Sunday, 18 January 2015

BAE Systems offers to build sophisticated “ultralight” guns in India

A Chinook helicopter lifts a M777 ultralight gun for deployment in mountains

By Ajai Shukla
Business Standard, 18th Jan 15

BAE Systems Inc. has sweetened its offer to supply artillery guns for the army’s new mountain strike corps. The US-based company hopes this will resurrect the procurement of 145 M777 ultralight howitzers (ULH), which has been in limbo since July, when the defence minister told parliament that the price was too high.

The new proposal, which dovetails with the “Make in India” initiative, offers to build more components in India for the 155-millimetre/39-calibre M777 ULH. In another major step forward, BAE Systems has offered to build the gun in a plant in India. This would become the global assembly, integration and test (AIT) centre for the M777 once the US plant at Hattiesburg, Mississippi shuts down.

The ministry of defence (MoD) has faced sharp criticism, most recently from parliament’s Consultative Committee on Defence, for not buying equipment --- especially artillery --- for the new mountain strike corps being raised for the Sino-India border. In a television interview last Monday, Defence Minister Manohar Parrikar promised to prioritise funding for buying artillery guns.

“Encouraged by Prime Minister Modi’s call to Make in India, we have developed and submitted a strengthened proposal on the M777 case. This includes a significantly higher degree of indigenisation on the weapon system. Moreover, we have included in our offer the transfer of the Assembly, Integration & Test (AIT) capabilities into India. The AIT facility will not only provide in-country support to the army on its weapon system but will begin the process of indigenous manufacture of modern artillery in India,” said Mark Simpkins, the India head of BAE Systems.

Meanwhile, BAE Systems is finalising a more attractive offsets proposal, which involves fabricating a significant number of M777 components in India.

“We have already signed Memoranda of Understanding with around 40 Indian companies after assessing their capabilities to manufacture M777 components to the requisite standard. Nearly half of these are micro, small and medium enterprises (MSMEs),” says Simpkins.

Simultaneously, BAE Systems is seeking to assure the MoD that the price of the M777 ULH would be reasonable. Its cost has risen since January 26, 2010, when the Pentagon had quoted $647 million (Rs 4,015 crore) for 145 guns in a Letter of Acceptance (LoA) to the MoD. This was marginally raised to $694 (Rs 4,306 crore) in March 2013. But alarms bells went off in New Delhi on August 7, 2013, when the Pentagon notified the US Congress that the guns would cost “up to $885 million” (Rs 5,492 crore).

BAE Systems has clarified in discussions that $885 million is the “upper limit of the price envelope” in case negotiations drag on for years.  If finalized quickly, they say the cost would remain around $694 million, quoted in last year’s LoA.

India is buying the M777 through the Foreign Military Sales (FMS) programme. In this the MoD deals with the Pentagon; which negotiates terms with the supplier (in this case BAE Systems); while charging the buyer (the MoD) a small fee for its services.

The offer to shift M777 assembly from Hattiesburg to India is a win-win proposal for BAE Systems and India. After supplying over a thousand M777s to several armies, Hattiesburg has no new guns on order. Until 2013, BAE Systems Inc had spent over $50 million on keeping the Hattiesburg line open in anticipation of an Indian order. Shifting AIT to India would spare the company that on-going cost.

If shifting AIT to India were not enough to interest the MoD, BAE Systems Inc. is dangling a further carrot, by pointing out that a larger Indian order for the M77 would allow far more components to be built in India.

Most military experts regard the order for 145 guns as a preliminary one, which would equip just 6-7 artillery regiments of the mountain strike corps’ two divisions. The army’s failure to buy artillery since the 1980 --- which Parriker himself highlighted --- means that India’s 16 other mountain divisions also badly require light, air-portable artillery guns, adding up to a total requirement of over a thousand guns.

In addition, several projects are under way to meet India’s requirement of 1,580 towed guns for the plains sector.

The Ordnance Factory Board (OFB) has developed a 155-mm/45-calibre gun called the Dhanush, and is building 114 for the army. Separately, the Defence R&D Organisation (DRDO) is spearheading the Advanced Towed Artillery Gun (ATAG) project, to build a powerful 155-mm/52-calibre gun, in partnership with the private sector.

In August, the defence ministry cleared the manufacture of 40 self-propelled guns, called Catapults, for an estimated Rs 820 crore.

