Friday, September 1 2006 15:31 Hrs (IST) - World Time -

Washington: As India's economic and strategic ties to the United States expand, defence contractors are eyeing its growing military budget and ageing arsenal as a multibillion dollar opportunity.

According to the Washington Post, at stake are contracts worth billions that could help offset a projected slowdown in Pentagon weapons spending and extend production lines for such items as the F-16 fighter.

While not the largest foreign defence market, the daily said industry officials and analysts consider it one of the fastest growing as it replaces fleets of Soviet-era planes and goes shopping for new radar and missile systems.

The largest near-term opportunity is India's plan to buy 126 fighter aircraft, which would replace their older Russian MiGs. Lockheed and Boeing are marketing their F-16 and F-18 aircraft respectively, squaring off against Britain's Eurofighter and Israel's Rafael.

"That will be the bellwether. How serious is India in looking at us as a supplier, how serious is the US in releasing technology?" Joel L. Johnson, an analyst at Teal Group Corp., a Fairfax research firm, told the Post.

"It's an untapped market that nobody has the inside track on yet," Johnson said citing Teal Group's estimate that India's defence budget is expected to reach more than $23 billion this year, compared with about $13 billion in 2000.

"The Indians have money, their economy is growing and, so, US companies are guessing that when our own defence budget finally gets crunched" the Indian market will be profitable, he was quoted as saying.

For both Lockheed and Boeing the orders could help extend their production lines. Lockheed has supported the F-16 line for years with international orders, but recently began laying off hundreds of workers as it prepared for demand to dwindle.

"If they pick us to re-capitalise their Air Force, you're talking about 25 years of relationship," the daily quoted Ron Covais, Lockheed's vice president for corporate international business development as saying.

Several of the Pentagon's largest contractors, including Lockheed Martin Corp. and Boeing Co., have either opened new offices or beefed up existing ones in India and are part of an industry-wide wooing of military officials and business leaders there.

Sikorsky Aircraft Corp., maker of the Black Hawk helicopter, opened an office in India in April and is competing for a contract for 200 helicopters potentially worth more than $3 billion. General Dynamics Corp., based in Falls Church, bought an Indian company in 2004 and is using it to sell communications equipment.

The Aerospace Industries Association, a lobbying group, is planning a trip there in December with executives from up to 20 companies.

"The biggest hurdle is going to be patience," Torkel Patterson, president of Raytheon International Inc., said of joining the market.

"We're getting to know each other," he said.

The company is hoping to sell Patriot missiles to India and to help it upgrade its missile defence system.

Overseas sales have become an increasingly important part of revenue for US defence contractors. Lockheed, headquartered in Bethesda, aims to increase its foreign business to 20 percent of revenue by the end of the decade, up from about 14 percent now.

Lockheed got a 'toe' into the Indian market this year when it was hired to supply parts for submarines.

"It's modest, but part of confidence building," said Lockheed's Covais.

Developing a significant presence in India will not be easy. The country has traditionally bought its weapons from Europe or Russia and has a complicated and lengthy procurement process, according to industry insiders cited by the Post.

"The cost of marketing could equal 5 to 10 percent of contract. You're looking at a lot of upfront costs," said Richard Aboulafia, an aviation analyst for Teal Group.

Los Angeles-based Northrop Grumman, the maker of the Global Hawk, has tapped the Maryland Department of Business and Economic Development for help, as it prepares to open an office in New Delhi next year.

The agency has arranged meetings for the firm and introduced them to Indian military officials, company officials said. "They have been educating us on how the Indian aerospace business has been developing," said Scott Porter, a Northrop vice president.

Critical to any contract, industry officials acknowledge, will be partnerships with Indian businesses, the Post said. The Indian government is expected to require contractors to do about 30 percent of the work in the country, aiding local businesses and ensuring that they will have access to critical technologies.