IndiasNavalShipbuildingIndustry KeyGapsandPolicyOptions

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

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Laxman Kumar Behera & S.N. Misra
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ARTICLE
India’s Naval Shipbuilding Industry:

Key Gaps and Policy Options
LAXMAN KUMAR BEHERA AND
S.N. MISRA
Self-reliance in defence production has been a major policy focus of

Indian policy- makers since independence. An important aspect of the
policy focus is indigenous warship construction which started in a small
measure in the mid-1950s when the decision was taken to construct
patrol craft, minesweepers and survey ships in domestic shipyards.1 The
big push for warship construction however came in the next decade
when the Ministry of Defence (MoD) acquired a number of shipyards
under its administrative control, and took a major decision to construct
the Leander-class frigate Indian Naval Ship (INS) Nilgiri indigenously at
the newly acquired Mazagaon Dock Ltd (MDL). Since then the naval
shipbuilding industry has grown significantly, contributing much of the
warship requirements of the Indian Navy, the fifth largest maritime
force in the world. Till mid-2011, nearly 90 ships and submarines have
been constructed indigenously and about 46 major ships are at various
stages of procurement from the domestic shipyards.2 To facilitate indig-
enous naval construction, the MoD in addition to acquiring a number
of shipyards under its administrative control, has articulated a detailed
set of guidelines for construction of warships in a time and cost bound
manner. It has also allowed the Indian private shipyards to construct
certain type of warships, in a move to infuse greater competition in
warship building.3
Notwithstanding the above measures, the naval shipbuilding industry
has not been able to meet the growing requirement of the naval forces
Laxman Kumar Behera, Research Fellow, Institute for Defence Studies and
Analyses, New Delhi. Email: laxmanbehera@gmail.com
S.N. Misra, Principal Controller of Defence Accounts (Navy), Ministry of
Defence, Government of India. Email: misra.sn54@gmail.com
Defence Studies, Vol. 12, No. 3, (September 2012), pp. 434–451

ISSN 1470-2436
http://www.tandfonline.com
http://dx.doi.org/10.1080/14702436.2012.703846 Ó 2012 Taylor & Francis
INDI A’S NAVAL SHIPBUILDING INDUSTRY 435
in the required time and cost efficiently. This has resulted in a huge gap
in maritime force level. As the Comptroller and Auditor General of
India (CAG) notes in a 2008 report the ‘Indian Navy holds just 67 per
cent of the force level envisaged in its 1985 plan’.4 The CAG in a recent
report also notes that ‘by 2012, Indian Navy may retain only 61, 44 and
20 per cent of the envisaged force levels for frigates, destroyers and cor-
vettes’.5 This paper tries to find out the key gaps in India’s naval ship-
building industry and the policy options available to the MoD to
strengthen this vital sector. The paper however begins with a brief over-
view of the naval shipbuilding sector in India.
Naval Shipbuilding Industry: An Overview

India’s overall shipbuilding industry comprises of 27 shipyards, of which
6 are under Central Public Sector, 2 under State government and 19 in
the private sector domain. However, all these shipyards are not involved
in naval shipbuilding. Of the six shipyards under the Central Public
Sector four are under the administrative control of Ministry of Defence
and known as defence public sector undertaking (PSU) shipyards.
These are: 1. Mazagon Dock Ltd (MDL), Garden Reach Shipbuilders
and Engineers Ltd (GRSE), Goa Shipyard Ltd (GSL) and Hindustan
Shipyard Ltd (HSL). Although these four shipyards are primarily
responsible for constructing naval ships, some others, both in the public
and private sector are also involved in naval shipbuilding.
Public Sector Shipyards

Mazagon Dock Ltd (MDL)
MDL is the leading defence shipyard under the MoD, with the capabil-
ity to construct warships of 6,500 dead weight ton (DWT) and mer-
chant ships up to 27,000 DWT.6 Since its incorporation in 1960 as a
defence PSU, the shipyard has expanded into a major frontline warship
builder, with the product range boasting all types of ships including
destroyers, frigates, corvettes, and submarine. It is the only shipyard in
India and among few in the world to have constructed a submarine.
With a workforce of 8,090 including 1,060 officers, 6,038 industrial
employees, the shipyard’s infrastructure consists of three dry docks, four
slipways, and three wet basins.7 Its shipbuilding capacity is expected to
increase in the coming years with the completion of the ongoing
modernisation plan involving an investment of Rs. 1,495 crore.8 The
436 DEFENCE STUDIES
modernisation plan includes the introduction of modular construction

technology, construction of a new wet basin, and an additional cradle
shop for submarine production.9 Major ships presently under construc-
tion by MDL include the third ship of P17 (Frigate) class,10 three ships
of P15A (Destroyer) Class, four ships of P15B class, and six Scorpene-
class submarines. It is the first shipyard under the MoD to have formed
a Joint Venture (JV) with a private shipyard, although the arrangement
has run into controversy, forcing the government to ‘put on hold’ the
JV.11
Garden Reach Shipbuilders and Engineers (GRSE)

