LEASING MILITARY EQUIPMENT
Geopolitics|May 2021
There is no way that India can replace many of its military requirements with leased equipment. The environment, the risk of loss and damage may impose prohibitive lease terms on any contract. However, there is scope in the logistics, coastal policing, search and rescue and training spheres, argues
SANJAY BADRI-MAHARAJ

Faced with shortages of funding and the need to constantly induct military equipment, the Draft Defence Procurement Procedure 2020 has proposed the innovative step of leasing noncombat equipment, for training, logistics and support functions.

Leasing is permitted under two categories — Lease (Indian) where Lessor is an Indian entity and is the owner of the assets and Lease (Global) where Lessor is a Global entity. Under the latter, the Indian Navy procured two American high-altitude long-endurance drones into the Navy — Sea Guardian, the unarmed version of the deadly Predator series on lease. In, addition to these that were procured under a one-year contract from an American firm, the Indian Navy has also gone in for leasing of a logistics ship from an Indian firm.

The DAP – the Defence Acquisition Procedure 2020 – defines leasing as a “means to possess and operate (a military) asset without owning the asset” and adds that it provides a useful way “to substitute huge initial capital outlays with periodical rental payments”. In this regard, the leasing of military equipment is not dissimilar to commercial vehicle leasing and the leasing of commercial aircraft which has become the norm for airlines who do not wish to be saddled with aircraft whose ownership is vested with them as well as all maintenance responsibilities.

Leasing offers a number of potential advantages to the Indian military not the least of which is the fact that support equipment – simulators, basic unarmed training aircraft and even logistics vehicles and vessels – can be acquired for specified periods of time without having to cater for the spares, support and maintenance burdens that these would incur. These responsibilities will often be assigned to the lessor who would be responsible for providing a level of serviceability and support for the leased equipment as stipulated.

Considerations for leasing

If a country is to consider the lease of military equipment, there are a number of non-commercial factors that the country would want to consider before leasing military equipment:

1) How much Control over the asset will it exercise?

The degree of control that a customer would want/need to retain over a capability depends on a number of factors, most importantly on its strategic importance. In the case of India, the navy already operates a nuclear attack submarine – the INS Chakra – on lease from Russia. This lease will last for ten years and will obviate the need for the navy to allow for the refueling of the submarine’s reactors. However, with other countries, there will be the issue of the public vs private dimension of asset control. Another issue is the control over the asset between the in the event of hostilities. In that case, contractual arrangements can be made to cater for such situations and contingency planning built into the system to allow for any potential use.

2) Dependency on private sector and/or third parties

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