Monday, 18 May 2015

Upgrading India's artillery: Private firms eye greater share in ultralight gun manufacture



By Ajai Shukla
Business Standard, 18th May 15

India’s increasingly capable private defence firms are pushing for more “Make in India” than BAE Systems Inc (BAE) has proposed in the forthcoming contract for 145 M777 ultra-light guns for the army.

The defence ministry last week cleared the purchase of these 155-millimetre, 39-calibre howitzers from the US Department of Defence (Pentagon) for a budgeted Rs 2,900 crore, which BAE sources say could eventually be about Rs 4,650 crore.

The US-based BAE is selecting an Indian partner to assemble imported kits into M777 guns. This would be done in an “Assembly, Integration and Testing (AIT) facility”, using tools and assembly jigs shipped to India from BAE’s now-shuttered assembly line in Hattiesburg, USA.

BAE is talking to several firms, including Larsen & Toubro (L&T); Tata Power (Strategic Engineering Division); Punj Lloyd; the Ordnance Factory Board (OFB); the Kalyani Group, and others.

Chief executive officers (CEOs) from three of these companies tell Business Standard that integrating the gun at an Indian AIT facility would be worth no more than 5 per cent of the contract amount, i.e. about Rs 230 crore.

They say, given Indian industry’s capability to manufacture gun barrels, breeches and components, it is tokenism to confine “Make in India” to just an AIT facility. They say the defence ministry --- being the world’s biggest buyer of artillery guns --- should leverage this position to extract more indigenisation from BAE.

“To promote ‘Make in India’, the M777 gun contract must involve indigenous component manufacture, not just putting it together from imported kits”, says Rajinder Bhatia, defence business chief of the Kalyani Group.

To be sure, manufacturing M777 components presents a technology challenge. They are built largely of titanium, which reduces their weight to just 4.2 tonnes, much lighter than conventional, steel 155-millimetre guns that weigh 10 tonnes. This allows the 39-calibre M777 guns to be transported easily, even heli-lifted, over the difficult mountain terrain on India’s northern borders.

Companies like L&T have delivered aerospace-grade titanium parts for Indian defence systems. Other Indian vendors also claim they could build M777 components in India with technology transferred from BAE.

Even so, building M777 components and systems in India would require the government to look beyond the current 145-gun contract and entice BAE with a larger contract based on India’s expansive artillery needs.

The current 145-gun tender would equip only 6-7 artillery regiments belonging to two newly raised mountain divisions. This is only a small part of the army’s need for light 155-millimetre guns in 50-plus artillery regiments in 16 mountain divisions. This 1,000-gun order would be a lip-smacking prospect that would entice BAE to offer far higher indigenisation.

“Mr Modi threw out the procurement procedure in buying Rafale fighters from France. Similarly, by deviating from the M777 tender and insisting upon higher indigenisation in exchange for a 1000-gun contract, ‘Make in India’ could be galvanised in gun production”, says an Indian defence company CEO.

BAE has signed agreements with a raft of Indian companies to discharge its offset liability in the M777 contract, worth about Rs 1,400 crore. Most of this offset work is believed to be unrelated to the M777.

Indian military doctrine involves bringing down long-range artillery fire on the enemy, pulverizing targets so comprehensively that infantry or tanks attacking them face little resistance, suffering far fewer casualties. On battlefields over the last century, artillery has killed more troops than any other arm.

To do so, the artillery policy envisages a large number of 155-millimetre guns, which fire heavier and more lethal shells than the 105-millimetre and 130-millimetre field guns that equip most artillery regiments.

India’s current 155-millimetre gun arsenal is confined to 400 FH-77 Bofors guns. In addition the OFB has just won a contract to build 114 155-millimetre, 45-calibre guns, which could rise to 414 guns if they perform well. Meanwhile, the Defence R&D Organisation (DRDO) is partnering domestic firms in developing a new 155-millimetre, 52-calibre gun in the Advanced Towed Artillery Gun (ATAG) project.

Indian generals and defence ministry officials have criticised the M777’s high price, but have decided it is worth the cost. The 105-millimetre field guns that the M777 will replace cost about Rs 2.5 crore each, one-tenth the M777’s Rs 25 crore tag. The OFB’s 155-millimetre Dhanush gun is half the cost of the M777.

In March/April 2014, then army chief, General Bikram Singh, pronounced the M777 too expensive in a defence ministry meeting. Defence Ministers AK Antony and Arun Jaitley told parliament that the M777 acquisition was stuck because of high cost. Now, without any reduction in cost, the defence ministry has cleared the contract.

