Amid procurement gloom, M-777 gun offers army hope

The M-777 purchase will give the Indian Army its first modern gun in a quarter century since the Bofors FH-77B

By Ajai Shukla

Business Standard, 4th Aug 13

The army is closing in on its first modern artillery gun purchase in almost three decades since the Bofors FH-77B field howitzer was bought in the mid-1980s. So politically paralyzing were the ripples from that controversial deal that buying artillery has been well nigh impossible since then.

Reaching the end of a lengthy evaluation now is the estimated $650 million (Rs 4,000 crore) purchase of 145 M-777 ultra light howitzers (ULHs), developed and built by BAE Systems, but to be procured through a Foreign Military Sale (FMS) contract. In this, India will buy the gun from the US Department of Defence (the Pentagon); the Pentagon negotiates terms with the supplier (in this case, BAE Systems), and charges a small percentage for its services.

A contentious element of this procurement --- offsets --- is now almost resolved. On Jan 22, 2010, Washington had indicated that there would be no offsets. Since then, BAE Systems has accepted an offset liability of 30 per cent of the contract value, amounting to almost $200 million. Of this, 30 per cent can be discharged by transferring technology, while at least 70 per cent must be discharged through sourcing equipment manufactured in India.

Defence R&D Organisation (DRDO) sources tell Business Standard that, with the MoD changing priority from buying artillery to developing guns in India, BAE Systems has been asked for technology for manufacturing artillery ammunition, specifically bi-modular charge systems (BMCS). BAE Systems has offered to manufacture high-tech gun components in India, for its global supply chain for the “future artillery gun” and “future naval gun” programmes.

BMCS technology is urgently required by the MoD for the upcoming Ordnance Factory, Nalanda, where a range of ammunition will be built. First Denel, and then Israel Military Industries (IMI), were to supply technology, but the MoD has blacklisted both those firms for alleged corruption.

“Our discussions have enabled us to arrive at an offset package which will help support the development of the Indian industrial supply base, building sustainable world-class indigenous capabilities and strengthening our existing global supply network. As we go forward, we see the Indian supply chain as being particularly relevant across our air, land and sea programs both locally and globally,” says Dean McCumiskey, who heads BAE Systems India.

Given the on-going negotiations, the Pentagon has accepted the MoD’s request to extend the validity of its commercial offer. Anticipating an order, the BAE Systems assembly line in the US, where gun components manufactured mainly in the UK are integrated into the M-777, is being kept active.

A delay in finalising a contract, say US government sources, would mean added expenses for reviving a shut-down assembly line. Foreign exchange risk is another variable. But an early closure of the contract would see the first M-777 guns being delivered by early-2014.

Last month, New Delhi announced the raising of a mountain strike corps over the next seven years. The M-777 ULH is being procured for the artillery regiments of this new formation.

For BAE Systems, the M-777 offers possibilities well beyond the current order of 145 guns. It could end up equipping artillery regiments in up to seven more Indian corps that are deployed in mountainous terrain.

India’s 220 artillery regiments have been making do with equipment procured in the 1970s and 1980s. The obsolescent Russian 130 millimetre medium gun equips the bulk of the medium regiments. The most modern guns --- 410 Bofors 155 millimetre FH-77B medium howitzers --- were bought more than a quarter century ago. These are 39 calibre guns, which fire lighter projectiles than the 45 calibre, or 52 calibre, guns that are standard today.

Indigenous initiatives are underway to obtain modern artillery. The Ordnance Factory Board (OFB) has been asked for 140 guns, built from Bofors blueprints, which would be 45 calibre. Simultaneously, a major DRDO project has been launched, in partnership with private industry, to develop and manufacture a 155 millimetre/52 calibre modern artillery system.

But the M-777 will remain relevant, since the heavier indigenous guns would be too bulky for deployment in India’s rugged mountain borderlands. Built partly from titanium, a helicopter can lift the M-777 to remote gun areas, providing the army with deployment options that standard howitzers do not offer.

If India buys the M-777, it would be the world’s fifth user. More than 1000 M-777s are in service with the US Army, the US Marines, and the Canadian and Australian armies.