Thursday, 18 February 2016

US offers M777 ultralight guns, Mahindra to build in India

BAE Systems to start delivery in six months, $750 million for 145 guns

By Ajai Shukla
Business Standard, 18th Feb 16

On Monday, the United States Department of Defense (Pentagon) delivered to the defence ministry a Letter of Acceptance (LoA), agreeing to supply 145 M777 ultra lightweight howitzers to India. Valid for 180 days, the LoA spells out the contract price, terms of supply and options available.

Sources close to the sale tell Business Standard the asking price for 145 guns is about $750 million (Rs 5,000 crore). The vendor, BAE Systems, will supply the first batch of 155-millimetre, 39-calibre howitzers within six months of signing the contract. The remaining guns would progressively be built in India.

In August 2013, the Pentagon had notified the US Congress that it was raising the maximum price of the sale to India from US $647 million, which had been notified in Jan 2010, to $885 million. However, BAE Systems officials clarify that this represented a maximum ceiling price, and the actual sale price would be significantly lower.

On Wednesday, BAE Systems named the Mahindra Group as its Indian partner for assembling imported M777 kits into fully built guns. BAE Systems has so far assembled the M777 in Hattiesburg, USA. With that line now shuttered, Mahindra will build the guns in an “Assembly, Integration and Test (AIT) facility”, using components shipped to India from BAE Systems facilities in the UK.

“BAE Systems is pleased to partner with Mahindra on our offer to develop an Assembly, Integration and Test facility in India. The facility is a fundamental part of the M777 production line,”said BAE Systems on Wednesday.

According to BAE Systems officials, the Pentagon has drawn up the LoA in close consultation with the customer, i.e. the Indian government. That would suggest the bulk of the negotiation has been completed.

Last May, after years of negotiations, the defence ministry cleared the purchase of 145 M777s for Rs 2,900 crore. The union cabinet must now clear the sale at the new price of Rs 5,000 crore.

Over the last three years, negotiations had apparently stalled, with successive defence ministers, AK Antony and Arun Jaitley, informing parliament that the cost was too high, and BAE Systems’ offset proposal was inadequate.

That impasse was broken last year when BAE Systems offered to assemble, integrate and test the M-777 in India. This brings the offer in conformity with the “Make in India” initiative. BAE Systems has also submitted a fresh offsets proposal.

BAE Systems pointed out on Wednesday: “A domestic Assembly, Integration and Test facility will enable the Indian Army to access maintenance, spares and support for the M777 locally.”

The M777, which has seen extensive operational service with the US military in Afghanistan, is being acquired to support Indian army operations on the rugged Himalayan borders with China and Pakistan. Built of titanium components and weighing just 4 tonnes (compared to 10-tonne conventional 155-millimetre guns), it can be air-lifted to high altitude deployment areas by helicopters like the CH-47E Chinook, which India is buying separately. The gun can also be towed more easily on narrow, twisty mountain roads.

The initial order for 145 guns could rise significantly once the M777 starts being built in India. This would equip just 6-7 artillery regiments, while the army actually needs new artillery for 50-plus artillery regiments in 16 mountain divisions.

“If India can offer a consolidated order for the 1,000-odd guns needed for 50 regiments, BAE Systems could be induced to offer far higher indigenisation”, says a senior artillery officer.

India’s 220-odd artillery regiments have received no new artillery since the 1980s, when it bought 400 FH-77B, 155 mm/39 calibre Bofors guns. An indigenous effort by the Ordnance Factory Board to develop a 155 mm/45 calibre gun is proceeding slowly, with a gun barrel bursting during trial firing in 2013. Simultaneously, the Defence R&D Organisation (DRDO) is developing a 155 mm/52 calibre artillery gun in partnership with the private sector.

India has pursued the M77 procurement through the Pentagon, under the Foreign Military Sales (FMS) programme. This involves the Pentagon negotiating terms with the vendor (BAE Systems), and signing the deal as a government-to-government contract. 

7 comments:

Unknown said...

All good promises but will see how much real tech transfer takes place. These will be completely imported:

1.The barrels will be made in England by Vickers.

2. The titanium is supplied by RTI International metals of Niles, Ohio.

3. The hydrostrut suspension system is provided by Horstman Defence Systems of the UK.

4.Also, General Dynamics Armament Systems Towed Artillery Digitisation (TAD) system if chosen- will also be imported.

5. The firing system is from Selex, Italy (LINAPS).

Sometimes cost of components is more than assembly/integration (eg Su-30 program) leading to questionable benefits to customer.

gurinder said...

Any updates on Dhanush ?

Guru said...

the LOA (letter of agreement) price reported in government websites is $700 mill down from the earlier quote of $885 mill. Not sure where ou got the $750 mill number.

Indian express report below which quotes the LOA price at $694 Mill. This includes the offset

http://indianexpress.com/article/india/india-news-india/bae-systems-selects-mahindra-as-india-partner-for-m777-howitzer-gun-deal/

SachinWRT said...

We're putting money on a local gun and at the same time we're importing a foreign gun? Something is not right here. Obviously, one of them is genuinely pursued and the other is a PR campaign.

Anonymous said...

Finally Indian army gets some guns ! they can deliver a few tens off the shelf will be great. Let us hope the tracked are also ordered quickly. Then the rest of artillery.

Sachin K said...

Ajai,

You mention in your article only about the failed trial of the 155x45mm during 2013. However as per report below, things seemed to have now moved much ahead.

http://timesofindia.indiatimes.com/city/nagpur/OFB-offering-Army-new-assault-rifles/articleshow/51031616.cms
OFB director general AK Prabhakar.
Prabhakar said that apart from the 155x45 mm calibre howitzers based on the Bofors guns, which will reach the Army in March, the OFB has also developed a 155x52 mm gun, which is a higher version. It was test fired recently at Pokhran. This gun has a higher range than the 155x45mm calibre and was made by improvising the existing 130mm guns available with the Army.
He was in the city to attend the valedictory function at National Academy of Defence Production, which trains officers joining the Indian Ordnance Factory Service (IOFS) cadre.

Raahul Kumar said...

I agree with Unknown, it is very unlikely that BAE systems can offer decent offsets or indiginization. Much smarter to give the DRDO more money to develop a titanium gun based on their ATAGs.