And in November, it gave the go-ahead for building 814 mounted gun systems (MGS) under the “Buy & Make (Indian)” category of the procurement procedure for an estimated Rs 15,750 crore. 


Parthasarathi said...

It is a proven gun. India should not miss this opportunity. Truly a win win situation. India must grab this opportunity.

Anonymous said...

Comments from MOD: Err! Thanks but we are a little short of funds

Rituraj said...

There are other factors which go against BAE's offer.

1. The BAE offer is only to assemble the gun in India. That is a screwdriver technology which is not needed. BAE is quite silent on manufacture of gun components in India with local raw materials.

2. The current BAE offer is a panicked one because Bharat Forge (Kalyani Group) is completing its development of ULH gun in collaboration with another American company. This ULH gun is about to come soon.

3. BAE knows it perfectly that once Indian made gun is available, BAE will zero chance to sell any gun to Indian Army. What more, Indian gun would be cheaper and a competitor eventually. SO this is a cheap move to scuttle local ULH gun development.

4. The BAE gun would be sold through US FMS. So it will come under ITAR provisions, will be monitored by the US Pentagon and many other restrictions would be imposed on the gun's eventual existence in India. In comparison, Bharat Forge gun would be free from any restriction and a potential export product.

5. BAE will keep the IP of its ULH gun and just alllow its license production. Its not even ready to provide its IP and complete TOT to its previous Indian partner Mahindras or OFB for local complete manufacture. The lessons of Dhanush gun are quite vivid.

My hunch is that Indian government would wait for while to see other competitors and their products, including Singaporean gun and Bharat Forge option. Then only a decision would come. No doubt, BAE is quite a cunning company.

Anonymous said...

Guarantee... Metallurgy... side... ToT...

Parthasarathi said...

@ Mr. Rituraj : Sir, you may be factually correct. At first they will only assemble the gun and may procure few parts locally. But later they have to produce/procure more and more parts in India. Because India is having cost advantage. Take an example of Ford and Hyundai cars. At first they were importing most of the parts from their parent country. But now almost all the parts are manufactured in India and they are exporting those cars from India. As it is cheaper to produce cars in India. Do not expect that some one will built all the parts of the howitzer in India from day one. M 777 is having lot of Titanium parts and India is the cheapest titanium producer of the world. So they have to procure/make locally. Anyway as far as performance is concern M 777 is much more proven than the guns are mentioned by you. I am not sure that Bharat Forge is offering any light weight 155 mm howitzer. But the Singaporean gun is not battle proven and the company is also blacklisted by MOD.. So we don't have many choices either.

victor raj said...

@Rituraj: Good analysis. Also TOT is not even mentioned. As you said, if the Indian government waits for other offers and dhanush, it will be a wise decision. When it comes defence, we desperately need self reliance, so TOT is important. Although if a product has lot of requirements in other countries too or if India has a bulk order and there our domestic capability is far away, then we can consider Make in India. Else instead actually learning something we will just assemble and waste lot of precious energy resources for electricity and we end up gain nothing. So we need to weigh up everything when it comes to defence.

G Karthikeyan said...

Guns, Guns Everywhere,
But not a single good one to fire!!

From a Gunner..Thats I!

Anonymous said...

Nothing is more scandalous and unjustifiable than the delay in decision making. BJP has caught the cold feet of UPA. Whole new production line has to come up for the make in India policy. It's as good as kissing it good bye given the IST.

Anonymous said...

Screw BAE ! India can make Ultralight howitzers in India and save a bunch while providing much needed fillip to the domestic private industry.

Anonymous said...

@Rituraj...well said bro...kudos...that a lot Indians still are wary of any American offer...and rightfully so! None of the American allies have ever benefitted by their it UK, Japan or South Korea.

It is better to respect history and stick to a non aligned...especially a non american development especially in defence dept. Only than will India truly succeed in establishing itself independently and assertively!

Brahamvakya said...

I will be happy to see any gun as long as it can fire. Anything is better than fighting with stones. My brothers serve in IA along with a nephew.

I only hope that we shd not stop our indigenous developments on Dhanush, Bharat Forge & Tata gun


Anonymous said...

What is the status of the Kalyani groups offer to the Indian Army?? That is true Make in India!! What happened to their field trials. Indian jurnos should take pride in spearheading local efforts. Would appreciate a detailed analysis of the indigenous effort.