India’s recent announcement that it may seek to impose financial penalties on the Russian government for continued delays in the delivery of the Admiral Gorschkov (rechristened INS Vikramaditya) marks yet another downturn in Indo-Russian commercial relations. The Gorschkov, originally slated to be delivered in August 2008, has experienced a series of delays and has has now seen its delivery schedule further pushed back until the end of 2013. While the Indian government had previously discussed penalizing the Russian government for its tardiness, the most recent statement is the first formal declaration of such intentions. If the government follows through on its intentions, it could impose a fee worth 5% of the carrier’s $2.3b price tag (approximately $115m).
While the acquisition of the Admiral Gorschkov is certainly one of the most high-profile delays, this is not the first time Russia has suffered setbacks in its dealings with India. In 2009, the Russians lost a $1b deal for airborne tankers to EADS because of poor maintenance services, and in mid-2012 the Indian Air Force cited strong concerns with the Sukhoi-30’s design and fly-by-wire controls after the third crash in as many years. Despite this, Russia remains India’s largest partner in arms sales, supplying weaponry and tanks in addition to the refurbished aircraft carrier and other aircraft. A strong market presence does not equate to invulnerability, however, and the mounting delays and second guesses have only been opening doors for other contractors to offer their wares.
Western firms have already established a foothold in the Indian aerospace marketWestern firms have already established a foothold in the Indian aerospace market, with India having recently purchased 15 CH-47F heavy lift helicopters and 22 AH-64D Apache attack helicopters from Boeing. This comes on the heels of a previous deal where Boeing won large contracts to supply C-17’s and P-8i long-range maritime reconnaissance and antisubmarine aircraft. Lockheed Martin has also been able to sell the C-130J in India as a replacement for older transports. Both MiL and MiG are seeing their market shares slowly eaten away as competitors offer comparable platforms with the added bonus of a reliable delivery schedule and proven support services. For Russia, there is still the promise of the jointly-developed fifth-generation fighter that is currently underway, though the timeframe for that project has also slipped three years to 2020. Using 050 Data, we can model this trend from 2008-2017, and see the change in defense spending trends. Russian awards are on the decline, while the United States and other western nations are making large gains as India shifts away from its past trading partners and, in the out-years, its own domestic industry.
With continuing pressure to modernize and expand its military both for national pride and because of China’s own military expansion (not to mention the ever-present threat posed by Pakistan), India is still a ripe market for defense sales. Russia remains a strong player in the Indian market, and India seems committed to joint development of the fifth-generation fighter, but the Russians should certainly be wary of further product delays for fear of losing their stake in a rapidly growing market. As evidenced by Boeing and Lockheed Martin’s previously successful market inroads, India is not against diversifying its supplier base by any means.