The cost of the 10 yr. lease for the Akula-2 is reported to be $1B,however,this includes the unspelt support and tech assistance provided for the ATV,where a few hundred Russian technical experts have been engaged in for a few years.The deal has been part of a large package which included for the Gorshkov and its aircraft,for extra cost.After 10 years it is most likely that the sub will be sold to us for a nominal sum,depreciated value,whatever.Let's take a look at the Scorpene deal for comparison from DID's extensive report.http://www.defenseindustrydaily.com/ind ... ted-01194/
ndia’s Multi-billion Dollar Scorpene Sub Contract
Dec 06, 2012
India’s submarine fleet currently consists of 16 submarines, about 13 of which are operational. Its Foxtrot Class boats can no longer be counted on, and its U209 derivatives from HDW are unlikely to last beyond 2015. With Pakistan acquiring modern submarines, and Chinese submarine building exploding, India’s future submarine fleet became an obvious national priority.
In 2005, India confirmed that it would buy 6 Franco-Spanish Scorpene diesel submarines, with an option for 6 more and extensive technology transfer agreements. The Scorpene deal had simmered on the back-burner for several years, and media reports touted a deal as “close” in 2004, but nothing was finalized until late 2005. The cost had been subject to varying estimates over the life of those multi-year negotiations, and continued to change after the contract was awarded, but the final figure for the first 6 boats is now generally accepted as being about $4 billion. Unfortunately, 7 years after that deal was signed, “Project 75” has yet to field a single submarine. A poor Indian procurement approach, and local inefficiency, are pushing the country’s overall submarine force toward an aging crisis. This DID FOCUS article covers the Scorpene deal and its structure, adds key contracts and new developments, and offers insights into the larger naval picture beyond India.
India’s New Submarines: The Deal
Schedule, Cost & Plans
Timeline & Industrial Arrangements
The Scorpene Class
The AIP Option
Scorpene Project: Contracts & Key Events [updated]
Appendix A: India’s Current Submarine Force, and Rival Navies
Appendix B: A Final, Nuclear Note
Appendix C: Additional Readings & Sources
India’s New Submarines: The Deal
Schedule, Cost & Plans
The Scorpene project will kick off The Indian Navy’s long-term goal of acquiring indigenous capability in design, development and construction of submarines. These “Project 75” submarines will all be built in India, and expected delivery dates for the first 6 were set at 2012-2017. DCNS remained committed to those dates, until everyone had to bow to the obvious and begin promising 1st delivery in 2015, with deliveries to the Navy running from 2015-2018. Given the record to date, and the difference between schedule slippage of 1st vs. final deliveries, it’s reasonable to expect deliveries beyond 2018.
Costs are also slipping.
Planned costs for the Project 75 deal had a range of reported figures, until a contract was signed. In the end, the reported figure was Rs 15,400 crore, or $3.5 billion converted equivalent at the time. Subsequent auditor reports indicated that the program would actually cost about 18,798 crore (about $4 billion), and escalations to 20,798 crore/ $4.38 billion and then 23,562 crore/ $4.56 billion have followed. That makes for about a 25.4% cost increase from the auditors’ baseline.
Tracking actual contracts is more difficult. Contracts signed as of August 2009 totaled INR 207.98 billion/ Rs 20,798 crore. The contracts were signed at different times, and will be paid over different periods, so a true currency conversion is difficult. A weakening American dollar and Euro have cushioned the increases somewhat, but most of the project’s cost involves local currency purchases. Contracts reportedly include:
Rs 6,315 crore contract with DCNS’ predecessor for transfer of technology, combat systems and construction design.
Rs 1,062 crore contract with MBDA for sea-skimming Exocet missiles and related systems
Rs 5,888 crore contract with MDL for local submarine construction
Rs 3,553 crore set aside for taxes
Rs 2,160 crore for other project requirements
Rs 2,000 crore added in March 2010 to cover added finalized costs of the “MDL procured material (MPM) packages”
Rs 2,764 crore unaccounted for yet in public releases, but envisaged in final INR 235 billion program costs.
