An air of resignation hangs over the East Yard, a giant workshop shed
in Mumbai’s Mazagaon Dock Limited (MDL), where six Scorpene submarines
are to be fabricated for the Indian Navy. Two years ago, when Business
Standard visited this facility, it hummed with activity as welders
assembled the hull of the first Scorpene, which was to join the Indian
Navy in 2012.
Scorpene cutaway (image : Naval)
Scorpene specification (image : The New Strait Times)
Since then, rumours of delay, by as much as two years, have swirled
around Project 75, under which the Scorpenes have been acquired.
Business Standard has learnt that work on the first Scorpene has ground
to a halt, and it is unlikely to be ready before 2015.
Most
disquietingly, the delay is due to a contracting blunder, stemming from
the Ministry of Defence’s propagation of a myth that significant parts
of the submarine were being built with Indian components.
Scorpene on construction (photo : Soerenkern)
This led the defence ministry to create a special category called
Mazagaon Procured Materials, or MPM. Of the total project cost of Rs
18,798 crore, Rs 2,700 crore (¤400 million) were set aside for MDL to
contract directly for submarine materials. But the impression created,
by giving MDL a budget for locally procuring materials and systems from
multiple vendors, was false. The bulk of MPM budget, as the defence
ministry knew, would go straight to a single vendor — French company
Armaris, with whom India signed the Scorpene contract. This would pay
for critical submarine systems, including the engine, the generators
and special submarine steels.
There was no question of competitive bidding for these items.
Since
they affected crucial aspects of Scorpene’s performance, such as noise
levels, they had to be bought from the original vendor, Armaris, for
performance guarantees to be valid.
It is not clear why the
defence ministry left these crucial Scorpene systems unpriced. What is
clear is that French company DCNS, which took over Armaris in 2007, is
now demanding close to Rs 4,700 crore (¤700 million) for these items,
almost twice of what was budgeted.
Minister of State for Defence
Pallam Raju told Business Standard that DCNS based its higher demand on
cost inflation since the contract was signed in October 2005. The MoD
asked the French government to intercede with DCNS, but Paris is
unwilling to help.
“We expect the French government to play a
role to ensure it (the MPM items) is not priced abnormally high.
We
understand their need to make profit, but the price should not be
abnormally high. We feel the French government is shirking its
responsibility,” said Raju.
The MoD pleaded its case with a
number of French officials, but in vain. “I visited Paris (in June 09)
and I had a meeting with DCNS. They assured us they would hold our
hand, but we are not getting that comfort level. I projected [the case]
to the French defence minister as well. [In November] We had a senior
French MoD bureaucrat… come [to Delhi] and I reflected it to him as
well,” said Raju.
The MoD blamed DCNS’ takeover of Armaris for further complicating
the negotiations. But that does not answer why a contract that took
nine years to finalise failed to fix the price for materials worth Rs
2,700 crore.
Senior naval officers familiar with the negotiations
said, “The inclusion of so many crucial systems in the MPM package —
systems that everyone knew had to be bought from Armaris/DCNS — was a
grave contracting mistake. This was done to give the impression of
greater indigenisation… since these would apparently be items that MDL
was procuring. But this scheme has backfired badly.”
Naval
planners are struggling to deal with a situation where the induction of
Scorpene submarines remains a long way off. Only after the MoD and DCNS
agree on a price that production would begin in France of the engines,
generators and other systems that are included in MPM category.
Technicians working on Project 75 estimate that, once a price is fixed
and a contract signed, it will be 33-36 months before the items are
delivered to MDL and fitted on the first Scorpene. Thereafter, the
painstaking process of outfitting the rest of the vessel, fitting
weapons and sensors and carrying out lengthy trials would begin before
handing over the submarine to the Navy.
But work at East Yard has
not entirely stopped. Having completed the first hull, MDL is going
ahead with fabricating the second and the third. Officials involved in
Project 75 say this will allow submarines to be delivered at nine-month
intervals, rather than the planned 12 months.
Until MPM contract
is signed, and the systems delivered, MDL’s East Yard will not be
producing submarines, but 200-foot metal tubes for a project that began
two decades ago, and gradually became a symbol of ineffective defence
planning.(Original News)
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