Military & Aerospace

India Lags Behind in Shipbuilding
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Issue Vol 22.3 Jul-Sep 2007 | Date : 16 Nov , 2011

There has been consistent boom in shipbuilding since 1990s. The main reason for this has been the rise in the volume of International trade due to healthy long range economic and energy demands. In addition the replacement of the single hull oil tankers have also contributed to driving new shipbuilding and this factor will continue to drive shipbuilding till 2010. The world Fleet has been growing steadily ever since 1990 and currently in the year 2007 it is 810 million GT and this is poised for growth to 1215 million GT by 2015. The average growth is expected to be 5.8 % during 2006 – 2010 and 4.1 % during 2011-2015.

China has dramatically grown in its shipbuilding capacity. The Chinas aim is to become second by 2010 and leading shipbuilder nation by 2020.

The above trends in the growing demands for new shipbuilding had been known and predicted. In order to take advantage of this boom in shipbuilding in the world, countries like Japan, S Korea and China had taken timely steps to enhance their shipbuilding capacity and opened new shipyards. They are now reaping the benefit of their actions taken well in time.

S Korea continues to enjoy the lion’s share of the world shipbuilding and likely to keep this supremacy for at least another ten years. Japan is number second. China is number three. During the year 2005, the delivered GT in the world stood as follows:

delivered_GT

China has dramatically grown in its shipbuilding capacity. The China’s aim is to become second by 2010 and leading shipbuilder nation by 2020. There are currently 150 shipyards in China. It is understood that from March,2006 to August,2006, 45 new shipyards were added. Japan is setting up new shipyard in China to deliver 100 ships every year.

India has not been blind to the booming shipbuilding industry for the last 15 years. But we have not so far succeeded in increasing our shipbuilding capacity. The intentions are there but have not materialised so far all these years.

The increase in the shipbuilding capacity earlier in Japan, then in S Korea and now in China has been possible due to generous incentives by their respective Governments. Some of these incentives are enumerated below:-

  • The land for setting up the shipyards is given out at very cheap rates by the State Governments. In some cases it had been given free. This constitutes a huge concession.
  • Provision of excellent infrastructure by way of Power, Roads, Dredging, Breakwaters and other facilities for the shipyards by the respective Governments on priority.
  • The S Korean Government started to assist the shipbuilding industry by issue of bank guarantee letter to the shipyards by the bank of Korea. And then the export & import bank of Korea was established later to provide the shipyards with bank loans at lower interest rates and long term payment as well as bank refund guarantee letter.
  • The S Korean Government also helped the shipyards to develop the shipbuilding industrial estate (e.g. Goje island where Daewoo and Samsung shipyards are located), by expanding the roads, supply of electricity, construction of breakwater and dredging etc.
  • The Chinese shipyards are exempt from sales tax which is 17%.
  • Other support was to allow the universities to reinforce the Naval architecture department in the college of Engineering so that the supply of the naval architects to the shipyards could be amply sufficient for the demand and to provide better scholarship programmes to the Naval architecture department.

It is understood that a large number of Naval architects from India are working in the Korean Shipyards.

India has not been blind to the booming shipbuilding industry for the last 15 years. But we have not so far succeeded in increasing our shipbuilding capacity. The intentions are there but have not materialised so far all these years. The shipbuilding industry is labour intensive and suits our country. We just have not been able to put the act together.

India need to take effective urgent and immediate steps to boost the shipbuilding capacity to meet both the domestic demands and take due share of the international demands.

As per data available in the year 2007, the Indian owned Fleet of Foreign going ships is presently 257 ships with 7.75 million GT. This is less than 1% of the total world 810 million GT. More over the Indian overseas trade carried by Indian owned vessels is only 13.7% and the balance 86.3% is carried by Foreign owned vessels.

India need to take effective urgent and immediate steps to boost the shipbuilding capacity to meet both the domestic demands and take due share of the international demands. Some of the justifications in favour of this are enumerated below : –

  • 40% of the Indian owned fleet is more than 20 years old and Indian owners will need to spend about $ 4 billion to replace these in the next 5 years.
  • Indian owned fleet need to grow in leaps and bounds to carry our own trade and to have some share in international trade.
  • There has to be some place other than Korea and China to build ships. India meets the requirements to fill this gap.
  • India has adequate internal market to manufacture their own ships and avoid these being imported.
  • India has very good manufacturing base.
  • India can provide huge work force, workers with good command of English language and established education and judicial system.
  • The ancillary industry will flourish with increasing shipbuilding capacity.
  • The existing 23 shipyards ( 9 govt. owned & 14 in pvt. Sector ) are totally inadequate to meet the challenges past, present & ahead. Of the above only one is capable of constructing an Aframax. size ship.

Recently some global ship owners are building some smaller ships at CSL, ABG, Bharti, L&T etc. , because the maritime nations like Japan, S.Korea and China are refusing to entertain orders for building relatively smaller vessels. This, of course, does not in any way put us in the league of shipbuilding nations.

Editor’s Pick

The facts and figures given in the foregoing paragraphs are stimulating shipbuilding expansion in India. The private shipyards like ABG, Bharti, Tebma etc are trying to expand their facilities. New players like L&T, Goodearth, Mercator, Adani Group and others have been trying to set up new shipyards. The Government has also announced setting up of two new shipyards. All these efforts have not yet yielded fruits.

The increase in shipbuilding, shipyards together with ports are inescapable if we have to cope with rising overseas trade. These are essential features for the poised economic growth.

In view of the phenomenal rapid growth of shipbuilding capacity in China ( para 4 above ), India may like to do some introspection both at centre and state levels and as national goal as to what can be done to accelerate the process of enhancing the shipbuilding capability and capacity substantially? The Government support on the lines as specified in the para 5 above will go a long way to place India in the International scene.

We need to simplify procedures to attract foreign players and also motivate internal players so that they are able to set up new shipyards rapidly to catch up, on the lost time in the last few years and become one of the leading nations in the world to manufacture ships of any size and class including specialised vessels. The support by way of land, power, roads and infrastructure etc will of course be required from the Government. The above introspection may also result in other actions that may be required to step up actions in the field of shipbuilding.

The increase in shipbuilding, shipyards together with ports are inescapable if we have to cope with rising overseas trade. These are essential features for the poised economic growth. As a subsidiary benefit, the strong shipbuilding industry in the country will support the defence preparedness with maximum content of self reliance and indigenisation.

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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Vice Adm Rajeshwer Nath

Vice Adm (Retd) Rajeshwer Nath.

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