Wednesday, 21 August 2013

Defence ministry delays raise light artillery cost by thousands of crores

An American gun detachment fires the M777 ultralight howitzer in Afghanistan 

By Ajai Shukla
Business Standard, 21st Aug 13

A delay of over 3 years by the ministry of defence (MoD) in ordering urgently needed artillery guns for mountain division has raised the cost by as much as 90 per cent. New Delhi’s order for 145 pieces of the BAE Systems M777 ultra light howitzers (ULHs), which would have cost less than Rs 2,960 crore in Jan 2010, could now cost up to Rs 5,610 crore.

On Aug 7, the US Department of Defense (Pentagon) re-notified the US Congress of the sale to India of 145 BAE Systems M777 towed 155 mm/39-calibre ultra light howitzers (ULHs) for up to $885 million. This has superseded the earlier notification of Jan 26, 2010, which had stated a maximum cost of US $647 million.

This price increase of 38 per cent comes alongside the appreciation of the dollar by almost 45 per cent, from Rs 45.86 on Jan 26, 2010 to Rs 63.53 today. This double whammy has raised the cost by up to Rs 2,650 crore

However, senior Pentagon sources point out that the price of $885 million mentioned in the re-notification of Aug 7 is the “upper limit of the price envelope”, and that a deal finalized quickly might not cost substantially more than the previously notified $647 million.

“But some escalation is inevitable, given that the earlier notification dated back more than three years. Besides, BAE Systems has already incurred costs in keeping its assembly line open,” says the Pentagon official.

New Delhi is directly negotiating the purchase of 145 M777 ULHs with the Pentagon under what the US calls the Foreign Military Sales (FMS) programme. In this, India buys the gun directly from the Pentagon, which negotiates terms with the supplier (in this case BAE Systems), charging a small percentage for its services.

Most major components of the M777 ULH are made in the United Kingdom. However, since the US Army and Marine Corps are major users of the gun (the British Army itself does not use the M777), it is assembled at a BAE Systems plant in Hattiesburg, Mississippi, USA.

Discussions continue between the MoD and BAE Systems but the purchase has not been finalised. There are reports of an effort to finalise a contract in time for Prime Minister Manmohan Singh’s visit to the US next month.

Production on the BAE Systems production line in Hattiesburg is winding down and would be closed in the absence of new orders. If New Delhi places an order for the M777 after the line closes down, that could result in a major cost escalation, since re-starting a shut down line and re-certifying suppliers of sub-systems would involve a substantial cost.

Business Standard understands that the previous commercial price bid from the Pentagon expired on July 31. The Pentagon is now likely to submit an “intermediate price offer” along with an expiry date.

The procurement of the M777 has been delayed partly due to controversy over the blacklisting of its competitor, the Pegasus howitzer offered by Singapore Technologies Kinetic (STK). Consequently, the M777 is a single-vendor purchase, which has made the MoD extremely cautious even though the army urgently wants the gun for the mountain divisions and strike corps that it is raising for the Sino-Indian border in the northeast.

If the M777 proves its worth, the initial order of 145 guns could be substantially increased in the form of “follow-on orders”. The Indian Army needs light 155 millimetre guns for seven corps that are deployed in mountain terrain. Unlike conventional artillery, ULHs can be lifted by helicopter to deployment areas high in the mountains.

India’s 220 artillery regiments (most of them fielding 18 guns each) have been making do with guns procured in the 1970s and 1980s. With overseas purchases repeatedly cancelled, and the ghost of the Bofors scandal lurking over the procurement of artillery guns, the Ordnance Factory Board (OFB) is building 140 guns. Alongside that, the Defence R&D Organisation (DRDO) is partnering the private sector in developing and manufacturing modern 155 millimetre/52 calibre artillery guns.


Shivanand Kanavi said...

How does M-777 compare with Bofors ? Can you explain to lay men like me?

Anonymous said...

better to have... accurate artillery pieces... than better not having... inaccurate...

Anonymous said...

This what happens when we have bunch of illiterate babus in ministry of Finance.

rajat said...

Why are we buying a gun whose production line is getting closed. I think this is bigger than the Bofors scandal. Funny thing is gun made by a British company is not used by them, so what guns are the Britishers using. Again only single vendor, is the world so short of producers of 155mm guns, if so then why buy this caliber gun.

Ashwani Sinha said...

The kast sentance 'Defence R&D Organisation (DRDO) is partnering the private sector in developing and manufacturing modern 155 millimetre/52 calibre artillery guns' is the most important of it all. We have to develop own indigenous defence production capability.

