NEW DELHI — The first-ever defense deal between India and Japan is back on track after two years as Japan has offered a price concession for the purchase of 12 US-2 amphibious aircraft for the Indian Navy, according to an official with the Indian Ministry of Defence (MoD).
"Japan has offered a price concession of more than 10 percent per aircraft from $133 million per aircraft to around $113 million, and the $1.35 billion government to government deal for US-2 amphibious aircraft is now ready for finalization," the official said, speaking on condition of anonymity
Shortly after coming to power in mid-2014 and during his first overseas visit to Japan, Indian Prime Minister Narendra Modi announced his wish to buy US-2 amphibious aircraft, made by ShinMaywa of Japan, for the Indian Navy.
However, negotiations suffered as the Japanese refused to lower the quoted price of $133 million per aircraft.
Japanese Embassy diplomats here were unavailable for comment.
An Indian Navy official said the amphibious aircraft are required immediately for operation in the Indian Ocean region.
"Carrying out operational logistics support for the naval units (including ships, submarines and embarked assets) at sea, within the Indian Ocean region or beyond is an operational gap that exists in the Indian Navy inventory," the Navy official said.
Anil Jai Singh, a retired Indian Navy commodore and defense analyst, said the US-2 aircraft "will offer a capability to quickly react to a developing situation in our island territories, which are almost 700 miles from the mainland and strategically vulnerable."
The purchase from Japan is also regarded as strategic because New Delhi is building ties with Tokyo as part of its Look East Policy meant to counter China's influence in the Indian Ocean and Pacific Ocean regions.
"The strategic importance of this needs no emphasis. It may be the first military export from Japan since World War II and hence sends out a very significant signal on the depth of the Indo-Japan strategic relationship as well as on the geopolitical dynamic of the Indo-Pacific," Singh said.
After Japan overturned its self-imposed 1967 ban on the export of arms in 2014, India was expected to become the first country to purchase defense equipment from Japan with the acquisition of US-2 aircraft.
An Indian Navy purchase of US-2 aircraft is regarded as strategically critical after China announced in July that it had built the world's largest flying boat, the AG600.
"Once the potential acquisition of US-2 aircraft by India made news, development of the prototype of AG600 became a priority for China. The intended utilization of the aircraft by China is almost similar to the perceived roles in India. Presence of Indian US-2 in [the] Indian Ocean region and AG600 of China in the South China Sea may create an interesting military and strategic balance in the area," the Indian Navy official said.
"Successful agreement towards acquiring the US-2 aircraft has the potential to power not only Indo-Japan defense cooperation but also strategic bonding between the two nations," the MoD official said. "[The] government of Japan considers this cooperation as an extension of strategic partnership between India and Japan."
Ankur Gupta, a defense analyst with Ernst & Young India, said of the potential deal: "India and Japan have been long-term partners in the infrastructure space. With this positive movement towards the US-2 purchase, these ties will move to the strategic level. Should some part of the platform be manufactured in India, then it will boost local capabilities as well."
Vivek Raghuvanshi is the India correspondent for Defense News.