India’s Ministry of Defence, under increasing pressure from the Navy and an ultimatum from the French government, has agreed to buy six Scorpene submarines from France for $4.6 billion — $1.4 billion more than the price tag negotiated in 2002.
Paris-based Armaris blamed the increased cost on prolonged negotiations that invalidated the $3.2 billion price tag agreed in 2002. And France’s Ministry of Defense (MoD) told Shekhar Dutt, India’s permanent defense production secretary, during his late-January visit to Paris that the submarines would be committed to another country if India did not finalize a contract soon, an Indian MoD official said.
An Armaris executive here declined to comment, but noted that a senior-level defense team from company headquarters was here in early March to finalize the new offer for the Scorpene submarines, which will be assembled in India.
The Indian MoD official said the ministry has no choice but to agree to the new price, as the Navy urgently needs the capability the subs will provide and any further delays will mean even higher costs or the loss of the subs altogether.
The official said that the Navy also pressured the government to allocate $100 million from the service’s 2005-06 budget to improve Mazagon Docks so it could build the Scorpenes.
The MoD official said the contract for the six Scorpenes will be signed this year.
In 1997, the MoD approved construction of two types of new-generation submarines under the Project 75 program. Two years later, negotiations for the Scorpene submarines began with Thomson-CSF, which became Thales, which now jointly owns Amaris with French shipyard DCN.
The previous Indian government failed to clear the deal even after the price was finalized in February 2002, said the MoD official, giving no reasons for the delay.
Under the proposed agreement, six Scorpene submarines will be built under license at Mazagon Docks, Mumbai, with technical assistance and equipment from French companies Armaris, DCN and Thales.
The Indian Defence Ministry said nearly 90 percent of the equipment — including the steel, power plant, weapon control systems and other subsystems — will be supplied by the French companies. The official said those firms will take 75 percent of the contract cost and Mazagon Docks will receive 25 percent of the $4.6 billion contract. He said $3.45 billion will cover the technology transfer fee, training of manpower, the royalty fee and the cost of equipment, components and systems, and raw material. Mazagon Docks will get $1.15 billion to cover submarine assembly, fabrication and labor.
An official from Mazagon Docks said March 15 that its submarine-building facility in Mumbai has been unused since 1992 and will require a complete revamp, costing more than $100 million, to build the six Scorpenes.
The first submarine will be delivered by Mazagon Docks 72 months after the contract is signed, and deliveries will be completed in 12 years, the Mazagon Docks official said.
The cost does not include weapons or Air Independent Propulsion systems, the latter of which can be retrofitted for extra cost, if the Navy wishes, the official said.