Tuesday, 28 July 2015

Corruption in defence procurement: “Blacklisting” must remain an option


By Ajai Shukla
Business Standard, 28th July 15

The debate over whether it is wise to blacklist global arms corporations found guilty of bribery and corruption is gathering steam as the defence ministry finalises its forthcoming defence procurement policy of 2015 (DPP-2015).

The National Democratic Alliance (NDA) government has always believed that the blacklisting of arms vendors who violated the DPP has become a stumbling block in defence procurement. Fifteen companies are already blacklisted and another 23 are under defence ministry scrutiny; the government cannot procure equipment of spares from them, narrowing its procurement options.

On August 23, 2014 former defence minister, Arun Jaitley, said corporate wrongdoing should be punished without blocking acquisitions and the flow of spares.

“We have to balance between two competing public interests. One public interest is that contracts are meant to be abided with and not violated, even by our suppliers. The other competing interest is the larger public interest in terms of our national security and defence preparedness. It is an issue that we are fully seized of and we are in the process of finding an answer to this, and you will hear about this from us very soon”, he promised.

Jaitley was referring to the Italian defence conglomerate, Finmeccanica, which the defence ministry had banned since February 2013, along with its subsidiaries, many of which are key defence suppliers to India. These include marine systems vendor, Whitehead Alenia Sistemi Subacquel (WASS); radar and communications specialist Selex Electronics Systems (ES); aerospace giant, Alenia Aeromacchi; armaments major, Otomelara; and helicopter maker, AgustaWestland. The United Progressive Alliance (UPA) defence minister, AK Antony proscribed Finmeccanica after its chairman was arrested in Italy on charges of bribing Indian officials to win a contract for twelve AgustaWestland AW-101 helicopters to ferry Indian VVIPs. The Italian court has since dismissed the case, but a Central Bureau of Investigation probe continues.

On August 26, Jaitley diluted the ban on Finmeccanica, allowing India’s military to go ahead with contracts already signed with its subsidiaries and to buy spares and upgrades for equipment earlier procured. However, Finmeccanica group companies remained proscribed from new tenders, and those where it was participating, but a winner had not been announced.

Manohar Parrikar, who succeeded Jaitley as as defence minister last November, shared Jaitley’s distaste for blacklisting. On December 12, Parrikar declared that companies that violated procurement norms should face “heavy financial penalties”, not blacklisting. Citing Finmeccanica, Parrikar asked: “Should we rule ourselves out of dealing with all of its 39 subsidiaries? There has to be a clear policy on that.”

Voicing his own views, Parrikar proposed: “How much you (the vendor) violated, pay the Indian government 4-5 times that, only then will you be permitted to participate in defence tenders.”

Calling this just “loud thinking”, Parrikar promised a formal policy on representatives and blacklisting by January 2015. The wait for this continues, with government legal experts and bureaucrats unwilling to renounce a key lever in their enforcement toolbox.

With the ministry publicly advocating out-of-court settlements rather than prosecuting of defaulters, the private industry has pressed home the advantage. On Wednesday, the Confederation of Indian Industries (CII), which represents big private sector corporations, issued a briefing paper that proposed the adoption of US-style “deferred prosecution agreements” (DPAs). In a DPA, the government grants amnesty to a defaulting company in exchange for its cooperation in investigating violations, hefty cash fines and an explicit or implicit acceptance of guilt.

Enumerating the disadvantages of blacklisting, the CII says it could result in vendors deciding “the risk of conducting business in India is too high”; dilution of competition in defence procurement that is already a field with limited players; and, in some cases, denying the military equipment that might be available only from a blacklisted company.

The CII paper also warns against the “Arthur Andersen effect” of blacklisting and vigorously prosecuting an erring vendor. This refers to the collapse of the American accounting firm in 2002 after its prosecution for falsifying the accounts of Enron. That led to the loss of about 28,000 jobs, many of them of innocents.