Most of the delays, and many of the cost increases, are attributable to India’s slow decision making, and lack of readiness. Meanwhile, India’s existing fleet continues to age, and the size of India’s submarine fleet will become a serious concern by 2016 or so.
“Project 75” had options for another 6 submarines, but that option has been replaced by a 6-boat “Project 75i” competition. Introducing another competition offers the prospect of improved technology, but it also adds industrial disruption if another design is chosen. India’s deeply flawed procurement process creates a further risk, which is that a new competition will become bogged down in allegations and/or protests, and fail to deliver anything.
If India can overcome its government’s own obstacles to fielding an effective submarine force, reports by Indian media describe a long-term desire to manufacture up to 24 submarines in a phased manner. Admiral Prakash has confirmed that target, and used the objective of “24 subs in 30 years.” Time will tell if actual budgets and shipbuilding performance can match the Navy’s appetites.
DID reminds our readers that long term plans for major capital acquisitions have a way of shrinking over time as budgetary tradeoffs are made – 32 DD (X) destroyers for the USA became 12, and then 3. Nevertheless, options and/or future schedule delays could easily keep submarine production for India going to 2030 or beyond, and the buildup of China’s forces in particular is likely to keep submarines high on India’s defense priority list.
(Nice to see BR quoted in the article for info on the kilo,U-209 and Foxtrot classes)
Dec 5/12: Project 75i. India’s cabinet Defence Acquisition Council (DAC) has accorded Acceptance of Necessity (AON) for buying “Project 75i”, India’s next 6 submarines. A global RFP is reportedly due “very soon,” and the Indian government has reportedly decided to spend up to $10 billion/ Rs 55,000 crore on India’s future submarine force.
Project 75i diesel-electric SSK subs will have air-independent propulsion, and India is also looking to equip them with conventional land attack missiles. DCNS could offer the AIM-2000 Scorpene with the MESMA AIP, and might be able to offer integration of MBDA’s developmental MdCN cruise missile. The MdCN is already slated for DCNS’ SSN Barracuda Class nuclear fast attack submarines, and the right electronic commonalities could give any French proposal a notable advantage over German and Spanish competitors. Indian government | Zee News.
Oct 28/12: Torpedoes. More headaches for India’s Black Shark torpedo buy. As if their direct competitor’s complaint wasn’t enough, a probe is now underway into India’s EUR 560 million purchase of 12 AW101 VIP helicopters. AgustaWestland is also a Finmeccanica company, and there are several cases of India’s blacklist laws being invoked against firms on the basis of mere corruption allegations, with no available proof.
The Rs 1,700 crore buy of 98 torpedoes for the Scorpene fleet was expected to be followed by a similar buy for Project 75i’s 6 submarines, and possibly a 3rd buy to plus up stocks and equip the new SSBN Arihant Class of nuclear-powered ballistic missile submarines. That could mean a total of up to Rs 5,100 crore, or about EUR 733 million / $947 million at risk given current conversions.
As for Atlas Elektronik’s claims that the torpedo bid was rigged (vid. Jan 31/11 entry), the Indian MoD’s Acquisitions Wing, Central Vigilance Commission (CVC), and Minister of State for Defence MM Pallam Raju have all rejected the claims, despite strong circumstantial evidence. India MoD | India’s Business Standard.
March 23/12: SEC sub-contract. DCNS India announces a Scorpene sub-contract and transfer of technology with SEC Industries Pvt Ltd of Hyderabad, India. The deal for hull hatches, cofferdam doors, knuckle hoses, ballast vent valves, High Pressure air cylinders, weapon handling and storage system is worth about Rs 310 crore/ EUR 50 million. To make this work, DCNS will provide SEC with full plans for the components, training for over 40 SEC personnel at DCNS facilities during 2012-2013, plus 5 years of on-the-job training and support for manufacturing and quality control at SEC in Hyderabad.
