MoD slams door on private sector in submarine project

I took this photo last year at L&T's shipyard being built at Katupalli, near Ennore, Tamil Nadu. The yard, which is close to completion, marks L&T's emergence as a serious shipbuilder

by Ajai Shukla

Business Standard, 3rd Mar 12

The defence ministry (MoD) has ruled that no private sector shipyard in the country has the infrastructure and capability required for building the high-tech conventional submarines that the Indian Navy wants. The long-delayed Project 75I, to build six conventional submarines for an estimated Rs 30,000-35,000 crore, will be divided up between foreign shipyards and the defence public sector.

The Secretary Defence Production, Shekhar Agarwal, has told Business Standard that the ministry has decided that the first two Project 75I submarines will be built abroad by the foreign vendor that wins the MoD contract. The next four vessels will be built in India, in the two defence shipyards that have the infrastructure for building submarines: Mazagon Dock Limited, Mumbai (MDL); and Hindustan Shipyard Ltd, Visakhapatnam (HSL).

This decision is a blow to private sector shipyards, especially L&T, which is playing a major role in building the Arihant-class nuclear submarines; but also to ABG Shipyard and Pipavav Shipyard, which have invested lavishly on infrastructure. Three successive MoD committees have considered the thorny question of which shipyards can build a submarine. The latest, headed by V Krishnamurthy, Chairman of the National Manufacturing Competitiveness Council (NMCC), submitted a split opinion last year, which mentioned that L&T could also be considered.

“The MoD has examined the Krishnamurthy Committee report and decided that no private sector shipyard individually has the capability to build a submarine,” said Agarwal.

Contacted for a comment, L&T's defence business chief, MV Kotwal said "We have not been informed about any such development by the MoD. But if it is true, it is extremely surprising. We have informed the MoD already about the capabilities and capacities that we have put in place for submarine building. These have already been demonstrated in the Arihant project. L&T has the engineering and manufacturing capability needed for building submarines in India."

This decision was taken by the MoD’s apex Defence Acquisition Council (DAC) in January, says Agarwal. But, since it countermands an earlier CCS sanction, this will require sanction from the Cabinet Committee on Security (CCS). In 1999, the CCS had sanctioned the 30-Year Submarine Construction Plan for constructing 24 conventional submarines entirely in India. The latest MoD decision to build two submarines abroad runs contrary to this.

Business Standard has learned that the Indian Navy has argued forcefully for building the first two Project 75I submarines abroad. The navy hopes that this would forestall the delays that marred the ongoing Project 75, which involves constructing six Scorpene submarines in MDL, in partnership with Franco-Spanish consortium, Armaris (which was subsequently taken over by French shipbuilder, DCNS). The first Scorpene, which was to be delivered this year, will only be completed in 2015.

Top MoD sources apprehend that the CCS might be wary of okaying the proposal to build two submarines abroad. In 1999, the National Democratic Alliance (NDA) had regarded Indian shipbuilders capable of building 24 submarines in India. Thirteen years later, and with significant shipbuilding successes under its belt, including the indigenous production of a nuclear submarine, the CCS faces risks for any decision to build abroad?

The CCS also faces a difficult decision in sanctioning a fresh Transfer of Technology (ToT), which the navy insists upon. India has already obtained ToT thrice: from Germany for the HDW submarine line; from France, for the Scorpene; and, to an unclear extent, from Russia for the nuclear INS Arihant. The technology for Scorpene alone cost Rs 6000 crore. A fresh request for ToT risks accusations of failure in absorbing technology.

Senior naval officers who favour indigenisation point out that, when India bought the HDW Type 209 submarine in the 1980s, HDW built the first two submarines abroad. But the next two submarines, which were built in MDL, faced lengthy delays. Eventually, the MoD decided not to build any more, largely because of corruption allegations. Now the CCS will again have to recommend that construction model.

The MoD’s Acquisitions Wing is drafting a Project Note, which summarises these issues for the CCS. This effort has been under way for more than a month now.

The Scorpene is a 1,800-tonne submarine that can remain at sea for 40-50 days. A submarine traditionally lurks underwater, firing torpedoes to destroy enemy battleships. It dives as deep as 300 metres to evade detection, but its diesel-electric engines are not as silent, or have as much endurance, as the new “air-independent propulsion”, or AIP, that the navy wants in the new Project 75I submarines. India has an option to install AIP in the last two Scorpenes that MDL builds, and then retrofit AIP into the other four Scorpenes as well.