“[Blacklisting] has usually not served its desired purpose. The inquiry is often delayed and moves in circles… (and) the matter is stuck in the Indian legal system. On the other hand, the automatic blacklisting of companies limits the government’s options of negotiating a better deal from multiple supplier sources”, argues the CII paper.

It is true that none of the companies that the defence ministry has blacklisted over the years have been successfully prosecuted and penalised for wrongdoing. However, defence industry experts overwhelmingly agree that this is not for lack of guilt, but rather because of the weaknesses and complexity of India’s criminal prosecution system.

The DPA that the CII recommends traces its roots back to 1992, when the US Department of Justice (DoJ) agreed not to prosecute investment banker, Salomon Brothers in view of its “unprecedented cooperation” with an on-going investigation. Later, the US formalised guidelines for DPAs in the US Attorney’s Manual and other official procedures.

Legal expert, Percival Billimoria, says the US DoJ offers a DPA when it believes the benefits of voluntary disclosure and large restitution payments outweigh the benefits and uncertainties of prosecuting the offending company. A DPA usually includes an acknowledgment by the offending company of the offences it has committed; an obligation to cooperate fully with the prosecuting/investigating agency; details of the consequences of breaching the DPA; an acknowledgment that a repeat offence would lead to prosecution; an agreement to institute internal compliance mechanisms to prevent further breaches of law and ethics; and an enumeration of penalties/fines imposed.

The CII states that $24.8 billion in fines were imposed in the US during 2010-2014, of which $3.87 billion were for violations of anti-corruption laws.

While there are clear advantages to offering a DPA in certain cases, a growing school of thought warns against allowing companies to buy their way out of trouble as a matter of course. The DPA model, in fact, is facing growing criticism within the US, since it makes adjudicating guilt the preserve of prosecutors, not courts of law.

Legal experts like Sherbir Panag, who heads the criminal compliance practice of MzM Legal, point out that the multi-million dollar fines imposed by the US DoJ and Securities Exchange Commission (SEC) --- Siemens alone paid $800 million in one case --- in no way indicate that criminal misconduct has reduced or compliance has become more robust. Reduction in the commission of offences and behaviour alteration requires strong deterrence induced by prosecution of individuals and companies. That is not achieved if liability reduction paperwork replaces prosecution substantially.

“The corporations that bear the fines start accepting them as an opportunity cost of doing business, unless sanctions and penalties proportionate to the offences committed are imposed”, says Panag.

Furthermore, a DPA only becomes attractive to a company if it is backed by a strong investigative and prosecuting mechanism, which India clearly lacks.

“The US has a focused and centralised agencies, centred on the DoJ and the SEC. In contrast, India has a plethora of agencies, mostly working at cross-purposes: the defence ministry that orders investigation and imposes the administrative sanctions; the Central Bureau of Investigation; and numerous agencies investigating economic offences. Besides having to coordinate these, major substantive and procedural law reforms would be needed to allow DPAs”, points out Panag.

As the defence ministry grapples with these shortcomings, it is evident that the airy imposition of monetary fines cannot credibly replace criminal investigation and prosecution. Blacklisting must remain in the sanctions/penal toolbox of the defence ministry, along with the possibility of negotiated resolutions through DPAs. To be credible, both must be backed up with vigorous investigation/prosecution mechanisms and a tailored legislative framework.

As agencies investigate Lashkar links, Khalistani role not ruled out


By Ajai Shukla
Business Standard, 28th July 15

Details are still emerging about the daylong attack on Monday by three terrorists in the Gurdaspur district of Punjab, which borders both Pakistan and the state of Jammu & Kashmir (J&K). 

Intelligence agencies are searching for linkages to Pakistani groups like the Lashkar-e-Tayyeba (LeT) or Jaish-e-Mohammed (JeM). Simultaneously, they are trying to establish whether Pakistan-based Khalistani militants also played a role, direct or indirect.

