India and Germany are set to sign a multi-billion-dollar deal to manufacture a next-generation conventional submarine by the end of March, with an Intergovernmental Agreement (IGA) finalised with Germany for long-term support and export clearances, and cost negotiations with Mazagaon Dockyards Limited (MDL) completed. Â
According to the sources, the IGA has been finalised, and the German defence minister is expected to visit India by the end of March for final signing. The IGA plays a pivotal role in assuring technology transfer, personnel training, and administrative clearance. Meanwhile, the main agreement will be signed between an MDL and the defence ministry.
The MDL bid, in partnership with Thyssenkrupp Marine Systems (TKMS) of Germany, was approved by a technical oversight committee that investigated the bidding process in January 2025. The previous year was spent on finalising costs and technical details with MDL taking the lead. Although the final cost of the deal has not yet been disclosed, it is expected to be around $10 billion. It would include significant technology transfer and employment generation in India through the development of an industrial ecosystem.
The contract could also position India as a warship-building hub for the German company, which is pursuing new markets and estimates that Indian shipbuilders can significantly reduce costs, enabling joint exports in the region. The Navy is facing a severe shortage of underwater platforms, which is why it is keen to sign the contract this fiscal year.
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The mainstay kilo-class submarines are being shut down due to the end of their service life, and the only additions in the past two decades have been six Kalvari-class submarines, also built by MDL. The Navy also has financial provisions in the current year that need to be utilised for the first payments to MDL under the mega contract.
