisted by a sustained programme of electronically filching US designs, technological secrets, and proprietory information.
It is the sort of strategic singlemindedness the Indian government and military need to be capable of. Indeed, the Indian government on the one hand takes pride in sticking by agreements at any cost, as Jaishankar affirmed in that podcast and, on the other, despite the PM’s efforts stifles indigenously-developed technology just so foreign hardware can continue to be purchased by all and sundry, especially the armed services. Aatmanirbharata can go suck.
Modifying Tata’s Boeing-Airbus deal with co-production at its core is an opportunity for institutional course correction. If Prime Minister Modi grabs it, besides generating literally millions of high paying jobs and raising the quality of skilled manpower, he will establish India as a production centre for high value Boeing and Airbus aircraft with gains spilling over into the military aviation sector, and a magnet for other high-tech global industries. Lose it, and India remains a technology plodder and client state.
Bharat Karnad is Emeritus Professor in National Security Studies at the Centre for Policy Research. He was member of the (First) National Security Advisory Board, and formerly Adviser, Defence Expenditure, to the (Tenth) Finance Commission.