Japan may cut price to ink aircraft deal with India

NEW DELHI: Japan is negotiating the sale of Shinmaywa US-2 search and rescue aircraft with India not for any economic gain but because it considers India a friendly country, Tokyo has said amid reports that the deal for 12 amphibious aircraft had collapsed over pricing and technology transfer issues.

Top Japanese defence ministry sources told TOI in an exclusive interaction that they would look at reducing the price for the $ 1.6 billion aircraft deal ?as much as possible, in a fresh attempt to revive the negotiations.

The agreement, if it happens, will have a huge symbolic significance as a message to China about deepening defence and security cooperation between India and Japan, both victims of Chinese territorial aggression.

"Our position is that if this agreement happens, it will have a very favourable impact on our relations with India,'' said a Japanese defence ministry official.
"We understand there are some consultations underwayin India over pricing. Pricing is determined by several factors. We are not doing this for economic gains but for our friendly relations with India and can look at reducing the price to the extent possible," added the official.

Japan is now hoping that there will be some progress in negotiations by the time PM Narendra Modi visits Tokyo later this year for the annual summit meet. Known for its short takeoff capability, the aircraft was meant to be deployed in the Andaman Nicobar Islands.

After Japan overturned its self-imposed 1967 ban on export of arms in 2014, India was expected to become the first country to purchase defence equipment from Japan with an agreement for US-2 aircraft. India and Japan had last year, after the summit meeting between Modi and his counterpart Shinzo Abe, signed an agreement for transfer of defence equipment and technology.

The 2 leaders had then said that they wanted to to deepen the bilateral defence relationship through two-way collaboration and technology cooperation, co-development and co-production. They had also expressed an intention to explore ``potential future projects on defence equipment and technology cooperation such as US-2 amphibian aircraft''.

The negotiations for the aircraft though were left in limbo with serious differences over pricing and India's demand that the aircraft come with state-of-the -art surveillance technology. Japanese officials, however, said there was no sensitive technology involved with the US-2 and wanted to treat it as a regular search and rescue seaplane only. India also wants co-production here as the government believes it can provide an impetus to the Make in India initiative.

According to Japanese defence ministry officials, manufacturing in India would be feasible only if the agreement comprised sale of a certain number of aircraft. ``If the number is too few, it would not be cost effective for India,'' said the official.

Maritime security is one of the key areas in Japan's cooperation with India. Japan, which is now participating regularly in India's Malabar exercise with the US, has encouraged India to speak up on issues related to South China Sea.

Japan is currently having to contend with an increasing assertive China in East China Sea where Chinese vessels continue to enter Japanese territorial waters in large numbers. While the Chinese coast guard have repeatedly ventured into Japan's contiguous zone and territorial seas near Senkaku (Chinese call it Diaoyu) islands, a Chinese navy vessel entered the contiguous zone for the first time in June this year. Japanese authorities see this as fresh escalation by China.