BAE Systems enthused about ‘Make in India’, upbeat on M777 guns

Exclusive Interview with Ian King, Chief Executive, BAE Systems plc & Deepak Parekh, Chairman, BAE Systems India (Services) Pvt Ltd.

What is BAE Systems overall strategy and plans for India?

Ian King: We’ve been operating in India for over 50 years. We have a training programme on the advanced jet trainer, the Hawk with Hindustan Aeronautics Limited (HAL). That is Make India. It is assembled in Bangalore. India is the largest user with the Indian Navy and Indian Air Force. And so... when we talked about what’s the next programme? It’s the M777 howitzer programme.

Deepak Parekh: This company is BAE Systems India. BAE Systems Services India with 100% equity. If you see the number of announcements the Government has made, for instance, Make in India cannot succeed unless land accusation has taken place and they have amended land acquisition act… So that is one of the initial steps… Then we’ve had number of initiatives the Govt has taken. FDI in Defence has been increased to 49% and for special cases they are willing to go up to 75% basis. These are the things that enthused BAE also to look at coming to India.

Can you elaborate on the M777 proposal?

Ian King: It is under Foreign Military Sales (FMS) route of the US government. It is a Government to Government arrangement and in terms of the final assembly, it will be done here. One can really kick-start the M777 because you've got a very mature plan. We know there's going to be an offset obligation, and we will commit to that obligation but we will go even further than that and have committed that we will do the final assembly of the howitzer in India. We will create a facility for final Assembly-Integration-Testing (AIT) with an Indian industrial partner. Previously we had a facility in the US. So we will basically take a replica and put it here in India. And then we will sign up an Indian partner to do it with us.

In case, things move forward on the M777, what will be the likely components that can be manufactured or moved to India?

Ian King: I think that will be subject to arrangements at that time. It’s quite a complex thing. Generally, with these programmes, you move bit by bit till you get the finals. The way we’ve done on Hawk. It will be better to start at the end with the assembly line first and then its easier to start manufacturing components.

Apart from M777, what are the other things you are trying to look at in the near to medium term?

Ian King: There’s the Future Infantry Combat vehicle is a programme where it seems budgets have been placed. Then there’s the Tactical Communications Systems (TCS) programme and with Bharat Electronics Limited (BEL).

We haven’t given up on Combat aircraft [For Eurofighter Typhoon under MMRCA]. Our position is that we think we have given a competitive offer and we stand ready. We’ve proven that with an aircraft we can transfer technology, we can set up assembly [line], we can work with HAL. Plus our missiles business, they also just got a contract for Advanced Medium Range Air-to-Air Missiles (AMRAAM) for Jaguar aircraft.

MoD is working on changing the defence procurement procedure with emphasis on ‘buy and make’ and ‘make’ categories. How do you see it?

Ian King: We have got a hugely successful programme in Hawk which worked for us and which worked for HAL. We have a relationship with BEL on the TCS programme. We had a relationship with Mahindra and Mahindra on the Future Infantry Combat Vehicle (FICV) programme and we're going to set up similar arrangements on the M777. It’s our business model. We're absolutely fine with Make in India. That's the assessment and we're comfortable with that arrangement.

The new government is focussed on ‘Make in India’. What measures are needed for it to fructify?

Deepak Parekh: Basically, the ease of doing business in India. I think we need to support the Prime Minister's vision on how do we make things easier.

I think we need to increase our defence spend and with current accounts likely to get in surplus in the next year… the government will have to look at putting more money in defence, healthcare and education. Many of these are done on Public-Private Partnership (PPP) basis. So the amount for revenue or rather capital expenditure is procured by the private sector.

Today you ask any of the top 10-15-20 business houses, they all have in their presentations of what they could do in defence. Defence is a major and new area of expansion for many large Indian corporates of the top 10 companies.

The agenda is large and complex. It takes time. I think you need to give Government three years to achieve some of these objectives. I am convinced that in five years, you will see a different India. So I think we are going in the right direction.

(EOM), the hindu