GRSE was acquired by the MoD in 1960 with the primary objective of
developing a second line of frigate construction. However the construc-
tion of frigates has so far been limited to three ships (P-16A class)
which were delivered to the Navy between 2000 and 2005. The other
ships that it has built include corvettes, fleet tankers, fast attack craft and
patrol ships among others. Its most high profile shipbuilding order in
recent years came in 2003 when the government sanctioned construc-
tion of four anti-submarine warfare (ASW) corvettes (P28 class), at an
estimated cost of Rs. 3,051 crore. The shipyard has also signed
Rs. 2,100 crore contract with the Navy to construct eight Landing Craft
Utility (LCU).12 Presently, GRSE is on a comprehensive modernisation
plan. An investment of Rs. 606 crore is planned for an upgrade of its
infrastructure to enable the shipyard to reduce the building period of
ship construction and double its shipbuilding capacity.13
Goa Shipyard Ltd (GSL)

GSL is the smallest shipyard under the MoD, having expertise in build-
ing medium-sized vessels for the Navy, Coast Guard and others. The
shipyard was a small barge repair facility established in 1957 by the Por-
tuguese and following the liberation of Goa in the early part of follow-
ing decade, it was leased to MDL which controlled the shipyard till
1967. GSL has the capability to build ships up to 105 metres long, 3,000
DWT and 4.5 metres draught. Its product range includes fast patrol ves-
sels, survey vessels, sail training ships, missile craft and offshore patrol
vessels. Like other defence PSU shipyards, GSL is also on a modernisa-
tion drive with the objective of enhancing its shipbuilding capability by
200 per cent. The modernisation plan which is being carried out in four
phases involves an estimated outlay of Rs. 792 crore.14
Hindustan Shipyard Ltd (HSL)

HSL, one of the oldest and largest shipyards under the public sector,
was transferred to the MoD from Ministry of Shipping in February
2010. Having so far built 163 ships, and repaired nearly 1,850 ships of
various types, the shipyard has certain experience in naval shipbuilding.
For the defence sector, it has built offshore patrol vessels and inshore
patrol vessels for the Indian Navy, besides undertaking refit of the
Navy’s submarines. When acquired by the MoD, the shipyard was
incurring continuous financial loss totaling Rs. 987 crore as of 31 March

2009. To revitalise the shipyard, the MoD has proposed a financial
restructuring plan worth Rs. 1,192 crore.15 The Department of Defence
Production of the MoD in consultation with the Navy and Defence
Research and Development Organisation (DRDO) has also prepared a
massive plan to modernise the shipyard to enable it to construct
advanced vessels such as landing platform docks, conventional and stra-
tegic submarines. In the commercial sector, it is presently building six
vessels, each of 53,000 DWT bulk carrier (its biggest so far) for Good
Earth Maritime Ltd. 16
Cochin Shipyard Ltd (CSL)

CSL is the only non-MoD-owned shipyard which is involved in a
major way in naval shipbuilding. The shipyard, which functions under
the Ministry of Shipping as the biggest among all public sector ship-
yards, is constructing India’s first ever indigenous aircraft carrier (of
40,000 DWT), propelling India among the select club of the few nations
having expertise in indigenously designing and building such platform.17
Till August 2011, CSL has completed 75 per cent of the hull work and
the carrier is expected to be launched in December 2011.18 In terms of
shipbuilding and ship repair capability, it can construct ships up to
110,000 DWT and repair ships up to 125,000 DWT. The yard has deliv-
ered two of India’s largest double hull Aframax tankers each of 95,000
DWT.19
Private Sector Shipyards

As indicated earlier, in India there are more private sector shipyards than
in the public sector. However few private yards have the necessary
infrastructure or skills required for warship construction. In terms of
infrastructure, only four shipyards – Larsen and Toubro (L&T), Pipavav
438 DEFENCE STUDIES
Defence and Offshore Engineering Company (Pipavav henceforth),

ABG and Bharati –_ have the capacity to construct ships of 100 metres
length or more.20 In the following is given a brief overview of two pri-
vate shipyards (Pipavav and L&T) that have emerged as the frontline
yards for naval shipbuilding.
Pipavav shipyard is situated on the west coast of India in the state of
Gujarat. The shipyard is the largest integrated shipbuilding company,
with a dry dock measuring 662 metres in length and 65 metres in width
(2nd largest in the world as the shipyard claims); a wet dock measuring
74060 metres. With these facilities, the shipyard seems to be geared

towards building and repairing ships up to 400,000 DWT.21 In the com-
mercial sector, the shipyard launched in June 2011 two Panamax bulk
carriers, each of 74,500 DWT. In defence shipbuilding, Pipavav has
made its ambitious plan known when it made successive announce-
ments in early 2011 about its key strategic partnership with international
yards for high-value defence shipbuilding. The first announcement
came in February 2011, when the shipyard intimated to the Bombay
Stock Exchange (BSE) about a Memorandum of Understanding (MoU)
with the US-based Northrop Grumman. The MoU, the company
claimed, ‘will allow the Company to focus on huge opportunities pres-
ent in the defence sector in India with the help of technology and
expertise possessed by Northrop’.22 The second announcement came in
April 2011 when Pipavav informed the BSE about another MoU with
Babcock Group (UK) ‘to work together to build next generation pro-
posed aircraft carrier for Indian Navy’.23 Its further strategic partnership
however came to a halt when the MoD put on hold its JV with the
state-owned MDL. Pipavav’s biggest success in defence so far consti-
tutes a contract worth Rs. 2975 crore for design and construction of five
naval offshore patrol vessels for the Indian Navy.24 Pipavav won this
contract in fierce competition with the GSL, which ‘lost narrowly’.25
The L&T shipyard has also made a significant progress in shipbuilding.
The company which plays a key role in India’s first ever construction of a
nuclear submarine has built a new greenfield shipyard at Kattupalli in
Tamil Nadu. According to its chairman the shipyard with a draught of up
to 14 metres and a waterfront exceeding 2.2 km is capable of building
‘large high-end warships’ such as submarines, frigates and other war-
ships.26 As regards submarine construction, a high-level committee set up
by the Prime Minister under the chairmanship of V. Krishnamurthy has
reportedly recommended L&T along with Pipavav as potential candidates
for construction of submarines under the P75 (I) programme,27 under
which the Indian Navy plans to acquire six submarines.
Public and Private Sector Shipyards: Core Strengths and

