Monday, April 2, 2012

Land Sector is Central to BAE in India

‘The major investment that we have made in Defence Land Systems India (DLSI) is a recognition that for us this has become a home market. The only way to gain access to a home market is to be onshore and to be national,' Dean McCumiskey, chief executive officer of BAE Systems India, told Shephard at Defexpo India 2012.

DLSI is a joint venture formed in February 2010 between Mahindra & Mahindra, which owns 74%, and BAE Systems which owns a 26% share, the maximum foreign direct investment allowed by the Indian government in the defence sector. One of its first products is the 6x6 Mine Protected Vehicle  which was developed with technology transferred from BAE Systems OMC South Africa. The vehicle is produced at DLSI’s recently opened Specialist Military Vehicles facility at Prithla in India's National Capital Region.
CV90120-T light tank
McCumiskey noted that India's ‘defence market is growing, and equipment buying is growing’. The Indian Ministry of Defence’s Director General (Acquisitions) Vivek Rae said during a DefExpo seminar that ‘you will see a growth in defence modernisation budgets of about 13-14% per year’. The government plans to spend Rs795 billion ($15.27 billion) on procurement during 2012-13.

‘That is why BAE Systems has invested so heavily in , why we have such a large and developing presence’, said McCumiskey. ‘Our strategy is predominantly around land systems. All of our land systems offerings will come through our joint venture and they will be “Indianised”’. 
In 2011 the MoD invited four Indian companies - Larsen & Toubro, the Mahindra Group, the state-owned Ordnance Factory Board and Tata Motors – to submit bids to design and build 2,600 Future Infantry Combat Vehicles (FICVs) to replace the army’s fleet of Russian-designed BMP II IFVs. The requirement is for a vehicle that can be operated by a three-man crew, able to carry seven ‘dismounts’, and armed with a cannon and missiles.

Two of the contenders will be selected to develop prototype vehicles for evaluation with the MoD funding 80% of the development cost. Under the government’s ‘Buy and Make Indian’ approach at least 50% of the proposed designs must be of indigenous content. The MoD wants to maintain two FICV production lines so will select one company to produce 65-70% of the total (Level 1) and a second company the remaining vehicles (Level 2).  It is expected to be India's most expensive defence project to date.
‘We would like to be L1 and that is the whole focus of our strategy, to have the best package, the best vehicle, said McCumiskey.

‘It is very exciting because it is the first “Make” programme. It will give us a chance to really Indianise a lot of offshore technology. FICV is not about bringing in a vehicle from somewhere else and making it Indian. It is about bringing in some base technology and developing a vehicle in India so that the intellectual property resides in India. It is a very different mindset to what has been done before, which were really just offsets, producing foreign systems in India.

‘We have a lot of modern technologies in BAE Systems [from projects such as CV90 and SEP] to bring into  to develop a new vehicle which can then be sold on. That will be the first generation. The second generation technology will be developed here.’

McCumiskey believes the 26% FDI limit is a challenge and that the project would possibly move faster if the limit were 49%. BAE Systems will have to consider what return it gets for its technology transfer. Nevertheless, ‘FICV is a huge opportunity, it is part of the reason we have a joint venture in.’ 
McCumiskey is optimistic that the government will approve in the new financial year, which begins on 1 April, the approximately $647 million package to buy 145 M777 lighweight 155mm towed howitzers with Laser Inertial Artillery Pointing Systems and associated parts, equipment, training and logistical support through the US government’s Foreign Military Sale programme. ‘I am sure the Indian Army will be as delighted with it as the Canadian and US armies and the  Marine Corps.’

BAE Systems is keen to assist through DLSI with the modernisation of the FH77B 155mm towed howitzers supplied by Bofors in the late 1980s, before it was acquired by BAE Systems.  McCumiskey said that although the army still needs to clarify its intention about the future of these weapons ‘it is important for us that this project be successful for many reasons. India needs modern artillery’. 
BAE Systems has yet make a final decision about developing the proposed MGS derivative of its Archer 155mm/52cal wheeled self-propelled artillery system for a potential Indian Army requirement. 

The example of the BvS10 MkII armoured all terrain vehicle which is displayed at DefExpo will remain in India for five months of trials and demonstration which is expected to help the army frame its emerging requirement for such a vehicle. McCumiskey believes the BvS10’s suitability for both military and disaster relief operations will appeal to the army.

BAE Systems is also promoting its CV90120, armed with a 120mm smoothbore gun, should the army decide to proceed with a project to acquire a light tank. In October 1999 the service issued a request for information for about 200 wheeled and about 100 tracked light tanks but the project has not moved since


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