An appropriate and compatible deal

VISIT: Air Force Commander Air Marshal Roshan Gunathilleke arrived in Sri Lanka on Wednesday morning after a visit to Ukraine. The main purpose of his visit was to accept MiG 27 ground attack crafts which were purchased from the Ukrainian Government after finalizing a Government to Government deal.

The Air Force Commander made this visit as the purchase of MiG 27 ground attack craft was made the most debated topic in the defence circles in the country during the past few weeks.

Amidst suggestions that the matter should be referred to the Commission appointed by the President to probe into military procurement the Government denied any scandal behind the deal.

The SLAF also firmly stands on its decision since it played the key role of selecting the most viable offer that can satisfy their needs and be favourable for their operational aspects and also of their financial aspects.

The Daily News went through the procedure the SLAF had adopted to finalize the Government to Government (G-to-G) deal with the Ukrainmash Company, a subsidiary of Ukrainian Government to purchase four MiG-27 ground attack crafts and to get the available four MiGs overhauled.

The SLAF since the end of year 2003 identified the need to overhaul the existing MiG ground attack crafts which were purchased from DS Alliance at a time the North East war was at its peak in the year 2000.

According to the procurement the Government paid US$ 1,882,500 (including the transport cost) per unit of MiG 27 fighter aircraft which had only two years remaining lifetime period according to the specifications for these fighter aircraft.

In addition to these four, another batch of three fighter aircraft including one MiG 23 trainer aircraft to train Lankan pilots too were purchased in October, 2000, paying US$ 1,705,000 per unit of MiG 27 fighter aircraft and US$ 1,005,000 for the trainer aircraft.

They too had two years remaining lifetime as in the case of the previous purchase.

Since these ground attack crafts had only two years remaining life time the Government following an agreement with DS Alliance extended the lifetime of the aircraft by paying US$ 155,000 per aircraft for their repairs.

Accordingly the SLAF had to spend US$ 2,037,500 (US$ 1,705,000 + US$ 155,000) for each aircraft that could be operated maximum four years before overhaul.

Out of the seven aircraft purchased in the year 2000, CF 732 destroyed due to LTTE attack on Katunayake Airport and CF 736 and CF 734 were crashed respectively on December 27,2001 and June 09,2004 and the balance were grounded at the end of year 2003 as these four attack crafts came to an end.

Since the fleet of four ground attack crafts have already become assets of the SLAF, the SLAF had to call for Tenders to overhaul the four crafts at the end 2003, since they believe that they are needed for its operations. After tenders were called for the overhaul of the four MiGs, the D.S. Alliance (Pvt) Ltd., a Singapore based company acting as an agent of the Ukrainian Government made their bids to overhaul the fleet which include three MiG 27s and one MiG 23 Trainer Aircraft.

According to D.S. Alliance offers they were prepared to overhaul the two MiG 27 crafts CF 731 and CF 735 at the rate of US$ 1,133,445.00 and the other MiG 27 (CF 737) at US$ 983,445. They offered to overhaul the MiG 23 Trainer Aircraft CTF 730 at US $ 1,299,045.

The prises quoted varied due to different work scope.

In 2006, the Government considered another flexible offer made in the year 2006 by the Ukrainmash, a subsidiary of the Ukraine Government to overhaul the fleet of attack crafts and to provide another four MiG 27 attack crafts which were manufactured in the years of 1980, 1981 and 1983 at US$ 2,577,000.00 each.

Any person who looks at this deal on the surface would feel that, the Ukrainian Government is offering these four MiG 27 crafts at a higher price compared to the MiGs purchased in the year 2000.

But when they impact deeper into the matter considering the work scope of the ground attack crafts purchased in the year 2000 and the work scope of the four ground attack crafts that are to be purchased in a G-to-G deal it would clear any doubts about the deal.

Unlike in the previous offer, in which the SLAF purchased seven MiGs which had only two years remaining lifetime at a cost of US$ 1,882,500.00 the SLAF this time is purchasing these four MiG 27 aircraft which have been fully overhauled with eight years lifetime at a cost US $ 2,577,000.00.

Therefore, the SLAF will not have to face the problem of overhauling or extending the lifetime of these attack crafts by bearing additional cost.

To get a better view of the picture, the cost for the overhaul of the attack craft should be added to the original value of the aircraft. One can realize this amount is much higher than the cost of a MiG attack craft after overhauling at the rates offered by the DS Alliance (Pvt) Ltd.

Therefore, it is impractical for anyone to come to a conclusion about the prices of the MiG 27 attack crafts considering only the original value of the craft without considering the remaining lifetime of the craft.

The SLAF also found it fit to purchase these four MiGs from Ukrainmash offer since it reduce the freight cost to a certain extent since Ukrainmash can transport the MiG 27 crafts and the MiG 23 UB trainer to the Lviv State Aircraft Repair Plant in Ukrain after they hand over the four MiGs to Sri Lanka.

In addition the favourable payment terms offered by the Ukrainmash is also another factor for the selection procedure.

The following table will explain the SLAF rationale behind the selection of the Ukrainian offer.