India's aerospace industry stands to miss out on a production partnership for Japan's ShinMaywa US-2 amphibian aircraft, according to sources close to the situation. Japanese Prime Minister Shinzo Abe visited his Indian counterpart Narendra Modi last month and stressed “the full potential of an India-Japan strategic and global partnership.” However, a deal proposed during their previous meeting in 2014 for final assembly in India of the US-2 remains unsigned. Indian defense industry sources speaking to AIN on condition of anonymity said that the delay might cause the Japanese to turn instead to Indonesia as a production partner.
Japan’s Ministry of Defense presented a detailed report on production arrangements for the amphibian in India last year, but Indian government paperwork for clearance of the project is yet to start. Meanwhile, though, Indonesia is increasingly concerned about Chinese expansion into the islands of the South China Sea. It also sees the potential for maritime rescue operations in Southeast Asia . Influential Indonesian politician Setya Novanto met Abe last November. “Japan cannot wait forever,” the Indian official told AIN.
The Indian Navy has an initial requirement for 12 US-2s, and the Indian Coast Guard recently requested another three. The envisioned missions include surveillance and reconnaissance, and logistics support and crew rotation to ships. “There is a [strong] business case for this aircraft program, to meet domestic and export demand,” Sujeet Samaddar, director and CEO of ShinMaywa Industries India, told AIN. Final assembly and integration of the US-2 in India is expected to cost 25 percent less than in Japan, but taxation issues will need to be addressed. “Cost is not a deal stopper. The benefits far outweigh the program costs,” said Samaddar.
India could seek funding from the Japanese Official Development Assistance (ODA) organization to support a co-production deal. The facilities created could help Japanese companies investing in India boost Modi’s "Make in India" policy. Pipavav Defense and Offshore Engineering is believed to be the first choice as ShinMaywa’s production partner in India if the deal goes ahead.