DAC approves $750m M777 artillery buy

The Indian defense ministry’s Defense Acquisition Council (DAC) has approved the purchase of 145 units of the BAE Systems M777A2 LW155 Ultra Light Howitzer at a cost of USD 750 million, clearing the Letter of Offer and Acceptance (LOA) to the U.S. government.

Back and Forth

The DAC had asked the U.S. government to to restate the price and availability for the acquisition and associated offsets in May 2015, since the old offer had expired in October 2013. The U.S. government had hiked the price tag from USD 647 million to USD 885 million in August 2013, shortly before the expiry of the offer.

BAE Systems had also closed its facility at Barrow-in-Furness in the U.K. where the titanium structures for the artillery were built, in October 2013. But sources in the company say they have retained the skill among their workforce and will be able to restart work at the facility.

Off the Shelf

The barrel of the system is built at Watervliet Arsenal, Mississippi in the U.S. The U.S. government will begin delivery of 25 units within six months of the order off the shelf for the Foreign Military Sale (FMS) from the BAE Systems Assembly, Integration and Testing (AIT) facility at Hattiesburg, New York in the U.S.

Indian Assembly

The rest of the 120 pieces of artillery will be delivered from an AIT facility in India set up by BAE Systems with Indian partner Mahindra, in an arrangement announced last February.

The first notification of this possible sale was issued by the U.S. Defense Security Cooperation Agency (DSCA) to the U.S. Congress in January 2010.

BAE Systems said in a statement, “We are pleased that the Indian Government is progressing the Foreign Military Sale of M777 Lightweight Howitzers. Our link with the domestic Assembly, Integration and Test facility demonstrates BAE Systems’ commitment to “Make in India” and remains a firm part of our strategy to work with the Indian Defence sector across Air, Sea, Land & Security. As committed, BAE Systems worked collectively with the USG in order for us to maintain escalation in the new LOA to under 6% of the 2013 submission, whilst maintaining delivery of systems within six months following the implemented Letter of Agreement (LOA).”

Offsets

BAE Systems is committed to giving 30 percent of the value of the order to Indian firms as its offset requirements. StratPost understands that the company has concluded Memoranda of Understanding (MoUs) with 40 Indian offset partner companies for this, which include Small and Medium Enterprises (SMEs).

Finmeccanica component

Interestingly, the M777 system incorporates the gun-mounted ring laser-gyro Laser Inertial Artillery Pointing System (LINAPS), which is a day and night, all-weather navigation system for artillery deployment, built by Selex, which used to be a subsidiary of Finmeccanica. Finmeccanica is now called Leonardo and Selex has merged with it’s electronics division.

New Delhi saw a Parliamentary furor last month after an Italian appeals court reversed a judgment absolving Finmecannica’s AgustaWestland Helicopters from corruption charges in the sale of 12 AW101 VVIP helicopters to the Indian Air Force (IAF). Although this latest judgment is now being appealed again in a higher court, the defense ministry has since decided to blacklist the company. It is, however, understood that this measure will not affect existing cases of acquisition, especially where a blacklisted company’s products are components in a system.

Second Largest Operator

The M777 is operated by the U.S. Marine Corps, U.S. Army, Canadian Army and the Australian Army. With 145 units, the Indian Army will become the second-largest operator of the system, behind the U.S., and will equip it’s Mountain Strike Corps with the artillery.

The acquisition case will now move to the Finance Ministry and the Cabinet Committee on Security for approval.