India has reportedly paused a $3.6 billion deal to procure Boeing jets from the US following the imposition of 50% tariffs. The US State Department approved the $2.42 billion original deal for six additional Boeing P-8I maritime patrol aircraft in 2021. Due to supply chain disruptions, inflation, and the tariffs imposed by US President Donald Trump, the price has soared in the ensuing years.
Aircraft Procurement Costs
According to reports citing defence sources, the decision was taken due to a nearly 50% hike in project costs. At the beginning of August, the sharp spike in price was driven in part by the 25% tariffs imposed by Trump, which made parts and components related to the aircraft procurement significantly more expensive for Boeing. According to the Financial Express, "these costs have since been passed down to the buyers (in this case, the Indian government)."
Ministry Of Defence
Factors such as rising costs, evolving geopolitical dynamics, and strategic autonomy are likely to play into the final decision. Multiple reports suggest that the Ministry of Defence has therefore chosen to pause the acquisition and conduct a strategic reassessment. There has been no official confirmation from the Indian government about the deal or its suspension.
Indian Exports
This tariff hence raises the overall cost for Boeing, which passes the increased cost on to the Indian buyer. The supply chain for the planes involves Indian exports or Indian-produced parts that now face a tariff when imported into the US or incorporated into the final product.
Air India Sends Boeing Dreamliners For Retrofitting
According to Financial Express, "Air India began sending its legacy Boeing 787-8 Dreamliners for retrofitting in the US, and soon, the developments followed. Sources told PTI that the first revamped jet was likely to join the fleet by the end of the year. There are a total of 33 Dreamliners with Air India — 26 legacy Boeing 787-8s and 7 Boeing 787-9s."
Configuration Of Retrofitted Planes?
These retrofitted planes will have a three-class configuration, each comprising 20 Business Class, 25 Premium Economy and 205 Economy class seats.