SEC is known in Indian defense circles as a manufacturer of missile airframes and components, and signed a deal with Israel’s IAI back in 2008. The company’s previous experience had been with heavy pump set and road-roller equipment. DCNS.
March 19/12: Delays. The 1st Indian Scorpene sub is now confirmed as scheduled for delivery in June 2015, barring further delays, and program cost is now confirmed at Rs 23,562 crore (currently about $4.56 billion).
The original schedule was for delivery by December 2012, with submarines arriving each year until December 2017. The new official schedule has deliveries beginning 2.5 years later in June 2015, with submarines arriving every 9 months until September 2018. Costs are up about 25.4% from the original CAG-audited cost of Rs 18,798 crore after the deal was signed, or 87% over the program’s initial 2002 figure. Indian MoD | New Kerala | PTI
July 29/11: Rear Admiral MT Moraes takes over as the Assistant Chief of Naval Staff (Submarines) at Delhi, to look after the planning and acquisition of submarines.
Rear Admiral Srikant is also slated to take over as Flag Officer Submarines (FOSM) based at Visakhapatnam, this is the indian Navy’s class authority on submarines, responsible for defining standards, policies and procedures for their operations and maintenance. Rear Admiral G Ashok Kumar will take over as Flag Officer Sea Training (FOST) at Kochi. India MoD.
June 8/11: Sub-contractor. DCNS India Pvt. Ltd. signs an undisclosed contract with Flash Forge India Pvt. Ltd., an ISO 9001:2008 certified manufacturer of customized special material forgings based in Visakhapatnam.
This first contract with Flash Forge for the manufacturing of mechanical equipment is the conclusion of a long process for DCNS, which involved identification of potential partners, audits of the manufacturing and quality processes, qualification, and then a competitive Request For Proposal (RFP). With a lot of the advance work out of the way, DCNS expects to announce other local contracts in the near future. DCNS.
June 6/11: IANS relays a report in the May 2011 issue of India Strategic, quoting DCNS India Managing Director Bernard Buisson to say that 2 Scorpene combat systems have been delivered to Mazagon Docks Ltd. (MDL). They’re in the process of integrating the first one.
Buisson reportedly said that there are about 20 – 25 French engineers assisting in technology transfer, and added that DCNS has had technical discussions with the Indian Navy on installing MESMA air independent propulsion (AIP) systems on board the last 2 submarines. That move would raise the subs’ cost, and DCNS said they are (still) awaiting the Navy’s response. IANS | India Strategic.
May 18/11: Delays. The Times of India reports that 2 Indian naval crews will be going to France “after some months” to train for operating the SSK Scorpene fast attack submarines. The article notes that by 2020, India’s fleet will comprise just 5 Kilo Class and 4 U209 Shishumar class boats available, and quotes an unnamed official:
“We now hope to get the first Scorpene by August 2015. Each submarine will have just a 36-member crew since automation levels in them are very high,”.... “The first Scorpene will be ‘launched’ into water in 2013, and will be ready for commissioning by August 2015 after extensive harbour and sea trials,” said a top DCNS official. “The target is to deliver the sixth submarine by 2018, one every nine months after the first one in 2015. The third and fourth submarines are already under construction at MDL….”
April 6/11: Stretch the Shishumars? The Scorpene project’s lateness, and uncertainties around Project 75I award and delivery dates, have led India’s Navy to talk with Germany’s HDW about upgrading the capabilities, and extending the lifespans, of its existing U209 Shishumar Class boats, inducted from 1989-1994. Zee News.
Feb 16/11: P75i. Indian media quote Indian navy chief Admiral Nirmal Verma, who reiterates that the follow-on program to the Scorpene deal is already cleared by India’s government. The result could add 6 more Scorpenes to the order books, or it could result in a parallel program to build another model. With 7 of India’s 14 active submarines due for retirement by 2015, and the Scorpene program 3 years late because of self-inflicted delays, the Indian government’s unwise choice to avoid building any Project 75 Scorpene submarines in France has created a looming crisis for the Navy.
