BAE Systems is preparing a wide-ranging offset package for India's procurement of the M777 lightweight howitzer, seen here in action in Afghanistan, to include localised production. Source: BAE Systems

BAE Systems is preparing a wide-ranging offset package - focused on localised defence production - to support its anticipated contract to supply the Indian Army with 145 M777 155 mm/39 calibre lightweight howitzer guns, the company has confirmed to IHS Jane's .

Complying with India's defence offset rules, the M777 offset programme will be worth 30% of the agreed value of the contract, which is expected to be about USD700 million, and will be channeled through industrial accords between BAE Systems and around 40 Indian companies.

A company spokesperson confirmed that these partnerships will facilitate the production in India of a variety of BAE Systems defence products for national and international programmes.

In addition, BAE Systems has offered to transfer its M777 assembly, integration, and test (AIT) facilities from the United States to India. An industry partner to support the provision of AIT activities is expected to be announced in the second half of 2015 with associated costs for the transfer included in the purchase contract.

India's procurement of the M777s, along with Selex Laser Inertial Artillery Pointing Systems (LINAPS), was approved by the Indian Ministry of Defence in May. The purchase will progress through the US Foreign Military Sales (FMS) mechanism, with the guns operated by the Indian Army's 17 Mountain Strike Corps, which is being formed for deployment along the disputed border with China.

"Our approach in the M777 offset proposal has been to tap into our diverse businesses, with their range of requirements to open opportunities for the Indian supply chain across our air, land, and sea programmes both locally and globally," the company said in a statement to IHS Jane's .

"In line with [India's] offset policy, the latest package - of over USD210 million - envisages investing in approximately 40 Indian defence suppliers across the country with an emphasis on the [state-owned] defence public sector undertakings and the medium, small, and micro enterprises sector.

"[This] reflects our commitment to India and confidence in our track record of fulfilling offset commitments around the world. Our offset partners in the offer for M777 will be diverse in both geographical spread and product categories."

Under the AIT package, BAE Systems' selected partner will undertake end-production of the gun system as well as assembly and maintenance, repair, and overhaul. The facility will also undertake similar activities for any export orders of the gun. BAE Systems' existing M777 AIT facility is located at Hattiesburg, Mississippi, where around 70% of the howitzer's assembly is completed.

Following the transfer of the AIT facility to India, however, some key parts of the gun will continue to be produced outside India. IHS Jane's has previously reported, for instance, that the M777 titanium barrel and associated recoil components will be imported from the BAE Systems plant at Barrow-in-Furness in the United Kingdom.