Navy, Germany’s TKMS wrap up cost negotiations for new submarines, P-75I deal likely early next fiscal

It is estimated the deal would eventually work out to cost around $9 bn at least for 6 submarines—negotiated down by India. Original bid by state-run MDL & TKMS was over Rs 1.2 lakh cr.

Representational image: A TKMS-class submarine | Flickr

New Delhi: The Indian Navy and German firm Thyssenkrupp Marine Systems (TKMS) have finally concluded cost negotiations for Project 75 India (P-75I), under which six conventional diesel-electric submarines are to be manufactured in India with Air Independent Propulsion (AIP) system, ThePrint has learnt.

Sources in the defence and security establishment said that while the deal was originally planned to be inked by March-end—as reported by ThePrint on 1 December last year—it is now likely to be signed only early next fiscal.

It was initially hoped that the cost-related talks would be completed mid-December, following which the file would move to the Ministry of Finance, and then to Cabinet Committee on Security (CCS), sources added. “There are certain processes before the CCS, and that is on. One could still hope to sign the contract this fiscal, but there is a chance it could slip into the next one,” a source told ThePrint.

While sources remained mum on the final cost of the project, it is estimated that the deal would eventually work out to be around a staggering USD 9 billion at least for six submarines.

This is set to be the most expensive conventional submarine contract to be signed globally, even though the cost has been brought down—as negotiated by the Navy. The original bid by state-run Mazagon Dock Limited (MDL) and TKMS was over Rs 1.2 lakh crore for the six submarines.

Interestingly, Canada is procuring 12 conventional diesel-electric submarines for USD 12 billion, for which TKMS is fighting it out with South Korea’s Hanwha Ocean..

Mélanie Joly, Canada’s industry minister, has said that Canada must get a new auto plant if it’s going to sign a contract with either Germany or South Korea to buy up to a dozen new submarines.

Sources said that the Indian project involves technology transfer and building an ecosystem here, which sets the cost of the deal higher compared to the Canadian proposal—in which there is no tech transfer, with all submarines to be built in Germany itself.

As previously reported by ThePrint, when the project had received a fresh Acceptance of Necessity (AoN) in 2018, it was benchmarked at Rs 43,000 crore. However, MDL and TKMS’s bid crossed Rs 1.2 lakh crore, with GST levy pushing it even higher.

When the MDL-TKMS bid was chosen earlier this year, the Germans were sounded to pare the costs down, with the Navy hoping to finalise the deal in the Rs 60,000 crore-70,000 crore range. The new management at MDL negotiated with the Germans and brought the cost down.

According to the request for proposal (RFP), the first submarine must be delivered seven years after contract signing with 45 percent indigenous content, followed by one each year until the programme reaches 60 percent localisation.

(Edited by Mannat Chugh)