Japan’s ShinMaywa to Build US-2 Amphibious Aircraft in India

It is not clear who the consumer of the aircraft would be as discussions on the procurement of the aircraft for the Indian Navy has hit a logjam with Japan initially unwilling to reduce prices and allow transfer of technology and now with the Indian Navy facing a severe fund crisis.

New Delhi (Sputnik): Japan's ShinMaywa Industries Limited has chosen Mahindra Defence as a partner to manufacture and assemble its amphibious US-2 aircraft in India. According to the MoU, which was signed on the sidelines of DefExpo 2018 in Chennai, Mahindra will also set up MRO (maintenance, repair, and overhaul) units for the aircraft.

"We are committed to absorbing maintenance transfer of technology for this large amphibious aircraft in India. Our partnership will contribute to growing the Indian aerospace ecosystem," SP Shukla, group president of the aerospace and defense sector at Mahindra Group, said in a statement.  

The agreement comes at the backdrop of discussions between India and Japan on the induction of amphibious aircraft in the Indian Navy making no headway since 2014.

Initially, the Indian Navy and the Indian Coast Guard had taken a keen interest in this aircraft due to its range of 4,500 km, but the high cost and Japan's rigid stance against sharing critical technology forced India to look towards other options. However, in the follow-up discussions, Japan had agreed to lower prices and also for a transfer of technology, but the deal seems to have eventually slipped down the ladder in a tightening matrix of procurement priorities for the Indian Navy. 

Since the aircraft will not be manufactured and assembled in India, it is likely to bring procurement discussions back on track. However, with the Indian Navy staring at an acute fund crunch, it is more or less impossible for the deal to get through anytime in the near future. The fund crisis in the Indian Navy is so severe that it has not been able to pay the committed liabilities for last three years, according to official statistics.

READ MORE: India, Japan Set to Ink Record $1.3 Billion Amphibious Aircraft Deal

"The committed liability is INR 25106 crore ($3.9 billion) and the allocations are INR 15083 crore ($2.3 billion). This has been the case for the last three financial years. There has always been disparity over the last three financial years in the modernization budget versus committed liability. We do this by managing our budget through the financial year by deferring certain committed liability payments so that we earmark a certain amount for our modernization and new schemes," an Indian Navy official said before a parliamentary panel in February this year.

Indian Navy does not have fund to pay committed liabilities. Third year in a row. No fund for new purchase. pic.twitter.com/a9rCWRE6PS

— Rishikesh Kumar (@rishhikesh) April 11, 2018

Moreover, the Narendra Modi government is likely to slip into general election mode in the next few months, reducing the possibility of any such crucial deal witnessing the light of the day.