Defense Update

NEW DELHI — India has awarded a $3.12 billion contract for local production of 464 T-90S main battle tanks after paying a technology transfer fee to Russia.

The contract was signed with little fanfare earlier this month. The deal stipulates that Russian original equipment manufacturer UralVagonZavod and arms export agency Rosoboronexport will be paid $1.2 billion for technology transfer, while India’s state-owned Ordnance Factory Board will be paid $1.92 billion for local production of 464 T-90S tanks, according to an Indian Ministry of Defence official.

India will pay the Russian defense companies in roubles, Russia’s currency.

The MoD official described the price tag of the technology transfer as too high, noting that domestic production of the tanks will increase to 80 percent from the current level of 40 percent.

A senior OFB executive said complete localization of T-90S tanks in India is impossible, as a large number of parts must continue to be imported. The parts that will be locally produced include panoramic night sights, thermal imaging fire-control systems and explosive reactive armor, he added. However, the engines and transmission system that makes up 45 percent of the cost of a T-90S tank will come from Russia.

Another MoD official said Russian defense companies will have to undertake full production and localization guarantees. In addition, both OFB and the two Russian firms will be penalized by the MoD should the project hit production delays or cost overruns.

OFB and UralVagonZavod are expected to manufacture 120 T-90S tanks per year and complete the project within four years.

Rosoboronexport executives in India declined to comment on the deal.

The T-90S tanks are to be manufactured at OFB’s Heavy Factory in Avadi, southern India, but more than a dozen ordnance factories will carry out assembly of subsystems imported from multiple Russian defense companies.

A senior Indian Army official said greater localization of the tank does not significantly help because life cycle support is not included. Because of this, the official argued, the service ends up paying three times more than the original cost of the tank.

The Army currently operates 1,100 T-90S tanks, of which 300 were directly procured from Russia.