India may build Frigates for The Philippines

The Indian Navy was, till not very long ago, dependent on foreign yards for its requirements of warships. It has come a long way since then and today all its future warships on order are with Indian shipyards, including hi-tech vessels like Aircraft Carriers, Nuclear Submarines, etc., the manufacture of which very few countries in the world have mastered.

Indian built warships have been transferred and have sailed under the flags of Sri Lanka, Mauritius, Seychelles, Maldives, etc., but never in a contest won against the best in the world in the face of competitive bidding. An opportunity to do just that presents itself to India now and must not be let go off.

There have been reports during the past couple of months that Garden Reach Shipbuilders and Engineers (GRSE), which has built, and is building, several top-class ships for the Indian Navy and Coast Guard, has been declared the lowest bidder in the international contest to build frigates for The Philippines. Further, GRSE’s technical bid for building these frigates has also come good. The Kamorta class ships, which GRSE is building for the Indian Navy, had been offered for The Philippines as well. GRSE gained this distinction in a global contest against several well-known and established shipyards including Spain’s Navantia and the South Korean Hyundai and Daewoo yards.

Press reports today, however, carry disturbing news that the contract may be slipping away from GRSE due to the company “failing to clear financial assessment tests”. It is relevant to state here that this was reportedly the finding of the Philippines in “post qualification assessment”. Such a finding could be due to reports that the payment for the ships, as per the terms of the contract, was reportedly to be made only on delivery and no stage payments in between were envisaged. The total cost of the ships to be constructed has been reported to be Rs. 2150 crore. As against this, the GRSE’s annual turnover for 2014-15 has been reported to be Rs. 1613 crore, with a profit of Rs. 43.45 crore.

The Philippines’ assessment seems to have been made on totally financial terms and could have over-looked one crucial fact, namely, that GRSE is a state owned public sector unit and hence its financial viability and ability from this point of view to deliver the vessels is, in a way, guaranteed.

This aspect needs to be stressed upon and the Government, led by the Ministry of External Affairs and ably supported by the Ministry of Defence and GRSE, needs to urgently expend diplomatic capital to ensure that the contract does not slip away.

It is also relevant that The Philippines, along with other South East Asian nations and China, is party to conflicting maritime claims in the South China Sea, which has essentially been triggered by China claiming almost the entire South China Sea with scant regard to the claims of other littoral nations. There is an overwhelming disparity in force levels and capability between China and The Philippines. The present contract for the frigates is an attempt by The Philippines to bridge its capability gap. In this context, India supplying warships to The Philippines makes eminent sense from a strategic perspective. While there have also been reports that India could be planning to sell BrahMos cruise missiles and Varunastra torpedoes to Vietnam, the frigate project could be the first contract to materialise for India to sell weaponry to a country in this strategically important region. China could not realistically object to the sale as it is a bid won against global competitive bidding and is unlikely to change the strategic parity between the two nations which is overwhelmingly in China’s favour. In addition, China is supplying countries in India’s neighbourhood, particularly Pakistan and Bangladesh, with ships and submarines. India’s strategic engagement in China’s neighbourhood should also not be misunderstood and seen through a similar prism.

The successful fulfilment of the contract would also enhance India’s status as a reliable supplier of warships and arms in the region and could even open doors to more such contracts in other geo-political theatres. The ability to win competitive bidding and deliver against the best in the world would also do a world of good to India’s prestige in the international arena. It would also establish India’s status as a maritime nation and would mesh in very well with the government’s current focus on ‘Make in India’. The aims of the first Maritime India Summit held in April 2016 would also receive a boost with this commendable effort in warship export.

Governments expending considerable diplomatic capital in pursuit of defence deals is something that happens all over the world. One may recall the visits of several European leaders including those of Britain and France to lobby with the Indian Government when the MMRCA deal was under consideration. The French have spared no efforts with continuing multiple visits by their Defence Minister to India in the run up to the Rafale deal, which is yet to be formally inked.

There is no reason for India to behave differently. It should be taken as a challenge by the Indian establishment to win this deal and successfully deliver exactly as per the terms of the contract. This would do the Indian reputation in several spheres a world of good. We would be seen as delivering against the best in the world as against the reputation that we perhaps now enjoy, especially among the less developed countries, of being a nation that promises a lot but is seen to be a laggard as far as delivery is concerned. The benefits in the strategic sphere would also be considerable. China should not be a constraining factor in this regard as it would have no real reasons to oppose the deal, though noises to the contrary could be expected, as the deal may not be seen by it as being to its strategic advantage.

The Government of India should expeditiously consider funding by the EXIM bank or any other mechanism to ensure that the deal does not slip away because of the perceived financial inability of GRSE, which may not actually be the case. A sovereign guarantee could also be considered if felt appropriate. India needs to actively pursue the deal, through high level diplomatic contacts if need be, to ensure that this golden opportunity, for which much effort must have been expended by GRSE, is grabbed and not be allowed to slip away especially on specious grounds.

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