Most intelligence insiders suspect the same Sialkot-based Islamist militant groups that have made a modus operandi in recent years of infiltrating and staging fidayeen (fight-to-the-death) attacks in the Samba-Kathua belt that borders Punjab. Having progressively discovered, including during a recent attack on March 21, that targets in Samba-Kathua are now heavily defended, the jihadis may have switched their attention 20-30 kilometres further south to Dinanagar, inside Punjab, where they struck on Monday, killing nine Indians.

Even so, experts like Ajai Sahni of the Institute of Conflict Management, are not ruling out a role by Khalistani militants who have conducted a low-intensity Sikh-separatist campaign from Pakistan since the end of the Punjab insurgency in the early 1990s.

Just a fortnight ago, a photograph appeared on social media showing Pakistan Sikh Gurdwara Prabandhak Committee (PSGPC) general secretary, Gopal Singh Chawla, and PSGPC office bearers meeting Jamaat-ud-Daawa (JuD) chief, Hafiz Saeed. The JuD is widely known to be a front of the LeT.

“While Khalistani and Kashmir-focused groups have not so far cooperated in staging attacks, we know Pakistan’s Inter-Services Intelligence (ISI) has been pressuring the Khalistanis to earn their keep in Pakistan. The ISI has been propagating the concept of K-2 --- Kashmir and Khalistan --- to keep India under pressure on two fronts”, says Sahni.

Noted Pakistan expert, C Christine Fair from Georgetown University, Washington DC, adds that there is credible information that Khalistani separatists in Canada, which has long been a hothouse of separatist activity, recently met ISI representatives there. There is little clarity about what this might mean for the K-2 project, or whether this could portend the revival of urban militancy in Punjab.

Either way, the Punjab Policy needs to prepare itself, both for a revival of Khalistani activism and for the spill-over of terrorism from the Kathua-Samba belt in J&K. Certainly, in the current operation, the Punjab Police has not acquitted itself with credit. It is worrying that they allowed three terrorists to kill nine Indians, including a superintendent of police, and to have taken over a police station well inside Indian territory, from where they fought off much larger numbers for over 12 hours.

While this is the first cross-border terror attack in Gurdaspur, that district has historical and emotional resonance for Pakistani, which has linked it with the J&K dispute since the time of partition. Pakistan had expected that Gurdaspur, which was a 51 per cent Muslim-majority district, would be allocated to Pakistan by the Radcliffe Commission. However, the Radcliffe boundary awards transferred only Shakargarh tehsil to Pakistan, leaving the rest of Gurdaspur with India.

Pakistani historians still fume that this was done at the instance of Lord Louis Mountbatten, who allegedly conspired with Nehru to ensure that the crucial highway to J&K, which passes through Gurdaspur district, remains with India.

It is this highway, running along the Indo-Pakistan border from Pathankote to Jammu, via Kathua and Samba, which has been frequently attacked by infiltrated fidayeen groups. Monday’s attack was only the latest. 

Sunday, 26 July 2015

Saturday, 25 July 2015

Defence watch: MoD's answers to questions in parliament on July 24th



Measures to promote indigisation of defence equipment, the Government has:

(a) Accorded preference to acquisition under “Buy (Indian)”, “Buy and Make (Indian)” and “Make” categories, over “Buy (Global)” and “Buy and Make (Global)” categories;

(b) Raised FDI limit in defence to 49 per cent through FIPB route, and beyond 49 with the approval of Cabinet Committee on Security, where it could bring in state-of-the-art technology;

(c) Removed restrictions on FII holdings in the defence JVs, and the need for single largest Indian shareholder to hold at least 51 per cent equity;

(d) Formulated “Outsourcing and Vendor Development Guidelines” for DPSUs/OFs to gradually outsource from private sector, including SMEs; (e) Removed anomalies in excise/custom duties, levying it uniformly on public and private sector.

