What P75 (I) imbroglio tells us about efficacy of acquisition procedures

The Naval groups’ decision is significant as it had partnered with the state-owned Mazagon Dock Shipbuilders Limited (MDL) for Project 75, of which P75(I) is an extension, to build six Kalvari (Scorpene) class submarines.

The SP model entails parallel shortlisting of foreign original equipment manufacturers

By Amit Cowshish

The French industrial conglomerate Naval Group, formerly known as Direction des Constructions Navales International (DCNS), has virtually pulled out of India’s Project 75 (India), or P75(I), which entails construction of six conventional diesel-electric submarines at an Indian shipyard.

Laurent Videau, Country and Managing Director, Naval Group India, reportedly said on April 30 that the Request for Proposal (RfP) issued by the Ministry of Defence (MoD) requires the submarines to be fitted with sea-proven Air Independent Propulsion (AIP) system, ‘which is not the case for us yet since the French Navy does not use such propulsion system’.

The Naval groups’ decision is significant as it had partnered with the state-owned Mazagon Dock Shipbuilders Limited (MDL) for Project 75, of which P75(I) is an extension, to build six Kalvari (Scorpene) class submarines. The last of these submarines, Vagsheer, was launched recently. Extending this arrangement to make another six submarines of the same class would have made perfect sense, but the MoD had other ideas.

Having unrolled the Strategic Partnership (SP) model in 2016 to involve the private sector in manufacturing of major defence platforms, MoD decided to delink P75 (I) from Project 75 and adopt this model for construction of additional six submarines.

Another significant decision MoD took was to seek an AIP system for the submarines which enables them to remain submerged for more than two weeks at a time without surfacing to recharge their batteries, while the traditional diesel-electric submarines must surface every few days.

The SP model entails parallel shortlisting of foreign original equipment manufacturers (OEMs) whose product meets the services’ requirement and the Indian companies who, as prime vendors, can partner with the former to make that product in India, with or without modifications. This model is an embellished and complexified version of the ‘Buy and Make (Indian)’ category which has been a part of the acquisition procedure for more than a decade.

Working on this model, MoD shortlisted two Indian shipyards in January 2020 as potential strategic partners to build six AIP submarines in India with transfer of technology from their foreign partner. One of these two was the state-owned MDL while the other was the private sector defence conglomerate Larsen & Toubro (L&T).  Selection of MDL was not in the spirit of the SP model, but that is another story.

Parallelly, MoD also shortlisted five foreign OEMs as potential technology providers to the Indian shipyard selected for building the submarines. These were ThyssenKrupp Marine Systems (TKMS) of Germany, Rubin Design Bureau of Russia, Navantia of Spain, Naval Group of France, and Daewoo Shipping & Marine Engineering (DSME) of South Korea.

On 20 July 2021, MoD formally issued an RfP for P75 (I), estimated to be around Rs 43,000 crore (US$5.6 billion), to the Indian shipyards, requiring them to tie up with one the five shortlisted OEMs and submit the bids by 21 November 2021, later extended to June 2022.

One of the reasons for extension of the bid submission deadline is believed to be the non-availability of sea-proven AIP technology with some of the foreign OEMs and the discomfort others have with a few RfP terms, particularly those related to indigenous content in the submarines made in India and the extent of liability of the foreign partners.

If these reports are true, P75 (I) faces an uncertain future. The Indian Navy’s 30-year plan to induct 24 submarines by 2030 was approved by the Cabinet Committee on Security in 1999, but only six conventional Kalvari (Scorpene) class submarines and a couple of nuclear-powered submarines have been built so far.

As it is, the plan is running behind schedule; any further delay in making up the void in India’s maritime capabilities, which seems imminent at this stage, would be a blow to operational preparedness.

The impending imbroglio points to an inexplicable lack of care in planning the acquisition of submarines. The procedure requires MoD to issue Request for Information (RfI) to kick start the process. This is intended to gather all manner of information required for preparing an acquisition proposal.

The feedback solicited from the foreign OEMs includes the features of the platforms already available with them. This feedback is collated with other information gathered by the Service Headquarters (SHQ) concerned to formulate realistic specifications, or Services Qualitative Requirement (SQRs), of the platform that would meet the operational requirements of that service.

After the SQRs are finalised with the approval of the Services Equipment Policy of the SHQ concerned, Expression of Interest (EoI) is solicited from the foreign OEMs detailing the nature, range, and depth of technology to be transferred by them to the Indian production agency. Among other things, the EoI also stipulates the level of indigenisation to be achieved and requirements related to development of the industrial ecosystem in India.

It is unthinkable that the foreign OEMs who responded to the RfI, and later to the EoI, misrepresented that they possessed sea-proven AIP technology and agreed to all other requirements mentioned in the EoI, which now they are understood to be uncomfortable with. The chances are that they did give honest feedback, but it was not given due regard while formulating the SQRs, including the requirement of AIP system.

It is also possible that the MoD did not intimate the foreign OEMs about the likely terms and conditions of the RfP or ask them if they had any concerns which MoD should keep in mind while finalising the RfP. Either way, it calls for introspection, if only to obviate such situations in future.

To queer the MoD’s pitch further, Defence Research and Development Organisation (DRDO) claims to have developed the prototype of an indigenous AIP system, which may be ready for integration with the submarines in a couple of years. According to the media reports, this system can be integrated with the Kalvari (Sorpene) class submarines. It is unlikely that the possibility of DRDO developing an AIP prototype in near future was not known when the SQRs were being finalised.

In the circumstances, it is surprising that the MoD did not ask the Naval Group to make another six Kavari (Scorpene) class submarines at MDL which could later be fitted with the indigenous AIP system. This would also have ensured utilisation of the skills acquired by MDL and the infrastructure built by it for making six submarines under Project 75.

These assets face risk of remaining idle, and ultimately dissipating, if the MDL does not get the contract under P75(I). History will only repeat itself if that happens, for in the past also MDL had to discontinue the assembly line it had set up for making German HDW submarines for want of follow-on orders from the Indian Navy.

The present situation calls for an honest reassessment of the SP model’s efficacy. The question MoD needs to ask itself is whether it would not be more efficacious to revert to the good old ‘Buy and Make (Indian)’ category for such projects. It would be simpler and faster to shortlist the foreign OEMs and ask them to select the Indian company of their choice for making the platform in India with such modifications as are mutually acceptable.

This contract for C-295 transport aircraft to replace the Indian Air Force’s fleet of Avro transport aircraft was awarded to Airbus precisely in this manner. Under this contract, Airbus is to supply 16 aircraft in a fly-away condition and make another 40 in India in collaboration with Tata Advanced Systems Limited, which was chosen by Airbus on its own.

True, it took almost a decade for this contract to be awarded, but it was partially because it was the first time when a foreign OEM was permitted to select an Indian partner on its own, and a public sector entity -state-owned Hindustan Aeronautics Limited, in this case- was excluded from the competition ab initio. There were other reasons too, but now that a precedent is available, other cases following this route are unlikely to take that much time.

Though in the instant case, shortlisting of MDL and L&T did not lead to vehement protests from other shipyards, the process per se is cumbersome and contentious. If nothing else, following the procedure adopted for concluding the C295 contract will also save MoD the trouble of shortlisting the prospective Indian partners. 

(The author is Former Financial Advisor (Acquisition), Ministry of Defence. Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited).

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