NEW DELHI — In a major boost to India's private sector, Larsen & Toubro, jointly with South Korea's Samsung Techwin, beat Russia's Rosoboronexport in the Indian Army's $1 billion tender for a 155mm howitzer gun.
Larsen and Samsung fielded the K-9 Vajra tracked howitzer against the Russian 2S19 MSTA howitzer in 2013 and 2014 trials, and the K-9 beat the Russian gun on several technical features, a Ministry of Defence official said.
A Larsen executive confirmed that the MoD informed the company about being short-listed and that price negotiations will begin soon.
This would be the second time that a domestic company beat an overseas competitor in a big-ticket global tender. In 2010, domestic defense major Tata Power Strategic Electronics Division beat Selex Sistemi Integrati of Italy to win the $260 million modernization of airfield infrastructure project.
The tender for the tracked guns, issued in 2011, was a rebid of a 2007 tender, and was issued to India's Tata Power, Larsen Bharat Earth Movers Ltd. (BEML) and Rosoboronexport. Larsen teamed with Samsung while state-owned BEML united with Slovak company Konstrukha.
Analysts said with the production of the K-9s anticipated in the city of Pune after the tender is formally inked, Larsen and Samsung could jointly emerge as India's leading howitzer makers in a market worth more than $6 billion.
"India has not purchased a single howitzer for the last 30 years now, so yes, this partnership has a great scope of becoming a major supplier for the Indian Army over the next decade," Ankur Gupta, a defense analyst with Ernst & Young India, said.
An Army official, however, said it is too early to project whether the joint venture can mature into a major howitzer maker here.
"Doubt [over] the order for tracked guns will increase unless Samsung L&T combined can spin this off into a self-propelled wheeled gun later and address the Indian artillery's old tender for 180-odd wheeled guns," the Army official said.
No Larsen executive would comment on the company's plans to manufacture howitzers nor would they say whether they will strike a joint venture company with Samsung on an equity-sharing basis. No Samsung executives were available for comment.
The South Korean company could have competed alone in the tender, but it chose to team with an Indian company. Analysts say that freed Samsung from fulfilling offsets that otherwise have to equal up to 30 percent of the contract's value.
"Samsung realized that having an Indian partner is advantageous," Gupta said. "Also by having significant indigenous content, all the work around offsets gets taken care of."
This "made sense even five years back when Make in India was not the flavor of the season: Give 50 percent work to an Indian entity and get away from the headache of offset," the Army official said. "In any case, probably L&T drove a hard bargain and asked for substantial work to be done in India to scale up their own capabilities on the back of such a project."
However, to what extent technology of the tracked gun will be passed on to Larsen is unknown. No Larsen executive would comment on the level of technology transfer that could happen.
It remains to be seen where the turret technology is coming from.
"For limited 100 numbers, [it] doesn't make sense to make turrets also in India, probably later when Samsung and L&T combined want to tap other global orders, they might put turret work in L&T manufacturing of the K-9 gun at Pune-based facilities of L&T," the Army official added.
A Larsen executive, however, said the building of the K-9 would enable the Indian Army to get better lifecycle support.
"It meets the Make in India requirement, lifecycle support can be provided from India, the next-generation gun can also be indigenous," the L&T executive said.
The Army plans to replace all existing field guns with a variety of 155mm/.52-caliber guns at a cost of more than $6 billion. As part of this purchase plan, named Field Artillery Rationalization Plan, the Army plans to buy a mix of around 3,600 155mm/.52-caliber guns by 2020 to 2025 for more than 220 artillery regiments.