Naval group in talks with both MDL and L&T for submarine project, says exclusivity needed

Leading naval manufacturer Naval Group has confirmed that it is in touch with both the Indian shipyards shortlisted for the ambitious P 75I submarine contract but believes that an exclusive arrangement needs to be worked out to take ahead the project.

The Rs 45,000 crore project has recently moved onto the next step with the shortlisting of two Indian shipyards – MDL and L&T – and five foreign companies they can collaborate with to acquire design and manufacturing technology.

The project is being processed on the Strategic Partnership model that will require the winning Indian company to manufacture six submarines in India. However, given that only two Indian shipyards are shortlisted, they have a choice of multiple foreign collaborators, leading to a potential clash of commercial interests.

Naval Group, which has manufactured the Scorpene class of submarines in India with MDL, says that the `industrially secure way’ would be to have an exclusive arrangement with just one Indian Strategic Partner.

“An exclusive arrangement with one SP might give more time to both the Original equipment manufacturer and the SP to prepare a thorough and exhaustive response to the RFP and thus provide Indian Navy with an offer with best possible solutions to all the identified requirements and minimum risks for the program over the long term. Indeed, exclusivity with a shipyard may be best cost effective and industrially secure way of responding to P75(I),” Alain Guillou, Senior Executive Vice President, Naval Group has said.

The senior executive said that the company was in touch with both the Indian companies since the shortlisting. “Like many other OEMs, we are having discussions with both SPs (L&T and MDL), who have been shortlisted rightly by the experienced Indian Navy and the government. MDL remains at core of Indian naval ship and submarine building while L&T is undoubtedly one of the biggest and qualified Indian national industrial for several sectors including strategic naval projects,” he said.

Besides the Naval Group, TKMS (Germany), Navantia (Spain), Rubin Design Bureau (Russia) and DSME (South Korea) have been shortlisted for the mega project. The next stage will be preparation of techno-commercial bids by the Indian companies in collaboration with a foreign partner of their choosing.

There are still doubts however if the foreign players will need to make offers with both Indian yards or can choose to have an exclusive arrangement with just one. “As OEM, we are not in position to comment and we shall follow the process as per SP guidelines. However it is true that the time required and the associated costs to make an offer of such magnitude are very high, sometimes as high as several millions of Euros. In addition to this the confidentiality of data related to the performances and subsequent “Chinese wall” arrangement to deal between partners will cost time, dedications and efforts of all parties involved,” Guillou said.

While technically, all five foreign technology collaborators have an equal chance of forming a winning partnership with the Indian company, the contest is expected to be a straight face off between the French Naval Group and Russia’s Rubin Design Bureau.

If the process goes smoothly, the final winner could be shortlisted within two years after an exhaustive trial and evaluation exercise. However, complications in the future include the ability of foreign collaborators to adhere with Indian conditions for technology transfer, delivery timelines and the responsibility for performance.

Economic times