Govt to finalise $660 mn deal for heavy artillery in major defence modernisation push

The Indian government looks set to finalise a $660 million deal with engineering firm Larsen and Tubro (L&T) to purchase heavy artillery for the Indian Army, which would provide a major fillip to the country's defence modernisation plans, said a report in the Economic Times.

The deal is part of Prime Minister Narendra Modi's ambitious $250 billion plan to revitalise the aging firepower the armed forces currently use.

The report quoted a senior army official as saying that the proposal to buy 100 heavy artillery guns from L&T is in its final phase before it would be cleared by the Cabinet Committee on Security, the topmost authority on security matters.

Representational Image. Reuters

Representational Image. Reuters

The daily also quoted a senior strategic affairs analyst, SK Chatterji, as saying, "Artillery is the weapon of choice when armies want to deploy a great amount of firepower. It also gives the advantage to our forces over the enemy."

India has been on a defence spending spree of late. In November, the government cleared a deal to buy 145 Howitzer 155mm ultra-light guns from the United States for approximately $750 million. This came closely on the heels of the Indian Army acquiring three indigenously-built Dhanush Howitzers in July 2016.

L&T, like many other Indian private sector companies in the defence sector, like Tata and Mahindra, is now a key player in the Modi government's 'Make in India' project. The ambitious plan also intends to indigenise defence technology in order to reduce dependence on arms imports.

A February 2016 report in Business Standard stated that L&T saw "huge potential" in the 'Make in India' project, and had also listed defence indigenisation as a potential investment opportunity.

Along with the push for indigenisation, the government in June 2016 also liberalised investment-related rules for the defence sector. After having earlier raised the FDI limit to 49 percent, the government later allowed 100 percent foreign investment — subject to government approval — in the sector, but dropped the "state of the art technology" clause.

However, a report in The Wire noted that the government's push for foreign investment in the sector seemed to have flopped, as less than one million dollars worth of FDI entered the sector since 2013. "Till September 2016, no FDI inflow has been received," Defence Minister Manohar Parrikar was quoted as saying.

The report added that bureaucratic red-tapism and opaque acquisition process, which has not yet been addressed by the government are also reasons for the lack of growth in foreign investment.

Updated Date: Jan 04, 2017 19:23 PM

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