India's $11 bn defence order to US cos snags on talks

Efforts by Lockheed Martin Corporation and rival Boeing Corpotaion to win India’s $11 billion fighter-jet order, the largest military contest in play worldwide, hinge on whether the country will allow US officials to monitor the use of American-made defence equipment.

Lockheed and Boeing, the largest US defence contractors, made their first military sales to India only within the past 12 months. Until the US lifted sanctions in September 2001 that were imposed after 1998 nuclear tests.

The relationship now faces its biggest test as the US contractors prepare to compete against each other and suppliers from Russia, France, Sweden and Europe for the 126-aircraft order that may come in 2010. Lockheed and Boeing have an additional hurdle, as India has yet to agree to US efforts to enforce a law requiring inspections of exported weapons.

“There are challenges,” Amer Latif, director of South Asian affairs at the US Department of Defense, said in an interview. “We need to come to agreement on end-use monitoring.” More than 80 countries have signed accords accepting US physical verification of weapons sold to them, he said.

Indian officials are trying to grasp the types of inspections the US will seek in a major aircraft sale, Rahul Roy-Chaudhury, a South Asia analyst at the International Institute for Strategic Studies in London, said in an interview.