Overdoing Leasing Puts a Strain on the Stretched Budget
Because of the continuing financial crunch, the armed forces are leasing an assortment of badly needed platforms and equipment from abroad to mitigate enduring operational gaps. Leasing was introduced as yet another procurement category in the Defence Acquisition Procedure 2020 (DAP-2020) launched last October.
Consequently, all three services had initiated a flood of inquiries and negotiations to lease varied platforms like naval utility helicopters (NUHs), mid-air refuellers, basic training aircraft, minesweepers and unmanned aerial vehicles (UAVs), among other kit.
Amit Cowshish (Ex-Financial Adviser, acquisition, MoD) & Rahul Bedi (Senior journalist) however, write that “in their keenness to haphazardly pursue this unexplored leasing option, the MoD, military, defence analysts and media appear to have disregarded that lease rent and other associated costs have to be disbursed from the existing stressed budget outlay. Besides lease rent payable to potential lessors over pre-determined intervals, the high cost of modifying platforms or equipment to meet the military’s operational requirements and insuring them too would have to be borne by the respective services from their annually shrinking outlays. As, of course, would the eventual cost of rendering the equipment, upon its lease expiry to its original state in keeping with the accepted standard international practice.
“Maintaining the equipment to standards stipulated by the lessor too would be the respective services’ responsibility, unless otherwise specified. This cost could even be higher if the equipment were to be serviced and maintained by the lessor as such an eventuality would entail stationing an upkeep crew in India for extended periods.”
In short, write the two authors “the leasing of materiel sounds appealing, but indiscriminate renting, given the MoD’s penurious financial milieu, would be problematic……”
Examples of leasing:The two authors, in their article mention some of the leasing done by the armed forces. “The Indian Navy — presently operating INS Chakra, its second nuclear-powered attack submarine leased from Moscow and with a replacement boat similarly agreed upon — is the first of the three services to have fast-tracked leasing. Late last year, it had leased two non-weaponised Medium-Altitude Long-Endurance (MALE) MQ-9B Sea Guardian UAVs from the US to monitor for one year…….
“And, last month, the Navy had invited responses from overseas vendors by June 18 regarding its planned five-year lease of 24 NUHs and related support equipment to replace its fleet of legacy licence-built Chetak helicopters, inducted into service since the 1960s…….
“The MoD is also in advanced negotiations with the French Government to lease one Airbus Defence and Space A330 multi-role tanker transport aircraft for the Indian Air Force (IAF) for training purposes. The proposed tanker that would be operated by the IAF, but maintained by the French Air Force, would in all likelihood be succeeded by leasing five more A330s to augment the reach and, hence, combat capability of the force’s combat aircraft…..
“In January, the Indian Army (IA) leased four Israel Aerospace Industries MALE UAVs in response to the continuing face-off with China’s People’s Liberation Army that began last May. Proposals for additional equipment for the IA are anticipated.
“In conclusion, while there is no argument regarding critical equipment voids in the military or about selectively filling them via leasing of equipment, opting indiscriminately for this conduit will adversely impact the MoD’s already pressured kitty. Fiscal and force planning remain critical.”
