BAE Systems picks Mahindra as partner for artillery gun deal

• The vendor, BAE Systems, will supply the first batch of 155-millimetre, 39-calibre howitzers within six months of signing the contract. The remaining guns would progressively be built in India.
• BAE Systems has picked the Mahindra group as a partner for the deal
  

  The M777 is being acquired to support Indian army operations on the rugged Himalayan borders with China and Pakistan.

• Mahindra will build the guns in an “Assembly, Integration and Test (AIT) facility”, using components shipped to India from BAE Systems facilities in the UK. The facility is a fundamental part of the M777 production line
• Over the last three years, negotiations had apparently stalled, with successive defence ministers informing parliament that the cost was too high, and BAE Systems’ offset proposal was inadequate.
• That impasse was broken last year when BAE Systems offered to assemble, integrate and test the M-777 in India. This brings the offer in conformity with the “Make in India” initiative. BAE Systems has also submitted a fresh offsets proposal.
• A domestic Assembly, Integration and Test facility will enable the Indian Army to access maintenance, spares and support for the M777 locally.
• The deal for 145 guns, which is expected to cost $700 million, is being discussed as a government-to-government deal under the Foreign Military Sales (FMS) programme.
• The deal envisaged investing in 40 Indian defence suppliers across the country with an emphasis on the Defence Public Sector Undertakings (DPSU) and the MSME (Medium, Small & Micro Enterprises) sector in addition to the AIT facility.

Foreign Military Sales (FMS) program

• The U.S. Department of Defense’s Foreign Military Sales (FMS) program facilitates sales of U.S. arms, defense equipment, defense services, and military training to foreign governments.
• The purchaser does not deal directly with the defense contractor; instead, the Defense Security Cooperation Agency serves as an intermediary, usually handling procurement, logistics and delivery and often providing product support, training, and infrastructure construction (such as hangars, runways, utilities, etc.)

M777

• The M777, which has seen extensive operational service with the US military in Afghanistan, is being acquired to support Indian army operations on the rugged Himalayan borders with China and Pakistan.
• Built of titanium components and weighing just four tonnes (compared to 10-tonne conventional 155-millimetre guns), it can be air-lifted to high altitude deployment areas by helicopters like the CH-47E Chinook, which India is buying separately.
• The gun can also be towed more easily on narrow, twisty mountain roads.
• The initial order for 145 guns could rise significantly once the M777 starts being built in India. This would equip just 6-7 artillery regiments, while the army actually needs new artillery for 50-plus artillery regiments in 16 mountain divisions.
• If India can offer a consolidated order for the 1,000-odd guns needed for 50 regiments, BAE Systems could be induced to offer far higher indigenisation
• India’s 220-odd artillery regiments have received no new artillery since the 1980s, when it bought 400 FH-77B, 155 mm/39 calibre Bofors guns.
• An indigenous effort by the Ordnance Factory Board to develop a 155 mm/45 calibre gun is proceeding slowly, with a gun barrel bursting during trial firing in 2013.
• Simultaneously, the Defence R&D Organisation (DRDO) is developing a 155 mm/52 calibre artillery gun in partnership with the private sector.