Indian Defence Ministry Disqualifies L&T Proposal in ₹70,000 Crore Submarine Deal
The Defence Ministry of India has rejected Larsen & Toubro's (L&T) proposal in the highly anticipated ₹70,000 crore submarine deal under Project 75 India. This ambitious project, aimed at bolstering the Indian Navy's underwater warfare capabilities, involves the construction of six advanced conventional submarines equipped with cutting-edge Air Independent Propulsion (AIP) technology.
The decision, announced on January 23, 2025, highlights the government’s adherence to stringent technical requirements in its bid evaluation process. L&T, which partnered with Spanish shipbuilder Navantia, has now been disqualified due to non-compliance with critical tender conditions, narrowing the field to just one competitor.
The Issue of Non-Compliance
The primary reason for the rejection of L&T's proposal was its AIP system, which, while operationally demonstrated onshore in Spain, had not been proven in actual sea conditions. The tender specifically required a sea-proven AIP system to ensure reliability in real-world scenarios. This shortfall directly violated one of the Indian Navy's most critical technical prerequisites.
The AIP system is a vital component for modern submarines, allowing them to stay submerged for extended periods without surfacing, thereby improving their stealth and combat effectiveness. Without a proven system, operational risks become significant, and the Indian Navy has opted to prioritize tested technologies for this strategic procurement.
MDL: The Sole Contender
With L&T's exit, Mazagon Dock Shipbuilders Limited (MDL), in collaboration with ThyssenKrupp Marine Systems (TKMS) of Germany, now remains the only bidder. MDL, already a key player in India's submarine-building domain, has extensive experience through its successful delivery of six Scorpene-class submarines under the original Project 75. The final vessel in that series, INS Vaghsheer, was handed over to the Navy earlier this month after undergoing rigorous testing and proving combat readiness.
MDL’s proven track record in managing large-scale naval projects and ThyssenKrupp's advanced AIP technology make their proposal a strong candidate to meet the Navy's high expectations.
Strategic Implications and Market Reactions
The disqualification of L&T has reshaped the dynamics of the submarine deal. While it raises questions about vendor diversity, it also reinforces the importance of meeting precise technical standards in defence procurements. The government has been advised by some industry experts to consider more equitable workload distribution across multiple Indian shipyards to avoid overburdening a single entity and to promote competition within the domestic defence sector.
The announcement had immediate financial repercussions. L&T shares dropped by approximately 1%, reflecting investor concerns about the company's lost opportunity. Meanwhile, MDL shares surged by over 5%, as the market responded positively to its strengthened position as the sole contender for this high-stakes contract.
Broader Context: Modernizing India's Navy
This development comes against the backdrop of India's efforts to counterbalance China's growing naval presence in the Indian Ocean Region (IOR). The ₹70,000 crore submarine project is a critical component of India’s broader initiative to modernize its maritime forces and ensure the security of its waters.
In addition to upgrading naval capabilities, the government is committed to promoting indigenous defence manufacturing under the "Aatmanirbhar Bharat" (Self-Reliant India) initiative. Projects like Project 75 India aim to enhance domestic shipbuilding expertise and reduce reliance on foreign imports for critical defence equipment.
Looking Ahead
With MDL moving forward as the sole bidder, the spotlight now shifts to the final stages of the procurement process. The Defence Ministry will conduct detailed evaluations to ensure compliance with financial and technical benchmarks. If MDL and ThyssenKrupp meet the Navy’s stringent requirements, the contract is likely to be finalized later this year, paving the way for the construction of submarines that will play a vital role in safeguarding India's maritime interests.
While L&T’s disqualification may have disappointed advocates of broader industry participation, it underscores the Defence Ministry’s commitment to quality and operational readiness in its pursuit of strategic assets. As India navigates complex regional dynamics, the modernization of its navy will remain a cornerstone of its defence policy.