=========================


Industrial licenses for defence production. There are 60 applications for defence industrial licenses pending with the government. A total of 287 industrial licences have been issued till date, with 70 having been issued since June 2014.

The government has pruned down the list of items for which industrial licences are needed under the IDR Act, reducing entry barriers for private industry. The initial validity of a licence has been increased from three to seven years, extendable by another three years. Restrictions on annual production capacity have been removed.

Recognising the need to promote defence exports, a Defence Exports Strategy has been promulgated.

========================


Export of defence equipment.  Over the last one year, defence equipment has been exported to 22 countries, including Afghanistan (helicopters, trucks), Oman (Jaguar fighter spares), Russia (MiG and Sukhoi-30 spares and services, avionics), Malaysia (Sukhoi-30 and MiG avionics and spares), Nepal (helicopters, ammunition, bulletproof vests), Singapore (naval vessel), Germany (light mechanical parts, detonating fuzes) and USA (work packages/forgings, electronics).

The Ministry of External Affairs (MEA) has a negative list of countries for defence exports. The MEA’s views are taken before granting NOC for export.

========================


FDI inflows into defence. Foreign direct investment worth $1.31 million has flown into defence during the last three years and the current year. A total of 34 proposals involving foreign investment have been approved so far.

========================


Crashes of fighter aircraft. During the last three years and the current year up to July 20, a total of 20 fighter aircraft have crashed. These include three Sukhoi-30MKI, 12 MiGs and five Jaguars. Four of these aircraft crashed in 2012-13; six in 2013-14; seven in 2014-15; and three this year so far.

Two air force personnel and two civilians were killed in these accidents. The loss to the government is estimated at Rs 386 crore.

========================


Shortage of soldiers, sailors and airmen. The personnel shortfalls in the military is as follows:

(a)        Army:             9,642 officers and 23,909 other ranks

(b)       Navy:              1,779 officers and 11,653 sailors

(c)        Air Force:        Nil officers and 6,654 airmen

========================


Coastal security. The Indian Coast Guard (ICG) has a total strength of 11,474 personnel. Based on inputs from national and state intelligence agencies, the ICG conducted 120 operations from January 1, 2012 till now.

Based on a “vulnerability/gap analysis” along the coast, a Coastal Security Scheme (CSS) has been formulated to strengthen security. Under Phase-1 of the CSS, 73 coastal police stations, 97 checkposts, 58 outposts, and 30 barracks have been established. Under Phase-II, another 131 coastal police stations, 60 jetties and 10 marine operation centres have been sanctioned.

=========================


One rank one pension. The policy to address pension disparities has been adopted by the Government in the budget 2014-15. It will be implemented once the Government approves the modalities.

Friday, 24 July 2015

“Lashkar-e-Toiba and Pak army recruit from same pool of educated youth”: Christine Fair


By Ajai Shukla
Business Standard, 23rd July 15

You thought Pakistani support for terrorism was buoyed by that country’s poverty, with poor, unemployed youths joining terrorist groups? Wrong! Pakistan’s poor people oppose terrorism far more forcefully than the country’s growing middle class.

And you thought promoting democracy in Pakistan was the way to snuff out terrorism since terrorism is the antithesis of democracy? Wrong! When it comes to Kashmir, democrats see the insurgency as a struggle for “azadi” or freedom, warranting armed struggle, even jihad.

Were you under the impression Pakistani jihadi groups were recruiting mainly from madrassahs (religious seminaries) that churn out radicalised youth? Wrong again! Most jihadis are reasonably educated, while less than one per cent of Pakistani youth get their education exclusively from a madrassah.

These were some of the common perceptions of Pakistan that C Christine Fair, an acclaimed Pakistan expert who teaches at Georgetown University rebutted on Thursday in Delhi. Fair was speaking at a think tank, Observer Research Foundation, on: “Violence in Pakistan: who supports it? Rebutting conventional wisdom”.