Verma says that the Navy is going through responses to the September 2009 RFI, and hopes to be able to issue a tender in 2011. Responses have reportedly included DCNS (Scorpene AIP), Germany’s HDW (U214) and its Swedish Kockums subsidiary (several options, incl. the forthcoming A26 design), Navantia (S-80), and Russia’s Rosoboronexport (Amur 1650), He adds that Project 75i is looking for an improved combat management system, better sensors and detection range, and the certain inclusion of Air Independent Propulsion (AIP) technology. Reports place the order total at $11 billion, but that seems high even if it includes both the current $4.38 billion for Project 75’s 6 subs, and a Project 75i program for another 6 diesel-electric boats. Time will tell.
The current plan is for India to order 2 submarines built at the winning foreign shipyard, and build 3 at Mazagon Docks Limited (MDL) in Mumbai, and 1 at Hindustan Shipyard in Visakaphatnam. That’s similar to the Project 75 plan pushed by India’s Navy, who wanted 2 boats built abroad because they feared that delays and performance issues might create problems for the Scorpene. Political favoritism overruled that request, and the feared scenario has come to pass. This time, the government is showing slightly more flexibility, by approving the plan to have 2 submarines built abroad in order to avoid a complete crash in fleet numbers. On the other hand, the Defence Acquisition Council (DAC) refused to accept the recommendation the Project 75i avoid MDL, due to that shipyard’s existing workload. Instead, the government assumes that it would be able to build 3 more submarines, which may even be of a different type, on an accelerated production schedule, while still delivering all 6 Project 75 Scorpene boats to the revised schedule. Yeah, right. IANS | Times of India.
Jan 31/11: Torpedo trouble? India’s Central Vigilance Commissioner has opened an inquiry into Project 75’s planned buy of 98 heavyweight torpedoes, after Atlas Elektronik GmbH executive director Kai Pelzer reportedly lodged a direct complaint. The complaint refers reportedly refers to irregularities in the conduct of the procurement process, including specific charges of corruption. The CVC inquiry was ordered in December 2010.
Atlas Electroniks’ complaint is straightforward: the competition was rigged. The RFP makes the torpedo vendor responsible for seamless integration and/or interface of the torpedo with the SUBTICS combat system. The Finmeccanica/DCNS Blackshark is the Scorpene’s default torpedo, but Atlas had to have their plan approved by the MoD’s Technical Evaluation Committee (TEC). That approval was given, but Atlas’ integration proposal was failed in the user trials. India’s DPP, Para 13, doesn’t allow requirements that “prejudice the technical choices by being narrow and tailor made.” The TEC’s approval escaped that trap, but Para 70a allows only one remaining vendor after trials. Atlas says this was the Navy’s intent all along.
The inquiry suspends India’s planned buy of Black Shark heavyweight torpedoes from Finmeccanica subsidiary Whitehead Alenia Sistemi Subacquel (WASS), until this can be sorted out. Atlas Elektronik Gmbh was offering their DM2A4 Seahake. Both torpedoes feature advanced seeker heads, and can be controlled by a trailing fiber optic cable. Defense World | Economic Times of India | Subsequent Business Standard coverage.
An Indian Tale Of Woe
September 6, 2012: India's effort to build the first six subs (French Scorpenes), under license, has been delayed several times and the price has gone up to $5 billion ($834 million each). While this effort will leave India with thousands of workers and specialists experienced in building modern submarines, all that will be wasted because the defense procurement bureaucrats seem to have learned nothing. These officials already caused numerous delays and cost overruns during negotiations to build these diesel-electric submarines. The bureaucrats mismanaged this deal to the extent that it is now three years behind schedule. But it is even more behind schedule if you count the several years the Indian bureaucrats delayed it even getting started. The delays and mismanagement have so far increased the cost of the $4 billion project by 25 percent. The original plan was to have the first Indian built Scorpene delivered at the end of this year. But now, because of problems getting the construction facilities and skilled workmen ready, the first Scorpene won't be delivered until 2015, with one each year after that until all six are delivered. That schedule is subject to change, and probably will, for the worse.
