Strategic Partnership Inching Forward

With the issue of second RFI under SP model the Process has inched a bit. The model can  build a formidable indigenous defence industry provided MoD streamlining the issues concerned with the process.

The Strategic Partnership policy laying down the qualification criteria with the financial and technical parameters for selection of OEM and Indian Partner  and approved on 31 May 2107. The policy targets to create an ecosystem including the SP itself, which is expected to be the system integrator with other stakeholders including, among others, development partners, specialized vendors and suppliers especially from the MSME sector.  As first a global RFI for Naval Utility Helicopters (NUH) and Naval Multi-Role Helicopters (NMRH) has been issued on 23 August 2017 and number of responses received being analysed.

Project 75-I

The submarines are vital part of the Naval fleet and ideal for sea denial operations, safeguarding maritime borders particularly during wartime situation. Considering India's threat perception and vast coastline, a robust mix of nuclear/ diesel-electric submarines is critical for defending the country. Ideally, the Navy has a requirement of a fleet of 25-30 submarines but is doing with only 13 submarines at present with not a very encouraging vintage spread. The desired level of combat capability requires a steady inflow of replacements and there is urgent requirement to induct submarines into service.

India's 30-year plan, made out in 1999, to build 24 submarines has so far yielded just one boat (submariners quaintly refer to their lethal vessels as “boats”) with five more in the pipeline. The Navy's four German-origin Shishumar-class submarines  which were commissioned between 1986-1994 and have completed 24-32 years of service  are overdue for their life cycle extension overhauls, which would take until 2030 to complete. At the same time, the Scorpene submarines are already becoming due for mid-life upgrades and for retrofitting the AIP system during the upgrade.

The first boat, INS Kalvari, commissioned last year, will fall due for an upgrade in 2023, followed by the other five. With MDL having built both the Shishumar-class and the Kalvari-class, it would be logical to entrust it with their upgrades. It is essential, therefore, to kick-start Project 75-I, a Rs.  40,000 crore (Rs.  400 billion)  building six submarines in the country, with an Indian vendor taking essential technology from a foreign original equipment manufacturer (OEM).

Market Projection

The global submarine market, is expected to be$ 254 bn by 2017-27 and the Indian submarine market with the projected requirement as given below, is expected to increase at a CAGR of ~6% during the next  decade, with a cumulative investment of about ~$40bn between 2017-27.  A comparative projected growth of market in the segment is shown in Figure below.

Indian Global “request for information” (RFI) for proj 75I issued  in June 2017  a first step to short list   the OEM and responses received from OEM  in October 2017 as under:-

Project Timeline

The selection process of the SP and the OEM will happen in parallel in an attempt to speed up the process. It may take  minimum 4 years for the OEM-Indian shipyard combine to be down-selected and signing of contact, as shown in the Fig below.

The first new submarine will roll out only 5-7 years after the final contract is inked.

Road ahead

To build a formidable indigenous defence industry, it is imperative to develop an ecosystem of indigenous sourcing. In the path to progress with great emphasis laid on “Make in India,” it is highly likely that the cost of design, development, supply chain management and production may be higher than a foreign made product. However, since the development, ecosystem and production will take place within the geography of the country, the taxpayers' money so billed against the Indian manufactured system under consideration is circulated within the same geography many times. The knock-on effects of indigenization are far higher and outweigh the initial higher cost. Thus, the cost to the country would be far less than the L-1 cost, if seen in this perspective.

Private sector need to gear up to deliver the desired strategic system within the timeframe and conforming to the highest quality standards while dealing with restricted availability of military grade raw materials will challenge their supply chain. Corporates must map the existing industry in terms of their preparedness, quality and capacity. Many corporates have made investments in multi disciplinary sub-sectors of defence. It is time now to build on the supply chain for the segments and develop an aerospace and defence manufacturing ecosystem.

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