Fair is the darling of Pakistan-critics worldwide, after an acclaimed book this year --- entitled “Fighting to the end: the Pakistan Army’s way of war” --- which quoted extensively from the writing of Pakistani officers to argue they placed the army’s interests far above those of Pakistan.

Deploying meticulous quantitative research to support unconventional conclusions, Fair argued that the Lashkar-e-Toiba’s (LeT’s) rank and file consists of reasonably well-educated youth, 60 per cent of whom had passed their matriculation and even intermediate examinations.

This conclusion is based on a study of 1,000 LeT fighters who were killed, mostly fighting in Kashmir. Research associates visited the homes of each of the dead jihadis to record their qualifications and motivations (see chart).

Lashkar-e-Toiba educational profile, versus Pakistani males

Education Level
Lashkar-e-Toiba
Pakistan
Punjab




Illiterate
1.3 %
30.4 %
30.8 %
Primary
12.7 %
21.4 %
21.6 %
Middle
21.7 %
14.3 %
15.6 %
Matric
44.0 %
13.1 %
13.4 %
Intermediate
16.8 %
10.9 %
9.3 %





“More than 60 per cent of them were matriculates or above, while only about 23 per cent of Pakistani, and Punjabi, males above the age of ten have similar qualifications. And just 1.13% of the Laskhar fighters were illiterate, compared to more than 30 per cent of the broader population”, said Fair.

The reason for that, she explained, is that the LeT recruits like most regular armies, turning away the uneducated and the unintelligent. “Even after they’re recruited, these Lashkar guys have to constantly prove themselves. They have to constantly lobby to be picked up for the next round of training. So Pakistan’s better lot are being killed [by Indian security forces] while fighting in Kashmir”, says Fair.

Fair says the Pakistan Army and the LeT recruit most of their fighters from the same few districts in Punjab. The army gets the pick of the youth, while the Lashkar chooses from those remaining.

She also rebutted Pakistan’s frequent complaint that supporting the US war on terror after the 9/11 attacks in 2001 had unleashed the monster of terrorism upon the country. Fair proves that terror-related violence was entrenched before 2001.

Differentiating between terror-related violence and political violence (see chart), Fair points out that terror-related incidents rose somewhat from 2,087 in the 14-year period from 1988-2001; to 3,721 in the decade between 2002-2011. In these same periods, incidents of political violence rose from 11,340 to 12,820.

Terrorism vis-à-vis political violence

Year
Terrorist attack incidents
Killed in terror incidents
Wounded in terror incidents
Other political violence incidents
Killed in political violence incidents
Wounded in political violence incidents







1988-2001
2,087
2,086
6,754
11,340
10,873
12,886
2002-2011
3,721
3,697
9,025
12,820
24,966
20,924
1998-2011
5,808
5,783
15,779
24,160
35,839
33,810


“But if you talk to Pakistanis, they would like you to believe that everything was fine before 9/11”, she says.

Her conclusions are based on a rich database on terrorist-related and political violence in Pakistan, painstakingly compiled by Fair and her associates during a 24-year period from January 1, 1988 through May 2011. These were first published online last year in a paper entitled “Measuring political violence in Pakistan: Insights from the BFSR Dataset”, co-authored by Fair.

Fair explains why Pakistan’s poor, particularly urban poor, do not support terrorism. She points out that most terrorists are from the Deobandi sect, which is responsible for practically all terror-related violence in Pakistan, including sectarian violence against Shias, Barelvis or Ahmedis, or anti-minority violence directed at Christians and Hindus.

“These target groups, and their shrines that are often hit, are located in the poorest parts of the towns and cities. These people are actually the immediate victims of terror. They are potential allies [for counter-terrorism officials]”, she says.

Fair’s extensive research on madrassahs suggests they are not the factories of jihad. What they do engender is a mind-set that supports jihad.

“Kids don’t make the decision to join a madrassah; their parents do. And parents who put their kid into a madrassah are more likely to approve of youngsters taking up jihad. While a madrassah education seldom leads to a youngster taking up jihad, there is a correlation between the two.

