Defence panel clears projects worth Rs 80,000 crore ($13 billion)

MoD to choose yards for building submarines;Israeli Spike anti-tank missile chosen over US Javelin

By Ajai Shukla

Business Standard, 26th Oct 14

The ministry of defence (MoD) on Saturday took a major step to address India’s critical submarine shortage,. A committee has been set up to evaluate which Indian defence shipyards can build six high-tech, conventional submarines under Project 75I at an estimated cost of Rs 50,000 crore.

The government has also cleared the procurement of the Spike anti-tank missile from Israel, effectively rejecting the US proposal to co-manufacture the Javelin missile and then co-develop a next-generation version of the Javelin for the US and Indian militaries. The government has also cleared several smaller projects whose worth, according to ministry officials, totals Rs 80,000 crore. The details of these smaller approvals, though, are not immediately available.

To identify shipyards that will bid for the tender, the high-level committee, under Secretary (Defence Production) G Mohan Kumar, has been given six-eight weeks to screen five public sector and two private shipyards --- Mazagon Dock Ltd, Mumbai (MDL), which is currently building six Scorpene submarines under Project 75; Garden Reach Shipbuilders and Engineers, Kolkata; Hindustan Shipyard Ltd, Visakhapatnam (HSL); Goa Shipyard Ltd; Cochin Shipyard Ltd; Larsen & Toubro (L&T) and Pipavav Shipyard.

Highly credible MoD sources say the shortlisted shipyards will be invited to submit bids, in partnership with a foreign shipyard that meets the navy’s specifications for the submarines. These include air-independent propulsion; the capability to fire land attack cruise missiles; and advanced stealth features that make them hard to detect.

Project 75I stems from a “30-Year Submarine Construction Plan”, approved by the cabinet in 1999, for constructing 24 conventional submarines in India. Two separate construction lines were to build six submarines each, one using western technology; and the other with Russian know-how. Based on this experience, Indian designers would build the next 12 submarines.

So far, only six submarines are being built under Project 75 --- the Scorpenes at MDL.

Further production has remained stalled, with three committees having been constituted by the defence ministry to identify Indian shipyards that can build Project 75I. In 2003, a committee, under a defence joint secretary, cleared L&T and MDL. Yet, in 2008, a similar committee ruled out L&T.

So incensed was the private engineering giant, which is playing a leading role in building India’s nuclear submarine, INS Arihant, that the chairman, AM Naik, met then prime minister, Manmohan Singh, to protest. That led to the setting up of a third high-level committee, headed by the National Manufacturing Competitiveness Council chief, V Krishnamurthy, which again cleared L&T and MDL.

Meanwhile, to ensure early delivery, the Indian Navy has pushed for building two submarines abroad, while the domestic manufacturer absorbed technology and cranked up production. Now, in keeping with the Modi government’s “Make in India” policy, and in accordance with the 1999 plan, it has been decided that all six vessels will be built in India.

Gone too is the impractical United Progressive Alliance (UPA) plan to divide production between two public sector defence shipyards (MDL and HSL) --- a device proposed by then defence minister, AK Antony, to keep HSL in business. Instead, a single shipyard will build all six submarines.

The big potential gainer from today’s decision is L&T, which is back in contention for winning, single-handedly, Indian warship-building’s largest-ever order.

Speaking to Business Standard today, MV Kotwal, L&T’s defence business chief, said: “L&T would welcome any decision to evaluate Indian shipyards for both capacity and capability in building submarines. We have both the infrastructure and the experience in our Hazira shipyard, and also in our new Katupalli shipyard (at Ennore, Tamil Nadu). Most importantly, we have established a state-of-the-art submarine design centre in Chennai and a virtual reality centre in Mumbai, both essential for Project 75I.”

Separately, Business Standard learns the MoD has cleared the Rs 2,000 crore procurement of two midget submarines, used for special operations like landing commandoes on enemy shores. It is likely that HSL Visakhapatnam, the defence ministry’s newest shipyard, will build these in partnership with a foreign vendor.

In another major decision on Saturday that is loaded with politics, the MoD has cleared the procurement of the Israeli Spike anti-tank missile for the army’s infantry battalions to destroy enemy tanks. MoD sources say the Rs 3,200 crore contract is for about 300 launchers and more than 8,000 missiles. Production facilities will be established in Bharat Dynamics Ltd, Hyderabad.

This constitutes a flat rejection of the US proposal to co-manufacture the Javelin anti-tank missile in India and, unprecedentedly, co-develop with the Defence R&D Organisation (DRDO) a next-generation version of the Javelin. That proposal was made under the Defence Trade & Technology Initiative, a high-level defence channel established to boost defence ties between New Delhi and Washington With the US lobbying New Delhi at multiple levels, including during Prime Minister Narendra Modi’s recent visit, this is an unmistakeable snub for Washington.

Amongst other procurements cleared are: 363 new BMP-2 infantry combat vehicles from Ordnance Factory, Medak, for the army for Rs 1,800 crore; 761 radio relay containers for army communications for Rs 662 crore; 1,768 railway wagons for Rs 740 crore for quickly moving army units over long distances; and 12 additional Dornier aircraft for the navy, which Hindustan Aeronautics Ltd (HAL) will build for Rs 1,850 crore.

Speaking at the MoD’s apex Defence Acquisition Council (DAC) on Saturday, where the procurement decisions were made, Defence Minister Arun Jaitley said “National security is a paramount concern for the government. All hurdles and bottlenecks in the procurement process should be addressed expeditiously so that the pace of acquisitions is not stymied.”

Equipment	Action	Financial effect
Decisions on Aug 29
197 Light Utility Helicopters	Tender scrapped (to be built in India)	---
6 submarines	Refit part in India	Rs 4,800 crore
118 Arjun Mark II tanks	Build in India	Rs 6,600 crore
40 Catapult SP guns	Build in India	Rs 820 crore
22 Apache and 15 Chinooks	Buy overseas	Rs 15,000 crore
Sonars for 11 warships	Buy overseas	Rs 1,770 crore
Naval multi-role helicopters	Buy overseas	Rs 1,800 crore
Army mobile network	Build in India	Rs 900 crore
Decisions on Oct 25
6 submarines (Project 75I)	Committee set up All built in India	Rs 50,000 crore
300 Spike launchers, 8,000 missiles	Build in India with ToT	Rs 3,200 crore
363 BMP-2 infantry carriers	Build in OF Medak	Rs 1,800 crore
761 radio relay containers	Buy in India	Rs 662 crore
1,768 railway wagons	Buy in India	Rs 740 crore
12 Dornier aircraft	Build in India (HAL)	Rs 1,850 crore