Tenders are maturing, but the navy its constrained by its lowest warship budget since 2011-12
By Ajai Shukla
Business Standard, 7th Nov 17
About two and a half years have elapsed
since the navy last signed a contract for new warships – the Rs 45,381 crore
deal in 2015 with Mazagon Dock Ltd, Mumbai (MDL) and Garden Reach Shipbuilders
& Engineers, Kolkata (GRSE) for seven stealth frigates under Project 17A.
With numerous other warship purchases stuck
in the defence ministry’s famously clogged procurement pipeline, the navy has
surrendered Rs 15,041 crore rupees during the last five years from its
budgetary allocation for new warships.
In four of the last five financial years
(see Table 1), the navy has surrendered thousands of crores of unspent money.
It returned Rs 2,543 crore in 2012-13; Rs 3,621 crore in 2013-14; Rs 5,285
crore in 2015-16; and Rs 4,371 crore last year.
Table 1: Navy fleet: capital allocation and actual
spend
(Rs crore)
2012-13
|
2013-14
|
2014-15
|
2015-16
|
2016-17
|
2017-18
|
|
Allocated
|
13617
|
11772
|
12576
|
16050
|
12467
|
11023
|
Spent
|
11074
|
8151
|
13355
|
10765
|
8096
|
???
|
Under(-) / over(+)
|
(-) 2543
|
(-) 3621
|
(+) 779
|
(-) 5285
|
(-) 4371
|
???
|
(Source: Union government budget documents)
Only in 2014-15 did the navy manage to
spend its allocation, overspending by Rs 779 crore.
Now, with contracts almost finalised for 23
new warships, the navy finds itself constrained by the lowest budgetary
allocation since 2011-12. This year it has only Rs 11,023 crore for fleet
expansion, compared to Rs 13,617 crore in 2012-13; Rs 11,772 crore in 2013-14;
Rs 12,576 crore in 2014-15, Rs 16,050 crore in 2015-16, and Rs 12,467 crore
last year.
This reduction in the fleet budget is
compounded by inflation, which usually runs at 5-10 per cent annually for
defence weaponry, including warships.
Now, with Rs 45,000 crore worth of warship
contracts near signing, navy admirals tell Business
Standard there is concern the government might cite a budget crunch. If the
navy were to sign the impending contracts without delay, it would need to pay
out Rs 4,500 crore, which is the traditional 10 per cent signing amount.
However, most of this year’s Rs 11,023
crore budget is pre-committed towards instalments on earlier contracts and
on-going projects, including the construction of Project 75 Scorpene
submarines, Project 15B destroyers, Project 17A frigates, Project 28 corvettes,
the indigenous aircraft carrier, INS Vikrant, and others.
The admirals say the contracts for 23 new
warships depends upon whether the government agrees to allocate an additional Rs
4,500 crore towards the “Navy Fleet” accounting head in the defence budget.
“The government thought it fit to take back
Rs 4,371 crore last year and Rs 5,285 crore the year before. So, hopefully, it
will find a way to enhance this year’s allocation by a similar amount”, says a
senior admiral, speaking anonymously.
The 23 contracts nearing finalisation are
for the building in Indian shipyards of five hydrographic survey vessels, two diving
support vessels, and 16 anti-submarine warfare shallow water craft (ASWC).
These will involve a pay out of about Rs 20,000 crore over 5-7 years, with an
advance of Rs 2,000 crore to be paid this year.
“We have concluded cost negotiations with
the shipyards that will build these vessels. By the year-end, the first two
contracts should be signed. The one for ASWC needs to be cleared by the Cabinet
Committee on Security, so we are targeting March 31”, said a MoD official
closely involved in these procurements.
Besides these, the navy hopes to conclude
another big contract this year for building four “landing platform docks” (LPDs).
The estimated Rs 25,000 crore contract is currently at the bid-opening stage.
After concluding these Rs 45,000 crore
worth of contracts this year, the navy’s target for 2018 is a Rs 25,000-30,000
crore contract for four Grigorivich-class frigates (Russian nomenclature: Project
1135.6). Two of these stealth frigates will be built in Russia, while Goa
Shipyard Ltd will build the other two.
The MCPP and LTIPP both talk about
increasing the navy’s warship strength from the current 140, to 198 warships by
2027. This would involve increasing the navy’s warship numbers by 5-6 every
year; in addition to replacing 2-3 warships that retire after completing their
service lives.
Towards this, the navy has about 75 vessels
of various types in the procurement pipeline, which will be completed by 2027 (see Table 2).
Table 2: Navy’s warship pipeline
Indigenous aircraft carrier (INS Vikrant) : 1
Project 15B stealth destroyers : 4
Project 17A stealth frigates : 7
Project 1135.6 frigates (from Russia) : 4
Project 28 corvettes : 1
Project 75 submarines (Scorpene-class) : 6
Anti-Submarine Warfare Shallow Water Craft
(ASWC) : 16
Mine Counter Measure Vessels (MCMV) : 12
Hydrography Survey Vessels : 5
Cadet Training Ships :
3
Naval Offshore Patrol Vessels (NOPV) : 5
Deep Sea Rescue Vessels (from UK) : 2
Landing Platform Docks (LPD) : 4
Fleet Support Ships (FSS) : 5
TOTAL : 75 vessels
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