Wednesday, 22 July 2015

Anil Ambani signs splashy Russian joint venture for submarine overhaul

Projects Rs 31,000 crore of business from Indian and regional navies

By Ajai Shukla
Business Standard, 22nd July 15

In a first for a private Indian defence company, Pipavav Defence & Offshore Engineering Co. Ltd. (PDOC) announced on Tuesday a joint venture (JV) with Russia’s Zvyozdochka submarine overhaul yard. This positions PDOC nicely for overhauling India’s nine Russian-origin Kilo-class submarines, and several identical submarines operated by other regional navies.

In an official announcement in Mumbai today, PDOC stated: “The indicative value of work proposed to be undertaken by the proposed JV is approx. (sic) Rs 11,000 crore.”

PDOC also mentioned “potential additional revenues of approx. Rs 20,000 crore” from the navies of Iran, Algeria and Vietnam.

A submarine undergoes an overhaul or refit --- termed “medium refit and life certification” (MRLC) --- every 10-15 years in its 30-year service life. This involves upgrading weapons, sensors and communications systems; and inspecting, repairing and replacing worn out parts of a submarine’s two hulls (an inner “pressure hull” and an outer hull).

Refitting a Kilo-class (or 877 EKM) submarine in India offers advantages like cheaper labour costs and saving on transportation to Russia and back. It also provides opportunities for indigenizing sub-systems in the submarine, and develops expertise.

PDOC’s statement says that Zvyozdochka will “provide complete technical assistance and support to the JV, including inter alia for enhancement of infrastructure at the PDOC facilities, training of engineers, etc. PDOC technicians will also be closely associated with the first Refit to be carried out in Russia.”

On August 29, 2014, the defence ministry had cleared a Rs 4,800 crore refit for six submarines. Mazagon Dock Ltd, Mumbai, was to refit two German-origin HDW submarines. Meanwhile Zvyozdochka and Naval Dockyard, Mumbai would each refit two Kilo-class submarines.

It is unclear whether the defence ministry is committed to the new JV between PDOC and Zvyozdochka; and, if so, whether it would change the arrangement it has already cleared.

It is also unclear whether the defence ministry would disregard the experience already developed in two Indian shipyards --- Naval Dockyard, Visakhapatnam, and Hindustan Shipyard Ltd, Visakhapatnam (HSL) --- which have refitted one Kilo-class submarine each.

Furthermore, other Indian shipyards, including Larsen & Toubro, are competing for a chunk of the submarine overhaul business.

HSL, especially, has had a bitter experience with Zvyozdochka, reported by this newspaper (September 2, 2014, “Russia delayed sub refit to weaken shipyard?”), in which the overhaul of a Kilo-class vessel, INS Sindhukirti, dragged on for nine years. Senior HSL officials made a strong case to suggest that Zvyozdochka experts deliberately prolonged the refit by ordering unnecessary work, to eliminate HSL from future Indian submarine refits.

Now officials from HSL and other shipyards allege that Zvyozdochka has chosen to partner PDOC, a new player in the market, in order to comprehensively control the refit programme, which the Russians would be unable to do with a more experienced Indian shipyard.

Rivals point out that PDOC has never produced a single naval combat vessel of any complexity. It is true that the shipyard is long overdue on delivering a Rs 2,500-crore order for five Naval Offshore Patrol Vessels.

Even so, Anil Ambani’s Reliance Infrastructure has recently thrown its weight behind the shipyard, acquiring it in March from Nikhil Gandhi of Sea King Infrastructure Ltd. Ambani paid Rs 819 crore for an 18 per cent stake, and is committed to making a public offer for another 26 per cent of the shipyard.

Ambani is gung-ho about PDOC’s prospects. At a seminar in Delhi on July 16, he spelled out an expansive vision of Pipavav Shipyard as a “Global Centre of Excellence” that would build warships of all kinds, from aircraft carriers to frigates to submarines.

