GK121,
1. Boeing was going to offer India a variant of the USAF-spec KC-767, not the Italian/Japanese-spec version.
2. Boeing simply knows that, if the USAF again chooses the Airbus KC-45, that India won't pay for the development of the variant, and will kick it out of the contest on cost grounds.
3. Thus, Boeing would lose all money it put into the Indian tanker bid effort.
4. In order to remain in the contest, Boeing would have to offer to pay for much of the development costs themselves, thus losing massive money on the deal.
Fair enough. But your post also highlights that as the Airbus KC-X bid is closely based on the RAAF's KC-30 design, which is actually flying and transferring fuel - albeit with a problem last week - Boeing's KC-X bid is much less mature and therefore has considerably more technical risk.
It will be interesting to see which way the USAF jumps on this one - personally, (and I claim no expertise in this) all the indicators are that the Airbus should win on merit. Again.
S41