Weaknesses
The public and private sector shipyards enjoy a unique set of advantages
and disadvantages. For the MoD-owned shipyards, the biggest advantage
lies in their long exposure to warship building, 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 increas-
ingly required to be stealthier and more endurable. This is one of the
reasons why the MDL, which is building all kind of warships (except
aircraft carriers) since 1960s becomes the natural choice for building the
Navy’s frontline warships. Because of its lack of experience in building
major warships, the private sector is way behind in these aspects and
needs certain 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 deci-
sion-making constraints. As discussed later in this paper, the operational
and financial autonomy of the government-owned shipyards is limited
and it has to depend on the administrative ministry for approval of key
decisions, which are often taken at a slower pace. For instance, in 1995
the MDL felt that its facilities should be modernised by 2006, in order
to take up construction work of certain ships. But to act on the plan it
has to get the approval from the MoD which came only in 2006.28
Compared to this, the private sector has complete autonomy in deci-
sion-making which facilitates it to meet the necessary infrastructural
needs at a much faster pace and often before a major naval project is
announced. The L&T’s Rs. 4,000 crore shipyard at Kattupalli is a case
in point. The shipyard, which can take on construction works such as
submarines and frigates, among others, is ‘almost ready’, even though
there is no assurance that it will get such orders to execute.
The stark contrast in autonomy of decision-making is evident from
the efforts by both the 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. While Pipavav was able to forge
partnerships with Northrop Grumman and Babcock, GRSE’s plan for a
tri-partite partnership with DCNS (France) and an Indian IT engineer-
ing company, Infotech Enterprises could not take off, because of objec-
tions raised by the MoD.29 The recent suspension of MDL’s JV
440 DEFENCE STUDIES
partnership with Pipavav also shows constraints in public sector ship-

yards’ decision-making.
Warship Construction: Demand-Supply Gap

The vast maritime interest of India has necessitated an enhanced role
for India’s maritime forces, particularly the Coast Guard and Navy –
the latter being made the prime agency for providing maritime secu-
rity.30 To carry out their missions, these forces have from time to time
articulated a modernisation plan including a shipbuilding plan. The

Maritime Perspective Plan, formulated by the Navy in 2005, projects
160 ships including 90 frontline ships consisting of aircraft carriers,
destroyers, frigates and corvettes.31 Similarly the Coast Guard’s plan
includes 154 ships and 93 boats/craft.32 However the above force level is
far from being achieved. By the end of 2010, Navy’s force level had
decreased to 130 ships. In the case of Coast Guard, the present force
level consists of 44 ships only.33
The decreased force levels of the Navy and Coast Guard have been
a major concern, as highlighted by the CAG and others. To address the
fast depletion, there has been a frantic effort to award major contracts to
various shipyards, both in India and abroad. For the Navy, till late 2011,
47 ships have been awarded for construction in various Indian ship-
yards, in addition to five more in foreign shipyards (Tables 1 and 2).
The above number is going to increase as two more projects – six sub-
marines of P75 (I) and seven stealth frigates of P17 (A) – are expected
TABLE 1. MAJOR ON-GOING SHIPBUILDING PROJECTS IN INDIA AS OF

NOVEMBER 2011.
Shipyard Type of Ships
MDL (15) seven destroyers, two frigates, six submarines

GRSE (15) four corvettes, three fast attack craft, eight LCU
GSL (5) four offshore patrol vessels and one sail training ship
CSL (1) indigenous aircraft carrier
Alcock Ashdown (6) survey vessels
Pipavav (5) NOPV
Note: The figures in the bracket denote the number of ships being constructed at the
shipyard.
Source: Standing Committee on Defence (2010–11), 15thLok Sabha, Demands for
Grants 2011–12, 12th Report (Lok Sabha Secretariat: New Delhi 2011) p.82;Rajat Pan-
dit, ‘Rs 3 lakh crore plan to boost India’s naval might’, The Economic Times, 26 Sept.
2011.
TABLE 2. CONSTRUCTION OF SHIPS IN FOREIGN COUNTRIES.
Country Type of Ships
Russia (4) aircraft carrier and three frigates

Italy (1) tanker
Source: As in Table 1 above.
to be announced soon.34 For the Coast Guard, ‘131 surface platforms

are already under construction in Indian yards and another 200 plat-
forms are in the process of being contracted’.35
The above initiatives notwithstanding, there are still concerns that
the maritime forces, particularly the Navy, may not get the projected
force level in the near future. The concern is primarily because of vari-
ous constraints of the Indian naval shipbuilding industry, particularly
the defence PSU shipyards which have won the bulk of the contracts.
The present capacity of the three PSU shipyards (MDL, GRSE and
GSL) is roughly four ships per year, whereas the Navy alone requires
induction of a minimum of eight ships per year to attain its force level
of 160 ships. Moreover, as far as the construction of frontline warships
(such as frigates, destroyers, and submarines) is concerned the capability
is mostly limited to MDL, which is already burdened with too many
contracts. So the challenge for the Navy is to get at least four more
ships in a year from other shipyards some of which are preferably
required to be able to construct frontline warships. As discussed in the
following paragraphs, the Indian naval shipbuilding industry is however
fraught with many fundamental weaknesses, which, if not taken care of,
will have a bearing upon the force level of the maritime forces, particu-
larly the Navy.
Key Gaps in Naval Shipbuilding Industry

