By N. C. Bipindra
New Delhi: The precarious situation that one of India’s private shipyards finds itself over its debts has put the navy in a quandary over how to proceed with a Rs 20,000-crore ($2.65-billion) tender for building four amphibious warships.
One of the options being considered is to go for a fresh tender to widen the pool of available bidders for the four Landing Platform Docks (LPDs). But that too is fraught with trouble, as at least three of India’s private sector shipyards have gone bust in the last decade due to bad management or being short of orders that did not match their production capabilities.
Said to be the largest-ever private sector warship building project of the Indian Navy, the Dec. 2013 tender has been languishing for the last seven years, as Reliance Naval and Engineering Limited has gone into bankruptcy proceedings and the Government of India is keenly watching the efforts for the company’s revival by its creditors. The Defence.Capital report on the RNEL revival efforts can be read here.
With Larsen & Toubro (L&T) being the only other bidder in the project, the Indian Navy is in a fix, as the single-vendor situation is a no-go under the existing Defence Procurement Procedure (DPP). Proceeding with the tender would require special clearance from the Defence Acquisition Council and the Indian defence minister. Another Indian private sector shipyard, ABG Shipyard Limited, in partnership with American company Alion Science, was also issued the tender in 2013. But the company was later disqualified over its poor financial record.
The best way out of this mess would be to go in for re-tendering of the project with better, revised terms and qualitative requirements, as technologies have improved since the time the tender was issued and the service qualitative requirements were finalised over a decade ago in 2008. This has been recommended to the Ministry of Defence. A final call is still awaited, according to three Indian Navy officers, with direct knowledge of the project. They asked not to be named citing rules.
The Indian Navy’s predicament was it had not opened the tenders submitted by both RNEL and L&T after the former got into financial woes. Considering the bids would mean including the troubled shipyard at Pipavav too for awarding of contract based on its quotation. The RNEL bids have become infructuous after the company filed for an insolvency proceeding on Jan. 15 before the Ahmedabad bench of the National Company Law Tribunal, one of the three officers cited above said. Read another, related Defence.Capital report on RNEL here.
The project, under the Buy and Make (India) procedure of the DPP, saw L&T and RNEL submitting their bids for the tender in partnership with Spain‘s Navantia and France‘s Naval Group respectively. While L&T had submitted bids for constructing the 20,000-ton to 30,000-ton LPDs based on the design of the Juan Carlos I Landing Helicopter Dock (LHD) and the RNEL’s was based on the Mistral LHD, to be built at their Kattupalli and Pipavav shipyards respectively.
Since the tender in 2013, the project had got a green signal from the DAC, then headed by late Arun Jaitley as Minister of Defence in May 2017. Following that approval, the two competing shipbuilders had submitted revised commercial bids to build all the four LPDs, though the 2013 tender had envisaged construction of only two of the warships at a private shipyard and the other two at the state-run Hindustan Shipyard Limited (HSL).
If the navy exercises the fresh tender option, it could open the doors for new players to join the bidding process, including state-run shipyards in India, apart from new foreign original equipment manufacturers as technology partners. Among the new bidders could be state-run Mazagon Dock Shipbuilders Limited, Garden Reach Shipbuilders and Engineers Limited, Goa Shipyard Limited and the HSL, which was part of the original LPD-building plans of the government.
The foreign technology partners, who may get a fresh opportunity to offer their LPDs to India, could be the United Kingdom‘s BAE Systems with Ocean-class LHD, the United States‘ Raytheon Technologies with San Antonio-class LPD, Germany‘s ThyssenKrupp Marine Systems for its Multipurpose Helicopter Dock MHD-150, South Korea‘s Hanjin Heavy Industries and Construction Company Limited for its Dokdo-class Assault Landing Ship, and The Netherlands‘ Damen Schelde Naval Shipbuilding for its Enforcer LPD. The Juan Carlos I, built for the Australian and Turkish navies, has a short take-off and vertical landing (STOVL) capability for deck-borne fighters like the Lockheed Martin Corporation‘s F-35B.
The Indian Navy became keen on having more LPDs after its operational experience with the INS Jalashwa, formerly United States Navy‘s USS Trenton bought over by India in 2007. The LPDs are for enhancing the Indian armed forces’ amphibious warfare capabilities, island projection and disaster response and relief operations — basically the capability to take the fight and Indian military arm to enemy’s shores during war and to reach out a helping hand to friendly nations during natural or man-made calamities.
The Indian Navy had projected requirements for the LPDs to include carrying capability for 10 heavy helicopters on the flight deck, battalion-sized 900 to 1,000 troopers, 20 infantry combat vehicles, and 40 heavy load trucks in its belly for beach-landing. The on-board weapons required by the navy include missile defence and anti-torpedo systems, along with an endurance of 45 days at sea. The newly-built LPDs would have been India’s first lot of electric-propulsion warships. Basically, the LPDs should be able to operate as a naval command post when needed.
With the nation going through a revenue crunch following the economic lock-down due to the COVID-19 pandemic, it is to be seen if the Narendra Modi government decides to go ahead with the single-vendor situation in the LPD tender and award the contract to L&T, or decides to re-tender the project to buy time to generate enough revenues to fund the programme.