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May 8, 2015

Make in India: Tata, Mahindra and Larsen & Toubro in race to partner gunmaker BAE for howitzers

A 'Made in India' American gun may finally boom for India's army. And the potential list of Indian companies as partners of American defence major BAE includes India Inc blue chips Tata, L&T and Mahindra.

The government will soon take a call on a fresh army proposal on acquiring BAE's M777 Howitzer after the American company offered to shift the manufacturing and testing facility from Hattiesburg, Mississippi, to India. The deal size is around $700 million.

BAE's howitzer was first considered in 2008 by the UPA regime but the idea was buried in 2013 thanks to differences over price and offset commitments.

The current 'Make in India' offer from BAE is set to come up for approval before the Defence Acquisition Committee (DAC), said senior defence ministry officials familiar with the matter. They spoke to ET on the condition they not be identified.

The Defence Acquisition Committee (DAC) is headed by the defence minister and its recommendations go straight to the Cabinet Committee on Security, the final arbiter on defence purchases.

BAE has now offered to set up an assembly, integration and testing facility with the help of an Indian partner; and is looking at a potential investment of over $200 million. BAE's offer includes not only manufacturing for the army but also shifting its export orders that come from the Middle East, South America and Europe.

Defence ministry officials said the army has asked that the Foreign Military Sales (FMS) option be revived for BAE's gun and that a fresh Letter of Offer and Acceptance be floated to Washington.

FMS means a government-to-government deal with the US, where Washington guarantees delivery and the best price.

The army, which is in dire need of new artillery guns, has requested an initial quantity of 145 ultralight howitzers — a number that could increase. The M777 project was first mooted in 2008. The US approved it in 2009. The gun was tested and found entirely satisfactory by the army.

But in 2013, differences between India and the US led to a stalemate.Officials said while BAE's new proposals on offset may be found acceptable, there may still be issues on the price. The price offered to the UPA government in 2013 was $694 million for 145 guns. BAE is learnt to have told the army that its price will not go up by more than 6-8% from the 2013 price.



economictimes

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