Project 75-India to build six subs being re-evaluated (above: INS Kalvari, the navy's first Scorpene)
By Ajai Shukla
Business Standard, 19th April 17
The navy’s warship procurement chief admitted on Tuesday that key purchases, including the vital procurement of six new submarines, were foundering on the defence ministry’s failure to finalise a “strategic partner” (SP) policy.
Under the SP policy, the ministry was to nominate select Indian defence companies as designated partners for foreign vendors to build weapons platforms in India. Separate SPs were to be chosen in ten production areas, such as warships, submarines, aircraft, helicopters, etc.
Over the last two years, the defence ministry has overshot numerous self-imposed deadlines for announcing the SP policy. The Defence Procurement Policy of 2016 (DPP-2016) was released last year with a blank space for the chapter on SP policy.
Today, Vice Admiral DM Deshpande, the navy’s Controller of Warship Production and Acquisition (CWPA) became the first senior officer to admit to the possibility that the defence ministry might fail to promulgate an SP policy at all.
Explaining the delay in contracting for six submarines to be built under Project 75-India, Deshpande linked it with the absence of an SP policy, which was needed to nominate an Indian firm to build the submarines in partnership with a foreign vendor.
“We need those submarines badly because our force levels are depleted. And in case the SP model doesn’t go ahead, for whatever reasons, then we will have to look elsewhere”, said Deshpande.
He admitted that there had been “a fair amount of progress on the SP model, but as things had changed”, the project had to be looked at afresh.
Business Standard first reported almost a year ago (May 9, 2016 “Ministry of Defence struggles to nominate private sector ‘strategic partners’”) the deep divisions between the ministry, industry and military on the modalities for choosing SPs. Given that firms nominated as SPs would benefit enormously from production contracts, defence ministry bureaucrats fear their choices might expose them to future allegations of bias.
Deshpande outlined the navy’s alternatives for submarine production if the SP policy failed to take off. He said the navy might opt for a more advanced version of the six Scorpene submarines already being built at Mazagon Dock, Mumbai under Project 75; or a separate government-to-government contract; or a third choice entirely.
“If strategic partnership (SP) happens, we will be better off for that. But if that doesn’t happen, all these options come to the fore and we will have to take a call”, he said.
The scuppering of the SP policy, which former defence minister Manohar Parrikar made a key pillar of his touted “Make in India” initiative, would set back key defence procurements like Project 75-India by at least two years.
Stating that the navy was preparing contingency plans, Deshpande admitted there would be “some sort of time penalties” in implementing alternatives.
This is a worrying prospect for a navy that, as Deshpande spelt out to an industry gathering in New Delhi today, is aiming to increase its strength to 170-180 ships (from the current 140 vessels) and 400 aircraft by 2027.
The absence of a SP policy is hitting more than just submarine production. The air force has issued a Request for Information (RFI) to global aerospace vendors for building single-engine fighters in India in partnership with an Indian company. But, without an Indian firm nominated as SP for aircraft production, global firms remain unclear who they must partner in preparing their bids.
The idea of private sector SPs is the brainchild of the Dhirendra Singh Committee that the defence ministry-constituted in 2014-15. Subsequently, the VK Aatre Task Force was asked to specify criteria for nominating firms as SPs.
In its report, it recommended designating one private sector SP for each of seven technology areas --- aircraft; helicopters; aero engines; submarines; warships; guns and artillery, and armoured vehicles. Simultaneously, two strategic partners each were to be recommended for three other technology segments --- metallic materials and alloys; non-metallic materials; and ammunition, including smart munitions.