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India’s Naval Shipbuilding Industry: Key Gaps and Policy Options

January 6, 2012

Chairperson: Shri V K Misra
Discussants: Commodore (Dr) R K Rana and Commodore (Retd) Sujeet Samaddar

Deliberations on Mr. Laxman Behera’s paper commenced with Chairperson V K Mishra’s opening remarks. Highlighting the performance of Indian naval shipbuilding industry in the past several years, he argued that shipbuilding industry has to acquire more strength. This is important given the kind of order book existing at the moment; as of now there is a yearning gap between the requirements and capabilities acquired by India’s shipbuilding industry. He further argued that time had come for India to go beyond the Indian Ocean; it has to acquire more naval capabilities to emerge as a superpower.

Laxman Behera started his presentation with the point that ever since the first major shipbuilding programme- the Leander Class frigate INS Nilgiri was launched at Mazgaon Dock Ltd in late 1960s, this industry has grown significantly, contributing much of the warship requirements of the Indian navy. For Indian naval shipbuilding industry, self- sufficiency has been a goal for a long-time. However, for a number of years, it has been a matter of compulsion rather than choice. Nevertheless, over the years the Indigenous ship building industry has emerged as the ‘builder’s navy’.

Mr. Behera opined that notwithstanding the establishment of defence shipyards and key procedural framework, the naval shipbuilding industry has not been able to meet the growing requirement of the naval forces, resulting in a huge gap in force level. Listing out the details of naval shipbuilding industrial units, Mr Behera mentioned that India’s overall shipbuilding industry comprises of twenty-seven shipyards, of which six are under Central Public Sector, two under State Government and nineteen in the Private Sector domain. However, not all of these shipyards are involved in naval shipbuilding. Of the six shipyards under the Central Public Sector, four are under the administration control of Ministry of Defence (MoD) and known as Defence Public Sector Undertaking (PSU) shipyards. Although these four shipyards are primarily responsible for constructive naval ships, some others, both in the public and private sector are also involved in the naval shipbuilding.

Mr. Behera further pointed out that public and private sector shipyards enjoy a unique set of advantages and disadvantages. For the MoD owned shipyards, their biggest advantage lies in long exposure to shipbuilding, enabling them to acquire certain construction skills, design capability and technology. These aspects are crucial for naval shipbuilding, which unlike the commercial shipbuilding is a difficult task given the complex nature of marrying a vast amount of weapons and sensors into warships, which are increasingly required to be stealthier and more durable.

Because of their lack of experience in building major warships, the private sector is way behind in these aspects and needs exposure along with technological and design assistance in order to be at par with their public sector counterparts. The biggest disadvantage the public sector shipyards face is the decision-making constraints. The operational and financial autonomy of the PSU shipyards is limited. It depends on the government for approval of key decisions, which are often taken at a slower pace. Compared to this, the private sector has complete autonomy in decision making which facilitates them to meet necessary infrastructural needs at a faster pace. The stark contrast in autonomy of decision-making is evident from the efforts by both private and public sector shipyards in forming strategic partnership. While the former has been able to tie up with major global companies, the public sector is yet to take off. Examples in this regard are Pipavav and GRSE.

Key gaps in Indian naval shipbuilding industry, according to Mr. Behera, are as under:

  • Inefficiency and constraints of the Public Sector Shipyards.
  • Lack of level- playing field to private shipyards.
  • Lack of design capability of shipyards.
  • Lack of a strong commercial shipbuilding industry.
  • Absence of a strong ancillary industry.
  • Lack of synergy between public and private yards.

Mr. Behera suggested a number of measures to tackle the prevailing problems. These include;

  1. Increasing competitiveness- bring in competition within the PSU shipyards by promoting them to compete with the private sector for all kinds of warship projects.
  2. Empowering shipyards to take their own decisions, including design etc, and allowing them to function in a competitive environment.
  3. Bringing in a transparent policy to facilitate partnership between public and the private sector.

Points of Discussion:

  • Other countries of the world including the US, UK, Italy etc also have faced similar problems. So, it would do well for India to learn from those countries.
  • Poor R&D is the biggest challenge facing the Indian shipbuilding industry. India has to take the R&D head-on, in order to overcome the problems faced by the industry.
  • Synergy amongst private sector participants is as important as between private and the public sector.
  • Absence of a comprehensive policy or understanding on defence exports is hurting India’s defence industry.
  • It is beyond debate that without the entry of private sector at all levels, Indian naval shipbuilding industry will not thrive.

Report prepared by Rahul Mishra, Research Assistant, IDSA