India’s Submarine Acquisition Program merits a relook

Indian defense acquisitions are governed by Defence Procurement Procedure –2002, which lists `free competition' as its basic aim and underlying philosophy. The procedure repeatedly stresses the importance of generating maximum competition. It also mandates that competitive tendering be followed as a norm. Therefore, Indian defense acquisitions have to be broad based with tenders being issued to all eligible producers. But surprisingly, under the NDA regime, DCN, the manufacturers of the Scorpene submarine, were the only ones approached with a request for an offer. Neither Kockums of Sweden (an obvious contender), nor Germany's HDW (then still under a cloud), were approached, making the entire `selection' process monopolistic and non-competitive. What is more, the finalization pending signing of the contract was done on the basis of selection criteria that are hopelessly outdated. As a result, India almost contracted for a vessel that lacked many essential facilities like Air Independent Propulsion (AIP), at a price that was not only very high to begin with, but has since been upped enormously by the suppliers on the plea that the costs have gone up due to a delay by the Indian government in inking the deal.

The Indian Navy is understandable very anxious to expedite the process as it sees a major gap in its submarine potential a few years down the line. Haste, however, as we were taught as children, makes for waste.

It appears that HDW, which has since been exonerated of all wrong doing by the special court, and given a totally clean chit, is not only keen to offer its Type 214 submarine on transfer of technology basis, but is also willing to throw in a basket of `offsets' as a sweetener, while bidding at most competitive prices. That their prices are competitively economical was proved recently when HDW won a Portuguese naval contract as the lowest bidder in a global tender.

What is even more interesting is that the German HDW boasts of a tried and tested fuel cell technology that provides it with Air Independent propulsion for prolonged periods when submerged. Submarines with this technology are in service with the German and Greek navies, are being built for the South Korean Navy and are being supplied to the Portuguese Navy. Of special interest to India is the existence at Mazagon Dock of compatible equipment dating from the period when it constructed HDW Type 209 (Shishumar Class) subs. Indeed, some of this equipment is currently being used to refit these vessels. This equipment, can not only save India millions if the more advanced HDW 214 subs are to be assembled there in the future, but also imply a critical six-month or more saving in time. Furthermore, expertise already exists at Mazagon Dock in applying HDW technology and manufacturing processes, whereas, if India goes in for the French Scorpene, not only would substantial fresh capital expenditure need to be incurred, but the learning curve would also be very much longer.

Shekhar Dutt, Secretary of the Dept. of Defence Production during a recent CII meeting on Offset and Countertrade asserted that India must focus on Offset agreements for all major defense deals The French have offered no offset deal with the Scorpene, whereas the Germans appear to have made it clear that they are ready and willing to discuss substantial and attractive offset terms with India. This
would not only upgrade Indian technological expertise, and capabilities, but also, over the years, generate substantial export revenues, thereby even further reducing the effective price of the submarines.

The Germans feel that the Indian Navy's fears can be well addressed by them and are confident of their ability to deliver the Type 214 vessels in a shorter time frame than what the French could. They base their confidence upon their ongoing production program at the HDW yard and the skills and infrastructure available at Mazagon Dock.

All in all, it would appear that a relook into the purchase of this vital defence equipment, which shall have a bearing upon this nation's security for many decades to come, is in order.

Amrish Sahgal is a defense and strategy analyst