A delay of over 3 years by the ministry of defence (MoD) in ordering urgently needed artillery guns for mountain division has raised the cost by as much as 90%.
New Delhi’s order for 145 pieces of the BAE Systems M777 ultra light howitzers (ULHs), which would have cost less than Rs 2,960 crore in Jan 2010, could now cost up to Rs 5,610 crore.
On Aug 7, the US Department of Defense (Pentagon) re-notified the US Congress of the sale to India of 145 BAE Systems M777 towed 155 mm/39-calibre ultra light howitzers (ULHs) for up to $885 million.
This has superseded the earlier notification of Jan 26, 2010, which had stated a maximum cost of US $647 million.
This price increase of 38% comes alongside the appreciation of the dollar by almost 45%, from Rs 45.86 on Jan 26, 2010 to Rs 63.53 today. This double whammy has raised the cost by up to Rs 2,650 crore
However, senior Pentagon sources point out that the price of $885 million mentioned in the re-notification of Aug 7 is the “upper limit of the price envelope”, and that a deal finalized quickly might not cost substantially more than the previously notified $647 million.
“But some escalation is inevitable, given that the earlier notification dated back more than three years. Besides, BAE Systems has already incurred costs in keeping its assembly line open,” says the Pentagon official.
Image: Indian army soldiers stand on 155mm FH 77 Bo2 Bofors artillery gun during the 'Vajra Shakti' (Power of Thunder) army exercise at Gag, some 45kms south of Jalandhar, 09 May 2005. (AFP)
Text: Business Standard