Inefficiency and Constraints of the Public Sector Shipyards
The key weakness of the Indian shipbuilding industry is the inefficiency
and constraints of PSU shipyards which constitute the backbone of war-
ship building. The inefficiency is due largely to the lack of competitive
environment in which they operate. Like other production agencies
under the MoD, PSU shipyards are treated as the captive production
agencies to meet the requirements of the defence forces. The Depart-
ment of Defence Production (DDP) of the MoD, which is the adminis-
trative head of the shipyards, takes a natural interest in ensuring orders
442 DEFENCE STUDIES
to them, irrespective of their capacity, capability and at times, at the cost

of timely delivery, developing alternative capacity and promoting com-
petition within the large industry. Some recent evidence in this regard
is found in the CAG report which notes that the decision to award
P15A to MDL was ‘taken despite the inadequate infrastructure with the
yard’. Similarly the decision to award the P28 class of ships to the
GRSE was ‘based not on the shipyard’s inherent advantage but because
MDL was already over-loaded and GSL did not have adequate
infrastructure to construct bigger warships’.36
Because the PSU shipyards are the nominated agencies and get
orders in a non-competitive bidding process, they have little incentive
to improve their efficiency. As pointed out by a former official in the
MoD, the PSU shipyards ‘are often found lacking in the areas of build
period, inventory management, labour utilisation, costing and procure-
ment among others’.37 The inefficiency has not only contributed to a
slow pace of construction, but has led to higher cost of production
which has become a major factor for their elimination in the competi-
tive bidding process involving the private shipyards.38
A part of the reason for inefficiency in the PSU shipyards is due to
the way the shipyards are allowed to function. Being government-
owned enterprises, the PSU shipyards have limited operational and
financial decision-making powers. For instance, they are not allowed to
form joint ventures in India if the expenditure on such an arrangement
is in excess of 15 per cent of their net worth. The financial autonomy is
restricted to Rs. 500 crore with respect to new projects, modernisation,
and purchase of equipment. Even business tours by the officials of the
shipyards have to be approved by the government.39 In addition, they
are also required to follow the strict government procurement rules
which sometimes delay their modernisation programme. For instance,
MDL has to retender a procurement contract for the Goliath crane
three times and in the process lost three years before it could finally
sign the contract.40
The most crucial operational limitation of the shipyards is in actual
warship building of large ships. For the large warship projects, the ship-
yards do not have complete control over the ships they are supposed to
build. It is primarily because of the Indian Navy’s deeper involvement
in crucial decision-making in the shipbuilding process. Unlike some
other navies in the world which rely on shipyards for the entire task of
shipbuilding, the Indian Navy takes a deep interest in warship construc-
tion, particularly in design and procurement of equipments, weapons
and sensors.41 However the problem with this arrangement is that the
design or the procurement decisions are hardly frozen well before the
shipyards are expected to start construction. In case of major warships
in which the Navy prefers the telescopic method of construction, the
design parameters are kept open for a long time which impinges upon
the schedule and cost of warship construction. Moreover, many times
the Navy brings in major changes in the design parameters midway
through the construction process which necessitate modification and
cause further delays and cost overruns. Similarly, since the Navy nomi-
nates the key equipments and their sources of procurement, the ship-
yards find it difficult to adhere to those decisions, for the reasons of

higher cost, lack of competition and timely delivery. As a result, the
normal construction schedule gets affected with due impact on the cost.
In the above background, the most crucial parameters of perfor-
mance of the shipyard in terms of cost and build period have taken a
back seat. The cost escalation in two crucial projects such as P-15A and
P-17 has been 225 per cent and 260 per cent, respectively.42 The time
overrun is also quite significant and higher than the average interna-
tional standard. As the CAG notes ‘‘as against the international timelines
[for construction of the first ship of a class] ranging from 66–84
months, the indigenous construction of P-15 by MDL and P-16A by
GRSE took 116 and 120 months respectively’ (see Table 3).
Lack of Level-Playing Field for the Private Yards

One of the reasons why the India’s warship building is not at pace with
the induction requirement is because the private yards are out of
the ambit of the major shipbuilding projects. Historically defence
TABLE 3. BUILD PERIOD FOR FRIGATE: INTERNATIONAL COMPARISON.
Shipyard Project Time Frame for First of Class (Months)
Lockheed Martin (US) 84