India is buying the M777 through the Foreign Military Sales (FMS) programme. In this the MoD is the buyer and the Pentagon is the seller, negotiating terms with the supplier (in this case BAE), and charging the customer a small fee.


The cost of the M777 has risen steadily, as evident from successive notifications that BAE has provided the US Congress. In January 26, 2010, the contract price was $647 million, which rose marginally in March 2013 to $694 million. On August 7, 2013, the Pentagon notified the US Congress that the contract was worth “up to $885 million”. Company sources say that, without significant delay, the deal would be signed at about $700-750 million.

9 comments:

Anonymous said...

It is not for Indian private industry to crib about tokenism. The fact is that foreign OEMs do not want to part with IP. Why does not Indian industry invest in R&D and develop local IP??

Anonymous said...

So Sir, what to do? Wait under that Indian banan tree for the banana to fall? And also when that Banaa falls like Arjun tank it would un -sized and rotten with 60 percent parts imported as also as costly as the foreign mal?
If Indian industry has capability, which we have been hearing for last four years, even from you, let them beat that BAE hollow in competition. After all they are in business and they got to win competitions. Are they beggars? Or they are providing there products free of cost or free from profits? And do you wish to promote another ambassador car in the country for another 50 years?

Promoting Indian industry must be at competitive terms. India can not rise and achive growth by patronage of third class products and by being comprodor.

Anonymous said...

What is the logic of roping in Pvt Cos to merely assemble parts for a high profit when OFBs are there to do the same for free??
We were under the impression that Modi's "Make in India" means encouraging foreign companies to setup their manufacturing facilities in India to take advantage of our low cost labor and raw material. This will lead to creation of jobs and boost our reserves. Instead of this, what is happening is just the reverse. Foreign OEMs are being forced to partner with shady Indian companies for lucrative Govt contracts. In other words instead of lowering the cost of defense procurement and improving our reserves, there will be additional middlemen in the form of private Indian companies who will raise the cost of overall defense bill due to their hefty commission or profit without any concomitant benefit to the nation.
One also needs to ask why Modi is so desperate for "Make in India" limited only to defense where there will only be financial outgo to foreign arms companies and shady Indian family owned companies?
If these technologies are being bought with taxpayers money, then why are they being gifted away to shady businessmen? Is defense now a new avenue to fleece a country with the largest number of people below poverty line?

Anonymous said...

Parrikar in less than a year has done more than his predecessors combined and he is just getting started ! Between Modi & Parrikar India's foes will be scared, very scared.

Krish said...

This is a bit of unsettling event. M-777 was out of the consideration for a long time because neither they were willing to follow the offset rule nor they were eager to reduce the price.

Now the price remains same and all they have agreed to is AIT which is a screwdrive technology. So why are they getting this costly order when companies like Bharat Forge and Punj LLoyd are willing to establish local manufacturing facilities to produce these guns. The order for Dhanush is still pending with IA and they are still evaluating the test data but for this M-777, there seems to be an urgency.

Looks like the import lobby is working overtime now in the garb of Make in India. BAE appointed Mr Deepak Parekh as its India Board Member and recently, Mr Parekh criticized PM Modi for not giving enough incentives to industrialists. Is this order to mollify Mr Parekh??

Kana said...

How large a helicopter fleet is needed for ~1000 ultralight mountain guns? The only reason to buy these vs. cheaper models is helo-transportability, but can this large a heavy lift helo fleet be sustained?

If we are talking about deploying guns in the mountains but not necessarily having large fleet to move them all around on short notice, I would guess that Mi-26 can lift NON-ultralight (cheaper) guns to predetermined areas.

Anonymous said...

@ Kana
How many Mi-26s do we have that can still fly ? SIX !
Even in a two front war India will not need to deploy "1000" M777s. 15 Chinooks operating 10 sorties a day over 2 days can airlift enough firepower to keep both the Pakis and the Chinkis busy.

Anonymous said...

The decisions are being made. The good thing is no new equipment is being decided, so the choice made by the services is being respected.

This is highly positive development. I hope the present raksha Mantri is inspired by Shri George Fernandes , he remains the most proactive RM ever.

Anonymous said...

But has everybody forgotten about the 155mm/52 cal towed guns that were being evaluated by the Indian Army? These guns were also slated to be 400 nos. initially and thereafter about 1500 guns on ToT basis. What is the current status of that evaluation?