Europe’s largest defense company, has given India the option of making howitzers locally to help conclude a deal that would equip an army strike force patrolling the Chinese border with the weapons.
Talks are under way with India’s Defense Ministry to finalize the proposal for local assembly and testing of M777 artillery, according to John Kelly, a vice president at U.S. unit BAE Systems Land & Armaments Inc. While the army is seeking to buy 145 howitzers for the planned mountain strike corps, Kelly said it may require as many as 450.
“If the quantity is higher, then we have more opportunity for indigenisation and that’s what we are working through at the moment,” he said in an interview in New Delhi two days ago. “What we see is to bring the crown jewel of the manufacturing process into India. It’s very much in response to Prime Minister Narendra Modi’s ‘Make in India’ push.”
Modi is trying to stoke arms production to curb overseas purchases by the world’s biggest importer of major conventional weapons. He raised the cap on foreign-direct investment in defense to 49 percent from 26 percent two months after taking power in May. Kelly said BAE Systems for now aims to transfer technology to a local partner rather than opt for a joint venture.
“The good news is conditions have improved -- we’re up to 49 percent,” he said, referring to the investment restriction. “I don’t know yet if it will go beyond 49 percent, but we would certainly like it to.”
Joint VenturesConcern lingers that preventing foreign companies from having controlling stakes may dim the allure of joint ventures. At the same time, India has cleared about $20 billion of arms procurement proposals since Modi’s election. That’s about double its spending on weapons in the last fiscal year.
An initial offer by BAE Systems to sell the 145 guns to India for $697 million stalled in October 2013. Kelly said the price now could be about 6 percent to 8 percent higher. The London-based company is also interested in India’s Futuristic Infantry Combat Vehicles project, he said.
U.S., Canadian and Australian orders for M777s total more than 1,000, and the weapon is designed to be highly mobile on land and sea and in the air, according to BAE System’s website.
Modi has prioritized military modernization amid border disputes with China and Pakistan and rising Chinese naval power.
He faced defense spending near a 50-year low as a percentage of the economy when he swept to power, partly because of a history of graft scandals that slowed purchases. Defense Minister Manohar Parrikar, appointed in November, has pledged quick and transparent decision-making.
The administration introduced the “Make in India” drive in September to lure investment and revive economic growth, with the aim of boosting manufacturing’s share of India’s $1.9 trillion gross domestic product to 25 percent from about 15 percent currently.
“The Modi government has taken on a very, very ambitious agenda,” Kelly said. “Actions are taken quicker, decisions are made quicker. We’re prepared to lean forward, we’re prepared to invest.”