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The fabrication of six Scorpene submarines at Mazagon Docks Limited (MDL) has suffered a setback since work has come to halt in the dockyard. The first Scopene, whose hull is being made at MDL, is now unlikely to join the Indian Navy before the year 2015 as opposed to 2012.
The six Scorpene submarines are being acquired under Project 75. Sources indicated that the reason for the delay in MDL is due to a contracting blunder on behalf of the Indian Defence Ministry. The Indian Defence Ministry indicated that special parts of the submarine were made with local components. This led to the creation of a special category called Mazagaon Procured Materials, or MPM. Of the total project cost of $3.75 billion, and in addition $540 million were set aside for MDL to contract directly for submarine materials. However, a false impression was created by giving MDL a budget for locally procuring materials and systems from multiple vendors.
As for the majority of the budget for MPM, it would go straight to a single vendor which is 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 need for competitive bidding for these items. Since these items affected crucial aspects of Scorpene’s performance, such as noise levels, they had to be bought from the original vendor, Armaris, for guaranteed performance.
At this juncture, it is ambiguous to say why the Defence Ministry did not price these crucial Scorpene systems. But now, the French company DCNS, which took over Armaris in 2007, is demanding close to $940 million for these items, almost twice of what was budgeted, sources indicated.
Senior Navy officials commented that the inclusion of so many crucial systems in the MPM package was a serious contracting mistake since they had to be sourced from the French company. Basically, the impression of indigenization which India wanted to project has had some negative repercussions, added Navy officials.
Minister of State for Defence Pallam Raju indicated that cost inflation has also affected the situation since the contract was signed in October 2005. The Minister added that the French government has been requested to intercede with DCNS but it has not worked. Even high level diplomatic talks and meetings are not helping India to salvage this situation.
Meanwhile, the Indian Navy will once again bear the brunt of this shortcoming caused by the Indian government since the work on the first Scorpene submarine has come to a complete standstill. The production of the engines, generators and other systems that are included in MPM category will only begin when the Indian Defence Ministry and DCNS arrive at a final price after their negotiations.
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