MDSL was unsure of selection for P-75i submarine contract due to new 'entities'

Senior journalist Sanjib Kr Baruah in this article explains the ongoing tussle over the biggest submarine project in India- Rs 45,000 crore P-75I submarine project. The Congress on Wednesday accused the Prime Minister Narendra Modi-led government of "favouring" the Adani group in the ₹45,000 crore P-75I submarine project, alleging that it was promoting its "crony capitalists".

New Delhi:The most likely forerunner to possibly bag Indian Navy’s Rs 45,000 crore P-75I submarine project, Mazagon Dock Shipbuilders Limited (MDSL), the only shipyard in the country to build a submarine, had expressed uncertainty in bagging the high-value contract because of the Government of India’s (GoI) changed policy.

“…recent changes in the policy framework governing defence procurement and manufacturing in India may result in our Company no longer being given such orders which may have an adverse effect on our business growth, financial condition and results of operations,” MSDL said in its draft red herring prospectus dated August 5, 2019.

Alluding to ‘entities’, the MDSL said: “In particular, the DPP (Defence Procurement Procedure) Strategic Partnership Model may create the formation of entities that may pose a significant competition for our Company, particularly in the submarine division”.

On Wednesday, the opposition Congress tore into the government raising a slew of allegations including favouritism, crony capitalism, violations of DPP and an alleged overruling of the Indian Navy and its ‘Empowered Committee’ by the BJP-led NDA government on the ongoing process for the award of the P-75I submarine project.

Expressing apprehension that the company may not be as competitive as in the past because of the changed environment, the MDSL document said: “While we would expect to continue to compete for such contracts, there is no guarantee that we will be successful, which may affect our ability to grow and/or maintain our sales, earnings and cash flow.”

“Under the DPP Strategic Partnership Model, the MoD (ministry of defence) has issued a request for expression of interest to shortlist Indian strategic partners for the construction of six conventional submarine under Project-75-India (P-75-I). Although we are in the process of submitting our expression of interest for the P-75-I, there is no assurance that we will be able to be selected for the project by the MoD,” the document added.

In response to the April 2019 ‘Request for Expression of Interest’ issued by the MoD for P-75I under Strategic Partnership Model, five responses were received—MDSL, L&T, Reliance Naval & Engineering Limited, Hindustan Shipyard Limited (HSL) and the last one a joint venture between Adani Defence and HSL.

In the meantime, the Indian Navy’s Empowered Committee headed by the Navy’s Controller of Warship Production and Acquisition, shortlisted two—MDSL and L&T—after examination of manufacturing facilities, financial records and other criteria.

Pointing out the media reports of Indian Navy’s Empowered Committee rejecting the Adani Defence JV, the Congress spokesperson Randeep Singh Surjewala pointed out in his statement: “Government of India and Defence Ministry now seek to overrule the ‘Empowered Committee’ of Indian Navy by directing consideration of Adani Defence JV… Adani Defence has ‘zero experience’ of making ships or submarines. It seeks to manufacture submarines based on a clause wherein its experience of setting up and running a power plant is counted”.

MDSL is a state-owned defence public sector undertaking shipyard under the Department of Defence Production, MoD, that makes, repairs and refits warships and submarines for use by the Indian Navy and other vessels for commercial clients.

Its order book, as on June 30, 2019, comprises four P-15 B destroyers, four P-17A stealth frigates, repair and refit of a ship, five Scorpene class submarines and one medium refit and life certification of a submarine.