Indian Navy, Ministry of Defence in a tussle over Rs 45,000-cr submarine project

NEW DELHI: A tussle has erupted over the biggest ‘Make in India’ project after the navy refrained from going ahead with a joint public-private bid while the defence ministry has emphasised that such teaming arrangements should be considered, as per procurement guidelines.

At the centre of the controversy is the Rs 45,000-crore submarine contest for the Indian Navy—referred to as P 75I—that will see the winning Indian entity producing six submarines domestically with a foreign technology partner. The contract is being processed under the ‘strategic partnership model’.

Sources told ET that after an examination of financial records and manufacturing facilities, the navy’s empowered committee has shortlisted two Indian entities that would qualify to bid for the project—state-owned Mazagaon Docks Ltd and private sector giant Larsen and Toubro—both of which have considerable experience in shipbuilding.


On the other hand, all five foreign technology collaborators who applied have been cleared to take part in the competition.

However, a third bid that was jointly made by Adani Defence and state-owned Hindustan Shipyard Ltd (HSL) has not been cleared on the grounds that administrative permissions are not in place for the joint venture that responded to the competitive process.

This has emerged as a point of contention, with the Department of Defence Production, under which HSL operates, asking the navy that the HSL-Adani bid also be considered for examination. The department has recommended this on the basis of procurement rules that state that cooperative arrangements between public and private sector companies should be considered.

At the same time, the department has confirmed that the proposal for the formation of a JV by HSL with Adani has been received and is under consideration by the ministry. The letter to the navy is believed to have been issued after the matter was raised by HSL-Adani.

The tussle has put the ministry in a unique position. At one hand, procurement rules and past precedence rules state that whenever possible, the widest possible competition needs to be ensured, to arrive at the most competitive pricing. On the other hand, the committee for shortlisting of Indian partners has hit on a technical point that was enshrined in the procurement bid issued by it.

The matter is now expected to land up at the defence ministry’s decision-taking body on procurement that is scheduled to meet at the end of this week.

The biggest shipbuilding plan under the strategic partnership model is expected to see the state owned MDL as the front runner.