Bath Iron Works (US) 79
Fincantieri (Italy) 78
DCN (France) 78
Daewoo (S. Korea) 72
Northrop Grumman (US) 66
Hyundai (S. Korea) 66
RosoboronExport (Russia) 84
Source: Report of the Comptroller and Auditor General of India, Indigenous Construction
of Indian Naval Warships, Performance Audit, No. 32 of 2010–11, Union Government
(Defence Services), Air Force and Navy, p.38.
444 DEFENCE STUDIES
production, including naval shipbuilding has been retained in the exclu-

sive domain of the public sector enterprises. This continues to be so
even though the 2001 reform measures have allowed 100 per cent pri-
vate participation in defence production. The biggest obstacle for private
yards is MoD’s shipbuilding procedures, which favors the public sector
enterprises over the private yards. As per the existing guidelines, the
MoD retains the power to nominate yards for major shipbuilding pro-
jects. However, the nomination approach invariably favours the public
sector yards whereas the private yards are allowed to compete for low-
end ship projects such as naval offshore patrol vessels (NOPV), barges,
hovercraft, fast patrol vessels, interceptor boats, cadet training ships and
fast interceptor craft.
The discrimination againsts the private sector shipyards is also evi-
dent from the recent decision of the MoD to acquire six submarines
(under the P-75I programme) for the Indian Navy. As per the MoD’s
plan, of the six submarines, two submarines ‘will be imported from the
foreign collaborator’, and other four will be constructed in two PSU
shipyards: three at MDL and one at HSL.43 From the private sector’s
perspective what is worrisome is the decision to involve HSL which has
no prior experience in submarine construction. Compared to that, some
of the private yards, particularly L&T, have experience from India’s
nuclear submarine construction.
The other obstacle for the private shipyards’ involvement in major
warship projects is the telescopic method of warship building preferred
by the Indian Navy. As mentioned earlier, in this method of warship
building many of the design parameters and key components are not
finalised at the stage of contract signing with the shipyards. Because of
this open ended nature of the contract one of the PSU shipyards
becomes a default executor of the contract. It is because it is ‘always
easy to modify the contact subsequently with a PSU shipyard and get
necessary approval from the government which is not easily possible in
the case of the private shipyards because of the oversight concerns’.44
Consequently, no private shipyards have so far been awarded a major
warship building project.
Lack of Design Capability in the Shipyards

Historically Indian shipyards are dependent on foreign sources for ship
design, because of lack investment in R&D and a shortage of qualified
naval architects/engineers. This has been a major factor why the major-
ity of the Indian shipyards, especially the private yards, are prevented
from participating in major naval shipbuilding projects, which involve

more complex design compared to commercial shipbuilding. Among
the PSU shipyards, except for the MDL, no other yards have the full
design capability to undertake construction of bigger and complex war-
ships. Even MDL’s design capability is not comprehensive. Like other
shipyards it is also dependent on the Navy which is the overall nodal
agency for design activities pertaining to warship building. However this
arrangement has not helped the Indian shipyards, including the MDL
to become independent for the entire spectrum of shipbuilding, besides
creating some other peculiar problems. As one General Manager of

MDL notes, ‘Dependence on the Navy’s design has over the years pro-
ven to be detrimental to the shipyards . . . which do not get direct expo-
sure to any new design concept and have stopped thinking about
generating their own designs’.45
To address the design issues plaguing warship building, the Ministry
of Defence has recently set up the National Institute for Research and
Development in Defence Shipbuilding (NIRDESH), which is being
funded by the MoD and the defence PSU Shipyards.46 However it is
not clear how far the organisation will cater to the design needs of the
private shipyards which are not the contributors to the organisation, but
have a different approach to address their own design shortcomings, by
way of partnering with foreign collaborators. At the same time it is also
not clear how the new organisation will interface with the Navy which
has its own design directorate.
Lack of a Strong Commercial Shipbuilding Industry

Despite noticeable differences, a strong and competitive commercial
shipbuilding industry has a positive impact on warship building. This is
clearly evident from China where expansion and modernisation of com-
mercial shipbuilding has vastly benefited all types of warship construc-
tion, in terms of quality, efficiency and output.47 In India however this
correlation is absent since the commercial shipbuilding industry is weak
and inefficient. Compared to China, Japan and South Korea which are
the global leaders in commercial shipbuilding with an individual share
of more than 25 per cent each, the Indian shipbuilding industry
accounts for less than one per cent of the global share.48 The lack of
competitiveness of the Indian shipbuilding industry is also evident in
the number of ships being ordered from it. This is clearly evident from
the Shipping Corporation of India Ltd (SCI), the largest shipping
company in India. Out of 24 ships on order by SCI as of December
446 DEFENCE STUDIES
2011, only seven ships are from Indian shipyards. Interestingly all the
remaining ships are due from China, showing the progress that Beijing
has made in commercial shipbuilding.49
The need for a strong and competitive shipbuilding industry has been
felt by many in India not only for employment generation and revenue
earning potential, but also for strategic reasons. This has been high-
lighted by the National Manufacturing Competitiveness Council
(NMCC), a group constituted under the Prime Minister. The NMCC
has identified shipbuilding industry as one of the five strategic sectors
which needs to be strengthened to build national capabilities in the long-

run. To provide an impetus to the Indian shipbuilding industry the Mar-
itime Agenda 2010–2020, announced by the Ministry of Shipping has laid
emphasis to overcome the current weakness and increase India’s share in
global shipbuilding to five per cent by 2020. As per the Agenda paper the
Indian shipbuilding industry is fraught with four key gaps. These are:
manufacturing gap (mostly due to unfavourable taxation policy in com-
parison to foreign shipyards); technology gap; resource gap; and skill
development gap. To overcome these gaps, the Agenda paper has given
policy recommendations, including tax incentives for domestic shipyards,
capital subsidy to shipyards for acquisition of modern technology, for-
mulation of maritime clusters for the holistic growth of the shipbuilding
industry, enunciation of an offset policy in government procurement,
and greater focus on ship design and R&D, among others.
Absence of a Strong Ancillary Industry

