MEA shoots down defence ministry's helicopter export - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Friday 22 May 2009

MEA shoots down defence ministry's helicopter export

(Photo: courtesy Ajai Shukla)

The VIP-kitted Dhruv helicopter that is now being used by the President of Ecuador

by Ajai Shukla
Business Standard, 23rd May 09

The prospects for India’s most promising defence export — the Dhruv Advanced Light Helicopter (ALH) — have just been dealt an unexpected blow. India’s Ministry of External Affairs (MEA) has turned down a Bolivian request for a line of credit to buy seven Dhruvs from Bangalore-based manufacturer Hindustan Aeronautics Limited (HAL).

Senior officials in India’s Ministry of Defence (MoD) are livid. India’s defence exports languish at about Rs 300-400 crore per year, barely 1 per cent of the Rs 30,000 crore spent annually on importing weaponry. The export of seven Dhruvs, each worth Rs 44 crore, would have effectively doubled defence exports.

MoD sources said the MEA turned down Bolivia’s request for a line of credit on the grounds that it was for military equipment. The MEA has not responded to an emailed questionnaire from Business Standard on the subject.

Dhruv ALHs, in fact, have civilian as well as military uses. Of five Dhruvs delivered to Ecuador this year, one was kitted out as a VIP transport for the Ecuadorian president. India has also supplied Dhruvs to Nepal and to Mauritius on easy credit, even as gifts.

Says a senior MoD official, “Frankly speaking, I was surprised by the MEA’s decision. I can only surmise that this decision was taken by someone at the lower level, without realising the implications on India’s defence exports.”

Bolivia barely registers on the MEA’s radar. That country does not have an embassy in New Delhi; an Honorary Consul represents India in La Paz, Bolivia’s capital.

But for the MoD, the sale of Dhruvs to Bolivia would be a vital step in cracking America’s domination of the South American helicopter market, which HAL was targeting aggressively. As more Dhruv ALHs flew in South American skies, HAL planned to set up major support infrastructure to pull in even more customers.

Five years ago, with the Chilean Air Force poised to buy the cheap and rugged Dhruv, Washington’s pressure allegedly forced Santiago to opt for US-made Bell helicopters. HAL bounced back by selling Ecuador five Dhruvs in 2008; Ecuador is reportedly considering a follow-up order. Chile, too, continues to watch with interest.

HAL’s Chairman and Managing Director, Ashok Nayak, refuses to talk about the MEA’s decision, but points out that HAL’s growing presence in South America will inevitably bring in more customers from that region.

Nayak explains, “We have already delivered the five Dhruv helicopters ordered by Ecuador. Our pilots are training the Ecuadorian Air Force; we have posted 15 HAL maintenance personnel in Ecuador for backup support, along with a substantial inventory of spares. We are steadily gaining experience in supporting the operations of Dhruv ALHs in South America. That is bound to pay off soon.

Helicopters are a vital part of the Bolivian Air Force, since anti-drug operations are its main focus. Without a single fixed-wing fighter aircraft, the Bolivian Air Force currently relies on the venerable American UH-1H Huey helicopter, which is approaching the end of its service life. With the Dhruv providing a state-of-the-art alternative at a price 25 per cent cheaper than its alternatives, Bolivia remains a potential buyer.


  1. Kick the idiot out of MEA and immediately issue order sanctioning the sale.

  2. Fantastic just fantastic. Now can some one tell me the name of the gentleman who blocked the sale of the helicopters. I would personally smear his face with black tar and dispatch him on a donkey. It would be some sight an ass sitting on a donkey.

  3. Hal should raise this issue with M K Anthony and lobby for the credit line to be opened in favour of Bolivia. China is already making its presence felt by supplying various defence systems. MEA already is playing second fiddle to the chinese intrusion at our backyard.This bunch of MEA non-performers should be confined to Guantanomo Bay which will be available soon. Real idiots!

  4. this moronic decision should be reversed asap, maybe coz of elections MEA was being run on autopilot by a pen pusher too scared to make any sensible decision.

  5. WTF!?!?!?? Damn!

  6. That MEA ass must be in the pay of USA. Now Bolivia has no option but to buy from USA.

  7. I don't think everything is lost. There can be a reversal in the decision and for that Shri.A.K Anthony the defense minister and Shri.S.M Krishna must sort this issue immediately. If needed PM must intervene and make sure that this is done. This kind of deals are of long term strategic interest for the Indian nation.

  8. fucking MEA...biggest junkies of them all...these are the same people who wilted to US pressure to go slow on the LCH...this is what you get when you go around sniffing other people's garbage.

  9. Our defense minister has consistently proved his incompetence in the last 5 years that led him to admit that he could not get his babus to move files. The fact is the way these ministries are structured or fractured into lobbies any official at any level can block the deal on any pretext(they are easy to find in our over complex and self defeating procedures) and nobody can do a shit about it.

  10. Hi Ajai, Plese go through this link - this link was found by ASPuar@BR. I think the Bolivia order is out of our hands now. May be if possible can you confirm whether the Bolivian order is indeed gone out of hands?. Thank you.

