India has told the US that in view of the price increase, it cannot go ahead with the procurement of 145 ultra-light howitzers for the Army, which plans to deploy such artillery guns in mountainous terrain.
During talks with US officials at the time of American Defence Secretary Chuck Hagel's recent visit, it was conveyed by India that it cannot go ahead with the deal due to the price hike asked for by the equipment manufacturer, Defence Ministry sources said here.
Till early 2013, the deal for the M777 howitzers was expected to cost India around Rs 3,600 crore but due to the delay in finalising the deal, the American side sought an increase of over Rs 300 crore in August last year.
The sources said the US side has conveyed that the production line of the howitzers has been closed down and India will have to pay for its reopening and the costs may escalate further if there are more delays in finalising the deal.
Under the procurement process, certain procedures have to be followed and it is difficult to justify a price hike in the middle of negotiations for the contract, they said.
Recently, Defence Minister Arun Jaitley had stated that the deal has not progressed due to issues over cost of the deal and offsets requirements. "The case for procurement of the ULH guns through the US government has not progressed due to cost issues and because the vendor has not been able to come up with a proposal fully compliant to the offset requirements," he had said.