New Delhi, Nov. 12: South Africa’s Denel Corporation, which stood by India during the Kargil war and rushed supplies of 155mm shells for the Bofors guns, is likely to bag a multi-million dollar contract to transfer knowhow and jointly produce artillery at a new ordnance factory being built in Nalanda.
Denel was in the race for what had come to be known in the arms market as the hottest artillery deal going.
A delegation led by Union defence secretary, Subir Dutta, leaves for South Africa early tomorrow to conclude talks with the South African arms major.
The ordnance factory — the 40th facility of its kind — has been in the making for some time now. Nalanda is defence minister George Fernandes’ Lok Sabha constituency. The army and the defence ministry have been projecting a dire need to upgrade the artillery, the rationale being that in the context of the security scenario in South Asia, India needs heavy calibre guns.
Army chief General S. Padmanabhan, who retires next month, is from the artillery and is known to be a strong advocate of beefing up the gunners’ units. Under him, the army has also carved out an additional new artillery division.
Denel has been in a tough race with six other competitors, the most high profile among them being Sweden’s Celsius, which took over Bofors and by virtue of which it already has a presence in India. The last time the India Army invested heavily in its artillery was in 1986, when it bought off-the-shelf from Bofors, 310 Howitzers for an estimated $ 700 million. The deal allegedly was concluded with a Rs 64-crore kickback and sparked a political scandal that tainted Prime Minister Rajiv Gandhi and is still doing the rounds of courts.
If the contract is signed, Denel will have pipped Celsius (Bofors), ODE of Singapore, Patria Valmas of Finland, Santa Barbara of Spain, Marconi Marine, Land and Naval Systems of the UK and Giat Industries of France.
The size of such large arms deals are rarely revealed when negotiations are nearing conclusion. India has been in the market to procure 155mm/52 calibre artillery and weapons systems. Part of this is likely to be purchased outright and the balance through co-production. One estimate that is two years old puts the cost of procuring about 500 self-propelled and towed Howitzers at more than $ 950 million.
If Denel swings the deal, it will be largely because it proposed not just sale of finished systems and artillery, but also offered to transfer technology and, possibly, also a part-buyback arrangement.
At a defence exhibition in New Delhi earlier this year, Armscor, an umbrella outfit of South African arms makers, made a strong pitch on behalf of Denel, telling the Indian government that it was willing to consider a joint venture.