  11. No, read the Ria Novosti article carefully... firstly, it talks about Mi-17s, which are a heavier class of helicopter. They would still need lighter, more agile choppers.

    Furthermore, the Russian defence industry is unable to meet Bolivia's orders. Like everyone else, they prioritise who they sell to, using strategic parameters.

    Using those parameters, as the Indian MEA does, it makes little sense to extend a line of credit to Bolivia. From a purely commercial viewpoint, however, which in this case would be to consolidate in the South American helicopter market, there is a strong case for granting Bolivia whatever terms they need for signing this contract.

    At the end of the day it is, of course, even the commercial argument has a strategic logic!

  12. Thank you for the clarification.

  13. Firstly, why is Bolivia asking for a line of credit to be extended by India? Surely Bolivia isn't facing a financial crisis. If that were to be the case, surely Bolivia could have just 'borrowed' some of the required funding from Venezuela, as President Hugo Chavez is only too happy to do so for countries like Argentina, Bolivia or Nicaragua?
    Secondly, before jumping to conclusions and squarely blaming the MEA, one has to establish the following:
    1) Which Union Ministry was approached for extending the line of credit--the MoF, MoD or MEA?
    2) Did Bolivia request for the opening of a line of credit with India's EXIM Bank in order to make the initial down-payment upon contract signature, or did it seek a deferred payment scheme for an extended period (between eight to 10 years)?
    3) Did Bolivia specifically ask for project financing of the type the MEA had earlier provided for countries like Myanmar for funding infrastructure development projects?
    4) Did the MoD express its inability to come up with innovative project financing schemes and consequently ask the MEA to pick up the tab?
    Of course, all this would have been avoidable only if HAL were a self-financed and public-listed corporate entity which could have treated the Bolivian request as purely a commercial issue that could have been settled internally by securing syndicated loans from non-governmental financial institutions. But even if HAL remains a MoD-owned corporate entity, the least the MoD needs to do is create an export promotion board/agency similar to Russia’s Rosoboronexport, Pakistan’s DEPO, the UK’s DESO, and France’s OFEMA/SOFMA. Traditionally, such institutions have played a critical role in raising syndicated loans for funding weapons export promotion programmes and for raising project financing in both South America and Africa. One can only guess why such institutions are still missing in India and have yet to be ‘indigenised’.

  14. Legends can be written of our capability to shoot ourselves in the foot

  15. the terminator24 May 2009 at 02:46

    MEA is noted for its shortsightedness. When other countries are doing everything to become as friendly as possible for commercial and strategic reasons, the babus in MEA are myopic as usual.

    India is not an exporter of defence or related items. It can't even go full trottle on indigenisation because of vested interests promoting foreign products and sabotaging Indian made defence items.

    If the same request had been made to the Pakistanis let alone the Chinese, the Pakis would have sold as many as possible to Bolivia on Chinese loan financing. They would have just painted their made in land of the pure decals to advertise their ability at the expense of the Yindoos.

    Indians lament at the lopsided trade with other countries but do not make an effort to be at par. They would bend over backwards to make others richer than themselves under the pretext of not antagonising or stepping on the toes of the others.

    India's trade with China is still in China's favour. Who is indirectly supporting China's economy. Money earned from India is used to finance the Pakistanis, Bangladesh, Myanmar, Nepal and Sri Lanka to screw us. Do we realize that?

    Indians have been and are still good at appeasing their hostile neighbours. They have never been known to take a more proactive action. Indians are reactive to their own detriment.

  16. The naive Bolivians may not know that the junior babus in MEA expect some 'mithai' before doing business in helicopters. Defense exports, market consolidation and deferred line of credit?! Who cares? Our paan-chewing babus have self-imposed morality to defend. May be, an all paid vacation for a week in the city of La Paz may knock some sense them. I hope pragmatism prevails.

  17. Ajai, will it be possible for you to cover the Arjun Tank trials against T-90s, now that regimental manoeuvers have been introduced in the game.

  18. Prasun,

    Please stop gassing to make yourself look good with 5 minutes of google. Fool.

  19. hmmm...let me do a wild guess ..I read somewhere that Bolivia is providing support to Iran's nuclear program with something like uranium ore. (not sure)...and washington is pissed off over it...

    if MEA people think this move was related to nuclear non proliferation or something ..they sud make sure that we get our share of divident.

  20. I just went red in the face just reading the comment. I am not even an Indian in the first place (my mom is) but even as an American I can tell that those guys are friggin' idiots who prolly got there by sucking ass. Pardon my language.

  21. I am sorry to deviate a bit out of the topic!!!

    But those paan chewing babus sitting in MEA(like all other govt. agencies) are product of the damned quota system!! These incompetent fellows dont care abt the welfare of our country, all they want is their f***ing 'mithai' to be SWEET!!!

    Our beloved country is going to the dogs!! :(

  22. Instead of the A** H**e Prathiba Patil, If I had been chosen as the president, I would have kickd the MEA officials and External Affairs sucker on their b**t and would have made them do some useful work.

  23. Useful work = Making them clean public toilets.


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