Like in any other sector ancillary industry plays a vital role in shipbuild-
ing in general and warship building in particular. In India the general
ancillary industry for shipbuilding is vastly underdeveloped. As observed
by the Working Group of the Ministry of Shipping, Road Transport and
Highways, ‘Almost all the machinery and equipment . . . such as main
engine, gear boxes, shafting, propellers, generators, switchboards, valves,
pumps, etc . . . required inside a ship are presently imported, because it is
cheaper as well as of good quality.’50 Given the poor state of ancillary
industry, it is not surprising that India’s PSU shipyards also spend a vast
amount of their resources importing key raw materials, parts, compo-
nents from foreign sources. The import dependency which is over Rs.
4,300 crore in the past five years for three key PSU shipyards (MDL,
GRSE and GSL) has also a strategic underpinning and an impact on the
build period of naval ships. For example, in the case of P-17 ships, which
are powered by the General Electric engine, the construction of the ships
was halted as the Obama administration stopped – although briefly – ‘‘all

work on the gas turbine engines’.51
Given that external dependency has a strategic consequence apart
from its bearing upon self-reliance, the Indian Navy has for its part for-
mulated a long term indigenization plan.52 The current plan which
caters to the period 2008–2022, provides some key details to domestic
industry that it could take up for indigenisation. However, given the
capital and technology-intensive nature of naval machinery and equip-
ment and low volume of business, few Indian companies have come
forward. One of the problems faced by the industry is the lack of hand-
holding either by the MoD or the Navy to protect against failures, and
long-term commitment from the government to safeguard the business
interests of the companies interested in manufacturing such items.
Lack of Synergy between Public and Private Yards

A key weakness in India’s naval shipbuilding is the lack of synergy
between public and private shipyards. Till now both types of shipyard
operate separately without combining their respective strengths. As
mentioned earlier, each sector has a unique set of advantages. While the
public sector has long exposure to naval shipbuilding, the private yards
have greater flexibility and operational autonomy, in addition to the vast
infrastructure they created in recent years. Given that the PSU ship-
yards, particularly the MDL and GRSE, alone are not in a position to
meet the warship requirement in the required timeframe (given their
huge order book, and slow execution rate, Table 4), there is scope to
partner with private yards to reduce the build period. In this regard
although there has been some attempt to form JV, the arrangement has
run into troubles, forcing the government to put on hold the first ever
partnership between MDL and Pipavav. Given that India’s shipbuilding
TABLE 4. TURNOVER AND ORDER BOOK OF DEFENCE PSU SHIPYARDS.
Turnover in 2011–12 Order book position Order book to Turnover

Shipyard (US $ billion) (US $ billion) ratio (Years)
MDL 0.50 19 38.0

GRSE 0.20 1.3 6.7
HSL 0.11 0.30 2.7
GSL 0.19 0.43 2.3
Source: Table extrapolated from Aviotech, ‘Summary of Performance of Unlisted

Defense Public Sector Undertakings (DPSUs) for FY11 and FY10’, Jan. 2012.
448 DEFENCE STUDIES
requirement is at a high level, there is an urgent need to formulate a

transparent policy framework to facilitate such an arrangement.
Conclusion
India naval shipbuilding industry has a come a long way from mere
construction of patrol craft, minesweepers and survey ships to all kinds
of frontline ships including submarines, destroyers, frigates and an air-
craft carrier. To facilitate warship construction, the MoD has not only
acquired a number of shipyards under its administrative control, but has
also encouraged other domestic shipyards, particularly private shipyards
some of which have shown a deep interest in warship construction.
These initiatives notwithstanding, India’s naval shipbuilding industry as
a whole does not seem to be growing in a healthy manner and is not in
a position to meet the growing requirements of the naval forces in time
and to cost. There are a number of weaknesses facing the industry
which need consideration by the policy-makers, to enable the sector to
deliver warships in a more competitive manner.
The first and foremost weakness of the industry is the inefficiency
and constraints of the defence PSU shipyards, which till now constitute
the backbone of India’s warship building. Given the government-owned
enterprises and assurance of orders from the MoD, the defence PSU
shipyards have little incentive to improve their efficiency. Similarly,
being government-controlled enterprises they have also many financial
and operational constraints which restrict them from becoming inde-
pendent in their own sphere of functioning. The operational limitations
have also been enhanced by the Navy’s involvement in the key deci-
sion-making process during warship building. These factors have eroded
their competitiveness, not allowed them to become independent,
resulted in a long build period for warships, and huge cost overruns in
many projects given to them. As the defence PSU shipyards are the
backbone of warship building, there is need to empower these shipyards
to take their own decisions and function independently yet in a compet-
itive environment.
One way to bring in competition within the PSU shipyards is by
way of encouraging them to compete with the private sector for all
kinds of warship projects. Although the MoD has created a level
playing field, this is so far limited to smaller ships, where the private
sector is allowed to compete with the public sector shipyards on an
equal footing. For bigger and complex warships however the MoD
still retains its power to nominate shipyards for construction, which
invariably goes to one of the public sector shipyards. This nomina-

tion approach, which breeds inefficiency, has also one fundamental
cyclical flaw. It does not allow private sector firms to get exposure to
complex warship building which in turn restricts their participation
in the bigger ships. Given that competition can bring in efficiency
(seen in the case of smaller ships) and the vast infrastructure they
have created for construction of bigger and complex warships and
also the strategic partnerships they have forged with international
shipyards, the MoD needs to open the entire warship building pro-
gramme to the industry on open competition.

