Source : The Economic Times
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Germany is keen to pursue the government-to-government route for jointly manufacturing advanced conventional submarines for an Indian Navy requirement, with the matter likely to be taken up at high-level bilateral meetings later this week during Chancellor Olaf Scholz’s visit.
Traditionally, Germany has been reluctant to openly pitch for commercial arms contracts but the mega submarine contract – the Navy requires six diesel-electric submarines with long underwater endurance – is being treated as an exception.
Currently, the requirement (named P75I) is being processed by the defence ministry under the strategic partnership route, which requires foreign technology providers to collaborate with Indian manufacturers and put forward competitive techno-commercial bids.
However, the SP route has faced significant delays, as foreign collaborators, including Germany’s ThyssenKrupp Marine Systems (TKMS), have pointed out to technical and financial conditions being imposed by the Indian side that cannot be matched.
As things stand, only two foreign technology providers are in the race – Germany and South Korea – as one condition included is for a sea-proven Air-Independent Propulsion (AIP) system. While Russia and France have this technology, they currently have no functional submarine fitted with it that can be sent for trials.
On the Indian side, there are two contenders – Mazagaon Dockyards Limited and Larsen and Toubro – that have met financial and technical requirements. Germany’s TKMS has chosen to go ahead with the contract with MDL, putting a stop to the long negotiations it held with L&T.
It is still unclear if South Korea can bid for the contest, as Government clearances are believed to be pending and the shipyard involved is facing a legal challenge from TKMS that contends its design has been copied. This could effectively leave Germany as the sole contender for the contract.
However, industry insiders say several challenges remain, including commercial conditions that impose heavy liabilities on foreign technology providers. German industry insiders aware of developments say the only practical way ahead is to go for a government-to-government route that would be able to provide flexibility to both the Indian shipyard and foreign vendor to negotiate terms and conditions.
A government-backed order could also come in handy for TKMS, which is facing the possibility of a demerger as ThyssenKrupp looks to leave the shipbuilding sector. A lookout is believed to be on for investors to buy the group, with the possibility of the German government taking a stake also not being ruled out.
