NEW DELHI — India has terminated a long-pending $5 billion deal to locally build minesweepers in technical collaboration with Kangnam Corporation of South Korea on the grounds of high costs and compliance issues.
The South Korean company was selected on a single-vendor basis to provide design and technology transfer for 12 mine countermeasure vessels, or MCMV, to state-owned Goa Shipyard Limited. But the deal has been officially canceled because Kangnam Corporation did not agree to India’s procurement requirements, according to a Ministry of Defence official.
“Kangnam Corporation was demanding over $1 billion for design and technical know-how of the MCMVs and despite yearlong negotiations refused to accept the requisite norms including intellectual property rights and production support guarantees,” the official said.
In 2016, Goa Shipyard shortlisted Kangnam Corporation as a single vendor to provide technology for MCMVs because India does not possess expertise to build the vessels.
Another MoD official said Goa Shipyard will now issue a new global expression of interest seeking technology to build the MCMVs.
The select invite will be issued to Kangnam Corporation, Intermarine of Italy, Navantia of Spain, Lockheed Martin of the U.S., ThyssenKrupp of Germany and Russian shipyards to kick-start a multi-vendor completion.
A senior service official said the cancellation is a big setback for the Indian Navy and the priority program is now delayed by another eight years.
Kangnam Corporation emerged from the 2008 global tender as the lowest bidder against Intermarine, and the South Korean company had even cleared price negotiations. However, the deal remained unsigned due to the alleged use of defense agents — an act not permitted under Indian defense procurement rules. The deal was subsequently canceled in 2014.
After canceling the global tender, the MoD nominated Goa Shipyard to build the vessels with foreign collaboration under the Buy & Make (India) category of India’s economic policy.
MCMVs use specialized composite material and high-grade steel and are equipped to detect a number of underwater mines.
The Indian Navy currently operates about six outdated Soviet-era MCMVs.