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Anil Ambani-led Reliance Naval and Engineering Ltd is pushing the Centre to “fast-track” the process of awarding naval contracts worth ₹50,000 crore, stung by an “inordinate delay” in finalising purchases critical to its future.
Besides, Reliance Naval has urged the Centre to stop the practice of awarding naval contracts on a nomination basis (without a tender) to state-owned yards and instead opt for the competitive bidding route.
It also said that defence PSUs are resorting to “cross-subsidisation” to win some of the recent tenders issued by the defence forces. It said the PSUs were able to quote “extremely low prices” because they were awarded other contracts on a nomination basis at “high margins”. The Navy and the Coast Guard had issued 13 request for information (RFI) in December 2014, on which Reliance Naval and other yards including state-run ones had responded.
Of these, acceptance of necessity (AoN) were issued for seven RFIs valued at ₹18,000 crore while another six RFIs valued at ₹32,000 crores are currently awaiting AoNs.
Nearly three-and-half years after the RFIs were issued, none of them have been converted into request for proposals (RFPs) on a competitive bidding basis.
“It roughly takes seven to 10 years from issuance of RFIs to contract signing and therefore there is an urgent need to review and fast track this process,” Reliance Naval said in a letter to Defence minister Nirmala Sitharaman.
The company, which runs a shipyard at Pipavav in Gujarat, said that four defence PSUs were awarded contracts worth ₹176,000 crore on nomination basis though they are facing “huge time and cost overrun”.
While the private yards have to factor the cost of debt servicing, infrastructure and production facilities into their price bids, the PSUs manage to “offset their low cost of competitive bids through their high margin of nominated awards”.
For instance, Reliance Naval was awarded a contract through competitive bidding for 14 fast patrol vessels with each vessel costing ₹60 crore, whereas Garden Reach Shipbuilders and Engineers Ltd was awarded five FPVs of similar specifications on nomination basis at a cost of ₹72 crore or 20 per cent higher per vessel.
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