Claiming that Pipavav Shipyard had assets worth over Rs 10,000 crore, Ambani played up its impressive shipbuilding facilities, including “the largest dry dock in the country and second-largest in the world”, Ambani said he would invest another Rs 5,000 crore in the shipyard.

If Ambani’s PDOC lacks experience, Zvyozdochka has that aplenty. Established in 1954, it has overhauled or refurbished more than 120 submarines and 90 warships. It remains to be seen how much of that experience and hold over the market it is willing to transfer to PDOC.

Tuesday, 21 July 2015

The ghost of Gorshkov

If private sector is to build three more frigates, why the Talwar-class? Just boost the Project 17-A order

By Ajai Shukla
Business Standard, 21st July 15

The Indian Navy, clearly, has an appetite for punishment. One might imagine that the nightmarish experience of refurbishing the Gorshkov --- now the aircraft carrier, INS Vikramaditya --- in a Russian shipyard would be enough to forestall any more such warship building projects. But no! Although the Gorshkov took more than twice the contracted time (118 months instead of 52 months) and almost thrice the contracted cost ($2.3 billion instead of $947 million), the navy now wants to involve itself in building three Russian Talwar-class frigates.

Frigates are versatile, multi-role warships of 4,000-6,000 tonnes that can deal with threats from the air (fighters and missiles), surface (missiles and guns) and underwater (submarines). The navy is 61 vessels short of its planned strength of 198 warships and this shortfall is most keenly felt in capital warships like frigates, the business end of any navy, with their ability to operate independently in the face of multi-dimensional threats. But there are capacity limitations to building more frigates in India: our yards that can do so are already stretched to capacity. Mazagon Dock Ltd, Mumbai (MDL) and Garden Reach Shipbuilders & Engineers, Kolkata (GRSE) have orders for building seven Project-17A frigates in India. So the navy has proposed that Yantar Shipyard, located in Kaliningrad, Russia, should tie up with an Indian private sector shipyard to build three Talwar-class frigates in India, to add to six such frigates procured from Russia earlier.

To be sure, the navy’s experience with the Talwar-class (Russian name: Krivak-III; or Project 1135.6) has been more reassuring than building the Gorshkov. The six Talwar-class warships were delivered at the price contracted and with less than a year of delay. The first tranche of three frigates (INS Talwar, Trishul and Tabar) was contracted in 1997 for about one billion dollars and delivered between 2003-04. The second tranche of three (INS Teg, Tarkash and Trikand) was contracted in 2006 and delivered in 2012-13 for a slightly higher price.

But the proposed third tranche has a less than wholesome odour, and not just because they are at least twice the cost. In December, Russian president Vladimir Putin urged Prime Minister Narendra Modi to take three Talwar-class frigates off Russia’s hands for three entirely self-serving reasons. First, Yantar shipyard has six frigates languishing in various stages of build, but the Russian Navy wants just three. Yantar began building six because Moscow was certain it could persuade perpetual-buyer India of the need for another three frigates. Second, the frigates that languish in Yantar have no power plants (engines). Ukraine has refused to supply Russia the Zorya gas turbines that power earlier Talwar-class frigates, and which were contracted for this batch too. Ukraine’s refusal comes after Moscow’s military adventure in Ukraine and its annexation of the Crimea. Squeezing another power plant into the Talwar-class hulls would involve major re-engineering. India, on the other hand, with strong defence ties with Ukraine, could obtain Zorya turbines without much problem. Thirdly, even though Moscow’s proposal has been cloaked in the rhetoric of “Make in India”, the Talwar-class features mainly Russian systems, sensors and weapons, which cannot be changed without adversely impacting on delivery time lines.

