The fate of the procurement of 145 units of M-777 light weight artillery howitzers from the US government for USD 694 million appears sealed, with the order failing to make the agenda of the meeting of the Defense Acquisitions Council (DAC) of the Indian Ministry of Defense on Friday.
This meeting comes the weekend before the visit of US Deputy Secretary of Defense Ashton Carter to India, who will be in New Delhi before Prime Minister Manmohan Singh’s visit to Washington DC, after the UN General Assembly at the end of this month.
Although the DAC did clear procurement of six Lockheed Martin C-130J Super Hercules aircraft for the Indian Air Force (IAF), in addition to 236 Russian T-90S main-battle tanks and machine guns, besides five other items on the agenda, for a total value of around INR 12,000 crore, it failed to take up the M-777 acquisition.
But the failure to take up this order for consideration by the DAC has wider implications as it is unlikely that any decision can be taken on this order by October 15, which is the deadline for the expiry of the initial offer of the US government, after which the value of the order will see a 37 percent escalation to USD 885 million, as reported by StratPost. In today’s terms this amounts to a difference of about INR 1,200 crore.
Not only does this mean that India will have to pay extra for this cost escalation for the artillery guns, it also makes the question of procurement of the howitzers, itself, uncertain. This is because the existing assembly lines of the BAE Systems M-777 howitzer are scheduled to shut down in the September-October period in the absence of any firm orders and the cost of restarting those lines would also have to be borne by India, if the ministry decides to clear the purchase later.
The defense ministry has been kept apprised of the impending cost escalation as well as the likelihood of the closing of the assembly lines for the howitzer, by the US government since the beginning of the year.
Meanwhile the Ordnance Factory Board (OFB), which had been mandated by the defense ministry to devise prototypes of the old Bofors FH77 B02 howitzer on the basis of designs kept in cold storage after transfer for license production by the Swedish company as part of the order in the eighties, which was aborted because of the infamous corruption scandal, has seen discouraging results so far.
Shishir Arya of The Times of India reported earlier this month that the project has been set back by at least a year after the OFB prototype’s barrel apparently came off during trials in August.
BAE Systems, which took over the old Bofors company that sold the howitzers to India in the eighties, after a series of ownership changes, had offered assistance to OFB in putting together the howitzer last year.