Saturday, August 29, 2009

Scorpene project will cost additional Rs 2,000 Crore

India will have to soon shell out well over Rs 2,000 Crore (US $ 409.25 Million)* more to French armament companies if it does not want its ongoing mammoth Rs 18,798 Crore (US $ 3.85 Billion)* project to construct 6 Scorpene submarines at Mazagon Docks Ltd (MDL) in Mumbai to come to a grinding halt.

The Scorpene project, under which the first submarine was to roll out by December 2012, with the others following one per year thereafter, is already running two years behind schedule, as was first reported by ToI.

"Our submarine force-levels need to increase...there is no doubt. We have lost a lot of time (in the Scorpene project),'' says Navy chief Admiral Sureesh Mehta.

Admiral Mehta, who retires after 42 years of service on August 31, has reason to be worried. India's underwater combat arm will left with only 9 out of its present fleet of 16 diesel-electric submarines -- 10 Russian Kilo-class, four German HDW and two virtually obsolete Foxtrot -- by 2012.

The number will further dip to just 5 in 2014. This when Pakistan is now looking to induct three advanced Type 214 German submarines, equipped with AIP (air-independent propulsion) to enhance their operational capabilities, after inducting 3 French Agosta-90B submarines, with the last one PNS Hamza even having AIP.

China, on its part, has a staggering 62 submarines, with around 10 of them being nuclear-propelled, and at least one Xia-class and two Jin-class being SSBNs (nuclear submarines with long-range ballistic missiles).

Sources said the Defence Acquisitions Council, headed by defence minister A K Antony, this month decided to approach the Cabinet Committee on Security to grant approval to the cost escalation of the French `MDL procured material (MPM) packages' from around 400 million Euros to 700 million Euros now.

The negotiations for these MPM packages, which include virtually all major systems connected with sensors, propulsion and the like, apart from the combat systems, have been stuck on the price issue for well over a year now.

"The Scorpene submarine hulls are being fabricated in MDL but there are no systems to put inside them. The French say the earlier price of 400 million Euros for the MPM packages was quoted when the contracts were inked in October 2005 and prices have doubled since then,'' said a source.

The October 2005 contracts with French companies include the Rs 6,135 Crore (US $ 1.26 Billion)* one with M/S Armaris (DCN-Thales joint venture) for transfer of technology, combat systems and construction design, and Rs 1,062 Crore (US $ 217.31 Million)* with M/S MBDA for sea-skimming Exocet missiles.

A Rs 5,888 Crore (US $ 1.205 Billion)* contract was also signed with MDL for indigenous submarine construction, with another Rs 3,553 Crore (US $ 727 Million)* earmarked for taxes and Rs 2,160 Crore (US $ 442 Million)* towards other items to be acquired during the project.

Incidentally, as reported earlier, the Comptroller and Auditor General in its latest report has blasted the government for taking 9 years to finalise the Scorpene deal despite Navy's depleting underwater combat force-levels.

This delay led to increase in the project cost by Rs 2,838 Crore (US $ 580.72 Million)*. "Moreover, the contractual provisions resulted in undue financial advantage to the vendor of a minimum of Rs 349 Crore (US $ 71.41 Million)*, besides other unquantifiable benefits,'' said CAG

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