The Indian Navy’s firepower is going to be significantly boosted with the addition of four heavy warships. The navy’s design chief, Rear Admiral MK Badhwar, has confirmed for the first time, to Business Standard, that the Defence Acquisition Council (DAC) — the top procurement body in the Ministry of Defence (MoD) — has cleared Project 15-B, the construction of four 6800-tonne destroyers by Mazagon Dock Ltd, Mumbai (MDL).
There was no competitive bidding for Project 15-B, since MDL is the only Indian shipyard large enough to build destroyers, which are significantly larger than frigates. MDL is currently completing Project 15-A, the construction of three destroyers of the Kolkata Class; Project 15-B (the class has not been named yet) is a “follow-on project”, i.e. it is only incrementally different from Project 15-A.
Asked when manufacture will begin, Admiral Badhwar said, “The Indian Navy has asked MDL for a quotation. Once that is received, an MoD Contract Negotiation Committee (CNC) will negotiate a price with MDL for the four destroyers. After the price is agreed upon, the MoD will accord final sanction for the project.”
The navy intends to drive a hard bargain with MDL. Admiral Badhwar explains, “The three Kolkata class destroyers built under Project 15-A cost about Rs 3800 crore each, i.e. about Rs 11,000 crore. Project 15-B should logically be cheaper.”
At that price, Project 15-B will save more than a billion dollars per warship. Australia bought its F100 frigates (at 3,000 tonne, significantly smaller and more lightly armed than the destroyers that will be built under Project 15-B) from Spanish shipyard, Navantia, for the equivalent of Rs 9,000 crore per frigate.
Crucial to how cheaply, and how fast, Project 15-B can be built is the issue of how different these warships will be from their predecessors in the Kolkata Class Project 15-A. Project 15-A has taken longer than anticipated because it incorporated significant changes and upgrades from its predecessor, Project 15 (three Delhi Class destroyers). But Project 15-B, MDL hopes, will have fewer design challenges; it will differ from its predecessor only in weaponry and sensors.
Vice Admiral HS Malhi, chairman and managing director (CMD) of MDL explains, “If there are no major changes in Project 15-B, we can definitely cut down the build time. If the vendors can use the same manufacturing equipment, if the same drawings can be used, it makes a big difference. Standardisation is the key.”
Admiral Malhi points, as an example, to the US Navy’s DDG-51 programme, in which 62 destroyers have already been churned out with standardised hulls and propulsion systems.
MDL’s CMD points out, “If you have that kind of production line, the speed of building and the cost of building comes down dramatically.”
This is the Catch-22 situation facing Indian warship-building. The shipyards want larger orders of warships with standardised designs. But the Indian Navy has tended to place smaller orders of 3-4 ships; the navy says construction delays by the shipyards mean that designs get outdated by the time the ships are rolled out.
This impasse, however, appears to be dissolving. The design similarities between Projects 15-A (three destroyers) and 15-B (four destroyers) could effectively combine those into a combined seven-destroyer order. Similarly, Project 17-A is being planned as an order for seven stealth frigates.
MDL believes that, since Project 15-B is a follow on of the 15-A, the design and planning period will be less than 1½ years. Once the design is finalised, the navy wants the first destroyer to roll out within four years, with the others completed at one-year intervals. By that ambitious timeline, if the order is placed on MDL by end-2009, the first 15-B destroyer would be commissioned in mid-2015.
Tax experts say valuation of shares is a grey area and may lead to litigation