Warship Deal to be Cancelled For 'Make In India' Option

New Delhi: India will opt out of an agreement to buy small warships from Korea - mine-sweepers - because a middleman was allegedly involved in the contract which was signed three years ago. Indian laws forbid the payment of commissions and use of agents for defence deals.

In keeping with Prime Minister Narendra Modi's "Make in India" campaign, the ships will now be built  over the next seven years by the state-run Goa Shipyards using technology acquired from a foreign manufacturer.

Mine-sweepers are used to locate and destroy underwater mines planted by the enemy; they are crucial in keeping sea lanes open and safe for trade and security.

In 2011, after years of negotiations, the government headed by Dr Manmohan Singh signed the deal which included the purchase of two mine-sweepers from Korea for 2,700 crores; another six would be manufactured in India with the Korean firm sharing its technology for an additional 6,000 crores.

The government's top lawyer, Attorney General Mukul Rohatgi, recently red-flagged the deal which was signed with South Korean manufacturer Kanganam. The company allegedly hired a middleman during the negotiations, but said this was to help with language difficulties. Because the firm made the disclosure and since no bribes were paid, it has not been blacklisted.

So the state-run Goa Ship Yard has been asked to acquire technology from the same Korean company and build the seven mine-sweepers. The first is expected to be ready in 2019.

The country has 14 ports which handle about 90 percent of the total volume of trade, but  only seven  operational mine-sweepers for the east and west coasts.

The new government has raised the foreign investment limit in the domestic defence industry to 49 percent from 26 percent, hoping to draw greater interest from its main arms suppliers.