Project 75 (I) hits a huge roadblock, one major contender pulls out; Know more

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August 19, 2021 6:40 PM

“Before responding each and every aspect has to be considered, preparing the response in compliance with the RfP which is voluminous takes time,” the source added.

The indigenous Fuel-Cell based AIP being made by DRDO is not expected to be ready in time for the project to start.The indigenous Fuel-Cell based AIP being made by DRDO is not expected to be ready in time for the project to start. (Representative image)

The long awaited Project 75 (I) gets ground after one of the major bidders has withdrawn from the race. The Ministry of Defence in July had issued a Request for Proposal (RfP) for the construction of six conventional diesel-electric submarines (SSK) under the Make in India initiative and in collaboration with an established foreign submarine builder.

According to sources the Germany based M/s tkMS (ThyssenKrupp Marine Systems) which had offered Type 218 Invincible Class submarines has sent a letter to the government citing three major reasons for withdrawing from the contest.

Also Read: The RfP for Project 75(I) presents opportunities and challenges

Highly placed sources have confirmed to Financial Express Online receiving a letter from the M/s TKMS based in Germany, citing reasons for withdrawing from the Project 75 (I).”

What are the reasons cited for withdrawal?

Lack of Flexibility in the RfP

“The company highlights the rigidity of RfP. The time given to respond for such a huge deal is very short. In big ticket projects the response time is around 12-15 months,” the source quoted above explained.

The RfP for the Project 75 (I) was issued on July 10, 2021 after the DAC had put its stamp of approval in June 2021. And for this the date for responding has been stated as November this year.

“Before responding each and every aspect has to be considered, preparing the response in compliance with the RfP which is voluminous takes time,” the source added.

Liability clause

Another reason for withdrawing from the contest is the Liability Clause. The company is expected to take responsibility for the boats which will be made by the shipyards identified by the government. If anything goes wrong the OEM will be held responsible and will have to pay the penalty,” the source said.

Adding, “It is essentially an unlimited Liability Clause for the next 30 years.”

Mazagon Docks Ltd, Mumbai, and Larsen & Tubro are the two shortlisted firms who will be working on the six submarines under Project 75 (I). Each of them will build three each.

Technology Transfer

The intended degree of Transfer of Technology (ToT) is not specified. There is no clarity in how much technology needs to be transferred.

The Ministry of Defence had issued a statement on the RfP being issued which has clearly stated that India is looking for deep Transfer of Technology from the foreign OEM which would help in developing the indigenous capability to design and build submarines.

There is also a focus on the contract being awarded to the lowest bidder (L1), which will deter the OEM from transferring its complete technology and sharing its Intellectual Property (IP).

How does the pulling out of the German company impact the project?

The Project 75 (I) submarines are expected to be fitted with Fuel-Cell based Air Independent Propulsion (AIP).

There are only two companies in the world who have fuel cell system AIP which are tried and tested and already fitted on submarines. These include M/s tkMS (ThyssenKrupp Marine Systems), of Germany. This was the first company in the world which designed and developed this technology.

And the other company which has this technology which is based on the technology of the German company is Daewoo of South Korea.

With the German company pulling out of the race, a single vendor situation has been created.

“Usually in such situations, the RfP is scrapped and a fresh one is issued,” according to a senior officer in the Ministry of Defence.

What about the AIP being made by DRDO?

The indigenous Fuel-Cell based AIP being made by DRDO is not expected to be ready in time for the project to start.

Why is AIP important?

With the Chinese presence growing in the Indian Ocean region (IOR), the Indian Navy needs it on an urgent basis. Even the submarines which are being constructed at the MDL shipyard under a joint venture with the French Naval Group do not have the AIP. And as has been reported earlier, the Indian Navy is looking at options to buy it from a foreign OEM.

Also Read: The wait for more submarines gets longer! Project 75 I gets delayed further

The Rs 43,000 crore project was the first one in accordance with the Strategic Partnership (SP) model which was introduced in the earlier Defence Procurement Procedure (DPP). Under the SP model the focus is on transforming the country’s military-industrial eco system.

OEMs to partner with the SPs

Financial Express Online had reported in March this year that the SPs identified already were to collaborate with any one of the shortlisted OEMs. These OEMs included M/s TKMS of Germany (Type 218 Invincible Class); M/s Naval Group of France (This group is already working on Project 75 “Scorpene’’ class submarine); M/s JSC ROE of Russia (Amur Class); M/s Navantia of Spain (S-80 Issac Peral class); and M/s Daewoo Shipbuilding and Marine Engineering Co Ltd of South Korea (KSS-3 submarine).

These companies were identified by the Ministry of Defence and received the RfP as they are considered as the best in the field of conventional submarine design and construction.

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