Along with the complete opening of shipbuilding to the private sec-
tor, the MoD also needs to give key responsibility to the shipyards for
entire task of warship construction, including the responsibility of war-
ship design, which has so far been retained by the Navy for major war-
ship building. The present method of telescopic construction followed
by the Navy not only impinges upon the cost and schedule of the war-
ship projects but also restricts the private sector from being involved
because of the open-ended nature of the contract.
The Indian naval shipbuilding industry has also been constrained due
to negligible civil-military integration in warship building. This is pri-
marily because of a weak commercial shipbuilding and ancillary industry
and the absence of a policy framework for such integration. Given the
commonality of infrastructure and many technologies between the two
sectors, the spin-on effects on naval shipbuilding can only be possible by
revitalising the moribund commercial industry. In this regard, the Mari-
time Agenda 2010–20, formulated by the Ministry of Shipping, needs to
be implemented seriously. As regards policy framework, the MoD needs
to bring in a transparent policy to facilitate partnership between the pub-
lic and private sector at the earliest opportunity.
NOTES
1 H. Wulf, ‘India: the Unfulfilled Quest for Self-Sufficiency’, in Michael Brzoska and Tho-
mas Ohlson, Arms Production in the Third World (London: Taylor & Francis 1986) p.139.
2 Rajat Pandit, ‘Rs 3 lakh crore plan to boost India’s naval might’, The Economic Times, 26
Sept. 2011. A crore is worth 10 million rupees or 100 lakhs.
3 Ministry of Defence, Government of India, Defence Procurement Procedures: Capital
Procurement 2011, pp.183–202.
4 Comptroller and Auditor General of India for the year ended March 2007, Union Govern-
ment (Defence Services), Air Force and Navy, Performance Audit, No. PA 5 of 2008, p.
viii.
5 Comptroller and Auditor General of India, ‘Indigenous Construction of Indian Naval
Warships’, Union Government (Defence Services), Air Force and Navy, Performance
Audit, No. 32 of 2010-11, p.iii.
450 DEFENCE STUDIES
6 Standing Committee on Defence (2005–06), 14th Lok Sabha, Defence Public Sector Under-
takings, 9th Report (New Delhi: Lok Sabha Secretariat 2006) p.62.
7 Information obtained from MDL.
8 Ministry of Defence, Government of India, Annual Report 2010–11, p.69.
9 Ibid.
10 INS Shivalik and INS Satpura, the first and second ships of the P17 class were commis-
sioned into Indian Navy in April 2010 and Aug. 2011, respectively. See Rajat Pandit,
‘Country’s first indigenously-built stealth warship commissioned’, The Times of India, 30
April, 2010; Indian Navy, ‘Stealth warship Satpura commissioned into the Navy’, Press
Release, 20 Aug. 2011.
11 Press Information Bureau, Government of India, ‘MoD puts on hold joint venture of
MDL - Government to bring out a policy on formation of JVS soon: Antony’, 26 Sept.,
2011.
12 Press Information Bureau, Government of India, ‘Navy Orders Eight Amphibious
Assault Vessels’, 30 Sept. 2011.
13 Ministry of Defence (note 8) p.65
14 Ibid. p.67.
15 Ministry of Defence, Government of India, Annual Report 2009–10, p.67.
16 Ministry of Defence (note 8) p.68.
17 Press Information Bureau, Government of India, ‘Antony lays keel of first Indigenous
Aircraft Carrier’, 28 Feb. 2009.
18 Press Information Bureau, Government of India, ‘Indigenous Aircraft Carrier’, 2 Aug. 2011.
19 Cochin Shipyard Ltd, ‘Cochin Shipyard: An Overview’, <http://cochinshipyard.com/
overview.html>.
20 Ministry of Shipping, Government of India, Statistics of India’s Ship Building and Ship
Repairing Industry 2009-10, pp.6–7.
21 Pipavav Shipyard, Annual Report 2009–10, p.6.
22 Bombay Stock Exchange, ‘MoU signed with Northrop Grumman Overseas Service Cor-
poration. Delaware, USA’, 17 Feb. 2011.
23 Bombay Stock Exchange, ‘MoU signed with Babcock Group, UK to build next genera-
tion aircraft carriers for Indian Navy’, 28 April 2011.
24 ‘Pipavav Shipyard gets Rs 2,975 cr navy order, posts FY11 profit’, < www.livemint.com/
2011/05/30130907/Pipavav-Shipyard-gets-Rs2975.html>.
25 Interaction with a GSL official in Goa.
26 N.K Kurup and S. Shanker, ‘L&T’s Shipyard in TN near Ready; Waits for Defence
Orders’, Business Line, 19 July 2011.
27 Dev Chatterjee and Sameer Hashmi, ‘Panel for Opening Up Submarine Construction to
Private Sector’, The Economic Times, 23 May 2011.
28 Comptroller and Auditor General of India (note 5) p.32.
29 Interaction with a GRSE functionary in Kolkata.
30 ‘Govt makes Navy responsible for maritime security’, The Economic Times, 28 Feb. 2009.
32 Standing Committee on Defence, 14th Lok Sabha, Demands for Grants 2007–-08, 16th
Report (New Delhi: Lok Sabha Secretariat 2007) p.101.
33 Standing Committee on Defence, 15th Lok Sabha, Performance of Coast Guard Organisation,
13th Report (New Delhi: Lok Sabha Secretariat 2011) p.24.
34 Rajat Pandit, ‘Rs 3 lakh crore plan to boost India’s naval might’, The Economic Times, 26
Sept. 2011.
35 Standing Committee on Defence, Performance of Coast Guard Organisation (note 33) p.28.
37 Interaction with an official in the Indian MoD.
38 Press Information Bureau, Government of India, ‘Indigenous Building of Ships’, 28
Nov. 2011.
39 Ministry of Heavy Industries and Public Enterprises, Government of India, ‘Empower-