All this ineffective urgency is in play because India's submarine fleet is dying of old age and new boats are not going to arrive in time. It's not like this was a surprise, but the Indian defense procurement bureaucracy has long been noted as slow, sloppy, and stubborn, especially in the face of demands that it speed up. The twisted tale of the tardy submarines is particularly painful.
The plan was to have a dozen new subs in service by the end of the decade. At present, there will be (with a bit of luck) six of them in service by then. The procurement bureaucracy is still seeking a supplier for the second six diesel-electric subs. This second six subs might begin arriving by the end of the decade. It's hard to say, although the defense procurement nabobs speak of "fast tracking" this project, but long-time observers of these officials are not expecting speed.
There's some urgency to all this because this year, five of India's 16 diesel-electric subs (10 Kilo and two Foxtrot class Russian built boats and four German Type 209s) were to be retired (some are already semi-retired because of age and infirmity). Because of the Scorpene delays, the Type 209s are being kept in service (but not allowed out to sea much) for several more years. That leaves India with 14 subs. But in the next year or so several of the older Kilos will reach retirement age. Thus, by the time the first Scorpene arrives in 2015, India will only have five or six working subs. India believes it needs at least 18 non-nuclear subs in service to deal with Pakistan and China.
India is also building and buying nuclear subs. India received a Russian Akula nuclear attack (SSN) sub earlier this year. This one is on lease with the option to buy. Indian SSNs and SSBNs (missile carrying boats) are under development, as they have been for decades.
After the bureaucrats and politicians dithered for nearly a decade, in 2005, India finally signed a deal to buy six French Scorpene class boats. The delays led to the French increasing prices on some key components and India has had some problems in getting production going on their end. The first Scorpene was to be built in France, with the other five built in India. While some problems were expected (India has been doing license manufacturing of complex weapons for decades), the defense ministry procurement bureaucrats never ceased to amaze when it came to delaying work or just getting in the way.
The Scorpenes are similar to the Agosta 90B subs (also French) that Pakistan recently bought. The first of the Agostas was built in France, but the other two were built in Pakistan. The Scorpenes purchase was seen as a response to the Pakistani Agostas. The Scorpene are a more recent design, the result of cooperation between French and Spanish sub builders. The Agosta is a 1,500 ton (surface displacement) diesel-electric sub with a 36 man crew and four 533mm (21 inch) torpedo tubes (with 20 torpedoes and/or anti-ship missiles carried). The Scorpene is a little heavier (1,700 tons), has a smaller crew (32), and is a little faster. It has six 533mm torpedo tubes and carries 18 torpedoes and/or missiles. Both models can be equipped with an AIP (air independent propulsion) system. This enables the sub to stay under longer, thus making the sub harder to find. AIP allows the sub to travel under water for more than a week, at low speed (5-10 kilometers an hour). The Pakistanis have an option to retrofit AIP in their current two Agostas.
While India was largely concerned with the Pakistani navy when the Scorpene contract was negotiated and signed, China is now seen as the primary adversary. The Chinese subs are not as effective as the Pakistani boats, both because of less advanced technology and less well trained crews. India could use their Scorpenes to confront any Chinese attempt to expand their naval presence into the Indian Ocean. Thus the delays and cost overruns with the Scorpenes are causing quite a lot of commotion in India. But at the rate India is going, it will be nearly a decade before all six of the Scorpenes are in service. At that point, India would have about a dozen subs (including nuclear powered models under construction). China will have over 60 boats, about 20 percent of them nuclear. China does have a lot for its warships to deal with off its coasts and in the Western Pacific but it does retain the capability of putting more subs off the Indian coast than can the Indian Navy.
So,after years of bumbling,the Scorpenes are going to cost,each,almost the same cost as a Russian nuclear powered Akula-2 which at least 4-5 times larger and carries infinitely far more firepower,range and endurance,etc.,etc.! Why on earth should we buy/build more in a follow on to the 6 being built,that too the first four WITHOUT AIP,with AIP an option only for the last 2. simply asinine!