Rao delays awarding Hawk deal to Britain: Indian leader's visit leaves aircraft order still in doubt

DESPITE self-congratulatory declarations on both sides, the first official visit of the Indian Prime Minister to Britain has been tempered by India's continuing refusal to clinch a deal for the purchase of Hawk trainer aircraft.

Frustrated British officials admitted yesterday that India was no nearer a decision, despite reports that the deal - worth up to pounds 1bn - might be finalised during the visit of Narasimha Rao. 'Would that it were true,' said one official. 'We'd like to say that it is true. But the evaluation process in India is some way from completion.'

Indian sources made clear that Britain could not take for granted a deal - expected to be for 66 aircraft - because of any loyalty India might feel towards its former colonial rulers. They said Britain was desperate to win the contract because thousands of jobs depended on it and because of the Pergau dam trade-for-arms debacle, which led Malaysia to scrap defence purchases. But, one Indian source added: 'Pressure won't work.'

British officials insisted that they had not realistically expected the deal to be finalised during the Rao visit. New Delhi's slow and deliberate approach was both an expression of Mr Rao's natural reluctance to be rushed into any decision and of the 'new and mature' Anglo-Indian relationship, whereby India would make an objective choice about the best aircraft at the lowest price.

On a visit to India 14 months ago John Major took a representative of British Aerospace to lobby for the deal. As one Indian source said: 'Pressure did not work then and it will not work now.'

An order would help to safeguard jobs at BAe's plants at Brough, Humberside and Warton, Lancashire, and provide business for suppliers such as Rolls-Royce. The rival French bid is for Alpha jets, made by Dassault-Dornier. One official said the problem was largely that the Indians were faced with almost 'identical products at the same price'.

Indian press reports say the Hawk deal has already been recommended by Indian Air Force experts. Some sources suggested New Delhi was spinning out the contest because of what it perceived as lack of political support from Britain over issues such as Kashmir. 'If India gives them this contract there is nothing left in its armoury,' said one.

The Indian decision-making process goes back a number of years. 'First there was the technical problem of whether they could design and build their own planes,' said one British official. 'They decided not to. Then there was the decision as to what kind of plane to buy from abroad. Then there was the question of whether there is enough money in the budget. And Manmohan Singh (the Finance Minister) cares a lot about the budget deficit.'

British officials admit Mr Singh is 'an effective operator' and say their faith in the successful liberalisation of the Indian economy rests largely on his competence.

During Mr Rao's visit, General Electric signed a memorandum of understanding on a pounds 1bn deal to build a power station in Maharashtra state. British officials brushed aside any parallels with the Pergau dam: 'You'd be hard pressed to get Pergau into this,' one said. 'It is not a dam; and the aid budget for India has been stable for a number of years. We'd dearly love to sell arms to the Indians, but it is not a case of aid for trade.'