the United States has offered to equip India's strike force against China with a key artillery weapon arranged to be made in India. The offer, which comes ahead of US President Barack Obama's visit to New Delhi later this month, is laden with powerful symbolism of the US joining hands with India against commonly perceived military threats.
The proposal involves the shifting of the M777 artillery gun assembly line from the US to India. The M777 is a 155mm titanium-based Ultra-Light Howitzer (ULH), which enables artillery to be airlifted by helicopter to distant mountainous military posts.
The ULH will be the principal weapon for India's new Mountain Strike Corps, which is being raised to deter China. Ultra-light artillery will give teeth to this strike formation and form the backbone of its firepower. The light weight of this gun makes its airlift and deployment in the mountains possible. There are very few options for the procurement of this gun.
"We've offered to bring the gun's assembly, integration and testing to India," John Kelly, vice president, British Aerospace (BAE), told The Sunday Guardian. BAE owns the American entity producing this weapon, which is combat proven in Afghanistan. It has also been extensively tested in India.
This offer is a government-to-government deal underwritten by the Obama administration under the Foreign Military Sales (FMS) route. During his visit, in which he will also be the chief guest at the Republic Day Parade, President Obama is expected to make a pitch for stepping up India-US defence trade. The US has for long been pushing for greater intimacy in defence ties with India.
India needs an estimated 450 ultra-light artillery guns for preparedness for mountain warfare. The initial requirement is for 145 guns at a cost of about $750 million. The need is vital because of India's vast unsettled mountainous boundaries, which create a greater probability of future wars being fought in Himalayan battlefields than anywhere else.
Indeed, the offer to indigenise the gun is an effort to revive an earlier, stalled bid to sell this howitzer to India. The earlier proposal was for a direct import of the weapon from the US. The new offer is bolder, and intended to be more compelling with a Make in India flavour. Sources in the Ministry of Defence said India is likely to enter into negotiations formally with a Letter of Request to the US soon.
"We have identified over 40 Indian partners to substantially indigenise the components. At the heart of the proposal is to shift the assembly line (from the Hattiesburg, Mississippi facility in the US) to India, and make the gun here under transfer of technology," says Kelly.
The earlier campaign for the sale of this gun hit an impasse last year over offsets (counter-trade obligations on the US supplier) and price issues. In July 2014, the then Defence Minister Arun Jaitley told Parliament, "The case for the procurement of Ultra-Light Howitzer guns through the US government has not progressed due to cost issues and because the vendor has not been able to come up with a proposal fully compliant to the offset requirements."
Under the FMS route, the weapon is purchased from the US Department of Defense, which in turn contracts it from the vendor (manufacturer). But the offsets are to be delivered by the vendor, and not the US government. The previous bid involved offsets worth $209 million, which means that equipment worth this amount would be sourced from Indian manufacturers as part of the contract.
The Ministry of Defence dismissed the earlier proposal as non-compliant because of offsets anomalies. Indian Defence Procurement Procedure (DPP) requires the contracted prime vendor specifically to deliver the offsets (in this case 30% of the value of the contract). The failed proposal involved the larger BAE group (of which the prime vendor is a part) delivering the offsets.
BAE believes the problem has now been sorted out, and anomalies have been "clarified". "With regards to the possible Foreign Military Sale of the M777 Ultra-Lightweight Howitzers between the United States and India, the United States government will contract with BAE Systems Global Combat Systems Limited and with other wholly owned subsidiaries of BAE Systems for the purposes of supporting out offset obligations," BAE responded to a query by The Sunday Guardian.
This suggests that the new arrangement has the blessings of the US government, and that the singular entity clearly identified for delivering the offsets is BAE Systems Global Combat System. Observers say this makes the new offer compliant to Indian requirements.
Trade analysts believe that the other problem over "cost issues" is more of a misunderstanding. The first offer, which expired in October 2013, came with a price tag of $697 million. A subsequent approval by the US Congress put a price ceiling of $885 million for the sale of 145 guns to India. "This was wrongly seen as the new price. The Congressional approval had left generous headroom by stipulating a ceiling of $885 million. We'll keep the actual price within 6-8% of the earlier figure," says Kelly, suggesting a new price close to $750 million.
After decades of arms denial to India, the US has emerged as a key military supplier to India over the last decade. The embargo was lifted with the sale of ANTPQ-37 artillery locating radars, which was the first military equipment supplied by the US to India after 1964.
Subsequently, there have been several multi-billion dollar deals involving big ticket items like the supply of C-17 strategic airlifters, C-130J special missions' aircraft, P8I maritime reconnaissance aircraft and Harpoon anti-ship missiles aggregating about $10 billion. In the works are deals for Apache attack helicopters, Chinook heavy-lift helicopters (capable of carrying the M777 gun) and Sikorsky naval helicopters, with values aggregating another $4 billion. The US has made 17 new proposals under the Defence Trade and Technology Initiative. Observers now regard military ties, in particular defence trade, as a key driver of the India-US relationship.
