Panel for opening up submarine construction to pvt sector

(The Economic Times) : A committee set up by the Prime Minister Manmohan Singh to study India's much-delayed submarine programme has recommended opening up construction of submarines to the private sector. Each submarine costs close to Rs 8,000 crore to the government exchequer.

The committee, led by former Chairman of SAIL Dr. V. Krishnamurthy, has said that private sector investments should be invited as public-private partnership and as joint ventures with the government owned companies.

The committee has said that with private sector setting up capacity in the country there is no need to import submarines in future thus opening up the Rs 50,000 crore markets for Indian companies like L&T and Pipavav Shipyard. India at present has 14 submarines in its fleet.

L&T, which is constructing a shipyard in Ennore in Tamil Nadu, and Pipavav Shipyard , which has an existing shipyard in Gujarat, have been recommended by the panel to build submarines in partnership with government owned companies as joint venture projects. With this, Pipavav and L&T will join a select group of four companies that have the capability to submarines. "The report has been submitted to the government last week and an announcement is expected soon," said a source with direct knowledge of the panel's report.

"If this space is opened up, it will be a big opportunity for private players. And there is no doubt that Indian private players are fully equipped to manufacture submarines' Nikhil Gandhi. CMD of Pipavav told ET NOW.

It was in 1999, the defence ministry had prepared a 30-year plan to acquire 24 submarines. As per the plan, first six submarines were to be delivered in 2005 and to be completed by 2015. The rest of the 18 Submarines were to be delivered between 2015 and 2029.

The government gave the orders for the first six submarines to Mazgaon Docks in collaboration with French Ministry of Defence Yard. But due to lack infrastructure, the project has met with serious delay. In fact, all the submarines will now be delivered only by 2022 instead of 2015.

Indian private players have been continuosly exploring opportunities to enter various segments of the Indian defence & aerospace sector. Earlier this year Tata group formed a joint venture with Lockheed Martin to make aerostructures for Lockheed's C-130 aircraft in India. L&T also has a joint venture with Cassidian, a division of European Aerospace And Defence (EADS) Group, for defence electronics. It has also worked in close cooperation with the Defence Research and Development Organisation (DRDO) on several projects.The Mahindra group also has a joint venture with UK-based BAE Systems for production of manufacture mine-proof vehicles.

The Indian defence sector would need investments of $200 bn to $300 bn in military & aerospace according to the defence ministry.The defence ministry is looking at signing offset contracts of more than Rs 10,000 crores in the 11th plan ending this year. Twelve offset contracts valuing Rs 9,943 crores have been signed with Indian private industries and defence PSU so far.