Anonymous said...

Keeping India's war fighting capability, specifically its offensive capability is a CBM that the Congress I has gifted to Pakistan.

I see this over and over again, with artillery, army modernization, letting private industry into defence production.

GoI wants to have the option of War as a diplomatic tool off the table. Netas want to have priority.

Vivek said...

Ajai,will be waiting for your take on the latest Chinese incursion in Arunachal.

Ravi Nambiar said...

a point to consider is that whether a short term purchase of requisite numbers of ULH followed by a mid to long term hard offer to buy out the soon to be shut down production line would be a viable way of bring down overall costs and at the same time modernizing our gun inventory to required levels

PD Gone Crazy said...

Along with paying a fortune for onions and petrol, we have to pay more bcoz some jerks who didn't failed in economics & wasn't time bound but still landed in the MOD and MOF. Any status on Tata's 155 cal. self propelled guns?

Akhou Keditsu said...

The purchase of the M777 is important for tactical reasons. As this gun is stated to be airlifted to remote mountainous positions, I hope the army aviation or the IAF has sufficient class of helos for the purpose. This deal should not be delayed as the current border tensions in Ladakh and Arunachal Pradesh show the requirement and urgency in such equipment if tensions were to escalate to conflict.

I don't understand why the MoD / OFB is developing / manufacturing the 155mm 39/45 cal guns when the global standard is now the 155/52 gun.
While upgrading old 130mm guns to 155mm to be used in certain theatre is understandable, manufacture of new 155/45 guns make no logic as they would be pitted against an enemy with 155/52 guns with better range.
Special ordinance (ERFB / BB) may give longer range to the 155 39/45 guns but so would it to the 155/52 guns and to more effect.

Also needed is a longer range MLRS. Our neighbours also have similar Smerch systems but their versions have been further developed with enhanced range so a showdown is definitely not in out favour. Perhaps development or procurement of ATACMS is the solution.

Also hear that the army has requirement for a light tank. Why not procure a few hundred BMP-3s to fit the role? It has excellent firepower with a 100mm gun and a 30mm autocanon along with a 7.62mm machine gun (all mounted co axial) plus two more 7.62mm bow machine guns up front. It has an (optional?) 5.45mm machine gun and a 40mm grenade launcher and carries the usual complement of troops. It is a proven platform and the Russian have offered it to India.

So many things to do. So little time. Economy now in turmoil. A weak government and a sleepy bureaucracy. Woe is us!

DJ100 said...

"Urgently needed gun" "Urgently needed submarines" "Urgently needed fighter jets"
Do you Indians have anything better to do invest in than imported toys of war? Shameful.
Look at your economy, internal upheaval and poverty. No country is interested in taking over a billion poor souls.
Stop fantasizing wars with China and Pakistan. One you can't beat and the other is too weak.
$7 million a gun is crazy expensive, not to mention $5000 per shell.
Do you really have that kind of money to spend?

Anonymous said...

@DJ100.. looking after and feeding the populace is definitely a priority. But India can't ignore the fact that neighbours are prowling and trying to annex / occupy its territory at every given chance.
Unfortunately, unlike western nations who have alliances and Big Brother Sam, India has to fend for herself.
Even the US does'nt have that kind of money to spend for its military but it does.

Anonymous said...

More commissions for the congress party if the cost goes up. with elections approaching, the paragons of inclusive growth and secularism need every dollar oops rupee they can bilk in the name of national security. started with their daddy being an agent for the SAAB deal and now, its more sophisticated. of course, their chamchas in tehelka wont dare to run an expose on them.

Anonymous said...

Stop giving excuses. Is priority BUT.... Very typical response to turn away from obvious truth.
USA produces majority of its equipment for warfighter and this most money spent stays within the country. In fact USA enjoys net income when comes to defense hardware. India should not and cannot compare itself with USA.

rustom said...

after a while broadsword will carry an article prompted by MoD,DRDO and HAL, hinting at bribes taken by the army to buy such when the MoD, DRDO, and HAL stops the army from getting what it wants, produces products that benefits the enemy due to its mis firing and being at the everlasting 'threshold' stage of delivering...

Anonymous said...

True, India cannot compare with the US in the military industry and true, the rupee leaves our shores.
Also true, India needs military deterrence and hence the purchases.
So if the money is to remain within, I would suggest a substantial nuclear buildup which will deter anybody and will not result in the rupee going to others.
Just spend on subs and missiles and make sure it has maximum reach. No need to purchase anything else.