Germany likely to opt out of Navy’s submarine project, South Korean company may be only vendor

Source : The Economic Times

The Navy’s plan to build six conventional submarines in India for an estimated Rs 43,000 crore is heading for troubled waters, with one of the prime foreign technology partners saying that it may not proceed with the negotiations as it finds some of the tender requirements too restrictive.

If the German group does not change its stand, the mega project could be heading for a single foreign vendor situation with South Korea’s Daewoo Shipbuilding and Marine Engineering as the only contender. Germany’s ThyssenKrupp Marine Systems (TKMS), which was considered as the frontrunner for the mega project, has raised concerns that some conditions are impossible to be fulfilled, including a high indigenous content percentage and almost unlimited liability on the foreign technology partner.

The Navy has been informed that the German company will not proceed in further engagement on the issue with Indian partners unless major changes are made in the tender conditions, a difficult scenario given the strict defence procurement rules.

As first reported by ET, the German company had emerged as the frontrunner after a condition was put in the tender for a sea-proven Air Independent Propulsion (AIP) system –– a critical component that will enable these boats to remain submerged for over two weeks, as against the 2-3 days of underwater endurance of the current submarines.

This requirement for a sea-proven AIP had effectively removed three of the five shortlisted foreign vendors, leaving only Germany and South Korea in the fray. The other three –– Russia, France and Spain –– do have AIP technology but it is not fitted on a submarine where it can be demonstrated. AIP technology has been demonstrated by DRDO as well but is yet to be sea-proven, with estimates that it could take 4-5 years at the earliest.

The boats are to be built either by Mazagaon Dockyard Limited (MDL) or Larsen and Toubro (L&T), with the winner being decided on the basis of techno-commercial proposals drawn up in consultation with the foreign partner.

While TKMS did not respond to a request for comments by ET, sources said that among the concerns raised was the indigenisation content, which has been set at 45% for the first boat and 60% for the sixth boat. A major point also raised was that the current conditions impose an almost unlimited liability on the performance of the submarines on the foreign collaborator, though the boats are to be built at an Indian yard. The Rs 43,000 crore budget too has been flagged as too low.

The German group is the second global contender after Sweden’s Saab Group that has expressed reservations on participating. The Swedish group pulled out earlier after a draft note on technical requirements was shared, with sources saying that its engineers and executives found the conditions impossible to achieve.

Given the technical requirements of the project –– India wants high technology transfer as well as rights to use the knowhow for future, indigenous projects –– foreign vendors with legacy contracts have suggested that the best way forward would be through a government to government deal. The Russian side, in particular, had even written to the defence ministry in 2018, suggesting that the only way to ensure such deep tech transfer would be through an inter-governmental agreement.

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