ment of Central Public Sector Enterprises (CPSEs) – Enhancement of Delegated Powers
of Miniratna PSEs’, Office Memorandum, 5 Aug. 2005.
40 Press Information Bureau, Government of India, ‘Delay in Modernisation Programme
of MDL’, 23 Nov. 2011.
41 The Navy also acknowledges that among other factors ‘‘‘timely finalisation of designs’
will enhance productivity of warship construction. Indian Navy, Freedom to use seas: India’s
Maritime Military Strategy, May 2007, p.121.
42 Press Information Bureau, Government of India, ‘Fleet Strength of Indian Navy’, 5 Sept.
2011.
43 ‘Tender soon for Rs 50k crore stealth submarine project’, The Times of India, 17 Feb.
2011.
44 Interaction with an MoD functionary.
45 P.R. Raghunath, ‘Defence Acquisition: Shipyard Perspective’, Paper circulated in the
International Seminar on Defence Acquisition, held in IDSA, New Delhi on 12–14 July
2011.
46 ‘NIRDESH key to Navy’s self-reliance’, The Hindu, 2 Jan. 2011.
47 Evan S. Medeiros et al., A New Direction for China’s Defence Industry (Santa Monica, CA:
Rand Corporation 2005) pp.109–53.
48 Ministry of Shipping, Government of India, Maritime Agenda: 2010–2020, p.383.
49 Shipping Corporation of India Ltd, Vessels on Order, <www.shipindia.com/fleet/vessels-
on-order.aspx>.
50 Ministry of Shipping, Road Transport and Highways, Government of India, Report of
working group for shipbuilding and shiprepair industry for the eleventh five year plan
(2007–2012), March 2007, p.23.
51 ‘US freezes engine supply, Navy in a fix’, The Times of India, 17 March 2009.
52 Indian Navy, 15 Year Indigenisation Plan 2008-09.
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India’s Naval Shipbuilding Industry: Key Gaps and Policy Options

Article in Defence Studies · September 2012

Satya Narayan Misra

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India’s Naval Shipbuilding

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India’s Naval Shipbuilding Industry:

Self-reliance in defence production has been a major policy focus of

Defence Studies, Vol. 12, No. 3, (September 2012), pp. 434–451

view of the naval shipbuilding sector in India.

Naval Shipbuilding Industry: An Overview

Public Sector Shipyards

modernisation plan includes the introduction of modular construction

Garden Reach Shipbuilders and Engineers (GRSE)

Goa Shipyard Ltd (GSL)

Hindustan Shipyard Ltd (HSL)

incurring continuous financial loss totaling Rs. 987 crore as of 31 March

Cochin Shipyard Ltd (CSL)

Private Sector Shipyards

Defence and Offshore Engineering Company (Pipavav henceforth),

74060 metres. With these facilities, the shipyard seems to be geared

Public and Private Sector Shipyards: Core Strengths and

partnership with Pipavav also shows constraints in public sector ship-

Warship Construction: Demand-Supply Gap

articulated a modernisation plan including a shipbuilding plan. The

TABLE 1. MAJOR ON-GOING SHIPBUILDING PROJECTS IN INDIA AS OF

Shipyard Type of Ships

MDL (15) seven destroyers, two frigates, six submarines

TABLE 2. CONSTRUCTION OF SHIPS IN FOREIGN COUNTRIES.

Country Type of Ships

Russia (4) aircraft carrier and three frigates

Source: As in Table 1 above.

to be announced soon.34 For the Coast Guard, ‘131 surface platforms

Key Gaps in Naval Shipbuilding Industry

to them, irrespective of their capacity, capability and at times, at the cost

yards find it difficult to adhere to those decisions, for the reasons of

Lack of Level-Playing Field for the Private Yards

TABLE 3. BUILD PERIOD FOR FRIGATE: INTERNATIONAL COMPARISON.

Shipyard Project Time Frame for First of Class (Months)

Lockheed Martin (US) 84

production, including naval shipbuilding has been retained in the exclu-

Lack of Design Capability in the Shipyards

from participating in major naval shipbuilding projects, which involve

creating some other peculiar problems. As one General Manager of

Lack of a Strong Commercial Shipbuilding Industry

which needs to be strengthened to build national capabilities in the long-

Absence of a Strong Ancillary Industry

was halted as the Obama administration stopped – although briefly – ‘‘all

Lack of Synergy between Public and Private Yards

TABLE 4. TURNOVER AND ORDER BOOK OF DEFENCE PSU SHIPYARDS.

Turnover in 2011–12 Order book position Order book to Turnover

MDL 0.50 19 38.0

Source: Table extrapolated from Aviotech, ‘Summary of Performance of Unlisted

requirement is at a high level, there is an urgent need to formulate a

invariably goes to one of the public sector shipyards. This nomina-

gramme to the industry on open competition.

39 Ministry of Heavy Industries and Public Enterprises, Government of India, ‘Empower-

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