To select an Indian partner shipyard, Yantar experts have toured, and approved, at least three Indian shipyards --- Larsen & Toubro’s new Katupalli shipyard, near Ennore; Pipavav Shipyard in Gujarat, recently taken over by Anil Ambani’s Reliance Infrastructure; and Cochin Shipyard Ltd (CSL). It is unclear whether the build plan involves transporting three partly built hulls from Russia to India and finishing the construction here; or whether it is planned to build three frigates in India, ground-up. Either way, the ghost of Gorshkov looms over this hare-brained project.

There is no convincing reason for New Delhi to contemplate a government-to-government proposal with Moscow, in which competitive tendering is abandoned, and a foreign design adopted, to build the Talwar class in India. Instead, the navy, with its proud tradition of developing and building Indian-designed-and-built frigates, should insist on another three Project 17-A frigates, to add to the seven that are slated to start construction shortly.

Even the predecessors of Project 17-A --- the three 5,600-tonne Shivalik-class frigates built under Project 17 --- are regarded as superior to the Talwar-class. Project 17-A will obviously be another notch ahead. Like the Shivalik-class, Project 17-A frigates would embark two medium helicopters, greatly enhancing their anti-submarine and airborne early warning capability. Much of the weaponry that will equip Project 17-A frigates is indigenously built, including rocket launchers, Brahmos cruise missiles and the world-class Long-Range Surface-to-Air Missile (LR-SAM). Vitally, the indigenous frigates would have secure Indian-designed electronic warfare (EW) systems and a tested indigenous “combat management system”, the computer brain that controls the frigate’s arsenal in battle. The levels of “Make in India” achievable in Project 17-A could never be matched whilst building the Talwar-class in India (see chart below). Furthermore, adding another three frigates to the seven already being built under Project 17-A would enhance economies of scale, reducing per-unit price of the frigate. And, with the Directorate General of Naval Design having already finalised much of Project 17-A’s design, build time would be greatly reduced, eroding one of the key arguments presented to justify buying the Talwar-class.

Parameter
Russian 1135.6
(Talwar Class)
Project 17-A
(Shivalik follow-on)
Displacement 
4,000 tonnes
5,600 tonnes
Propulsion
Zorya gas turbine (Ukraine)
General Electric LM 2500 gas turbine (built in India)
Surface to Air Missile 
Shtil-1
LR-SAM (Indo-Israeli)
Surface-to-surface missile
Klub / Brahmos
Brahmos (Indo-Russian)

Electronic warfare suite
TK-25E-M (Russian)
Ellora (Indian)
Radars
Garpun-Bal
Fregat M2EM
Russian IFF

MF-STAR (Israeli)
Fregat M2EM
Indigenous BEL Aparna
Indigenous IFF System
Guns
100 mm gun (Russian)
Super Rapid Gun Mount (built in India under licence)
Digital CMS (combat management system)
Tribovaniye-M (Russian)
Indigenous CMS-17
Helicopters on board
One
Two
Ship data network
Not fitted
Indigenous AISDN

Instead of the bizarre solution of Russia deciding which Indian shipyard should build naval frigates, this should be decided through competitive tendering between Pipavav, L&T and other eligible Indian shipyards. The defence ministry must evaluate proposals, with greater indigenization being a key parameter for selection, along with a company’s track record and warship construction infrastructure. The contract should include exemplary penal clauses that impose stiff monetary penalties on delays and quality shortfalls, as well as cancellation of defence production licences for inordinate delays. The defence ministry must also promote scale manufacture by coordinating common sub-vendors for all three shipyards that would simultaneously build Project 17-A --- MDL (four ships), GRSE (three ships) and the selected private shipyard (three ships). This would also be an opportunity for a comparative evaluation of three shipyards to deliver on time, on cost and as per quality standards.

There is no war looming that forces the defence ministry into the messy business of hybrid solutions --- Russian hulls, Indian build, Russian fitments, sensors and weapons. If the ministry has a pressing compulsion, it is to demonstrate that it can, coherently and logically weave together the numerous threads of warship building into a strong fabric. Its decision on these three warships would be an important signal of intent.