Building Blocks

Removing roadblocks and adding acceleration will help Indian shipbuilding industry scale up its potential and reach the milestone of strategic, competitive and self-sustaining industry.

Radhika Rani G.

The Maritime Agenda envisages Indian shipbuilding and ship repair industry to reach international standard, be self-sufficient in building and repairing commercial vessels and generate huge investment and employment opportunities in the coming decade. The Agenda also hopes to achieve a global market share of 5 per cent for shipbuilding by 2020, up from 1.4 per cent now. 

The vision document includes development of a strong ancillary base in the country at the turn of the decade, additional employment for 2.5 million (0.5 million direct and 2.00 million indirect) in core shipbuilding and ancillary industries and development of strong R&D facilities and design capabilities for commercial shipbuilding. The action plan also seeks to achieve self-sufficiency in ship repair requirements of the country – around 10 per cent of the global share – to emerge as a dominant ship repair centre in Asia replacing Colombo, Dubai, Singapore and Bahrain. 

Where are we?

According to Clarkson Research, the total order book in global shipbuilding at the beginning of February this year comprised 7,191 newbuildings with 137.7 million cgt (compensated gross tonnage). A major share of this was taken by Asian giants – China and South Korea. While China had an order book of 3,061 ships with 52.7 million cgt, and South Korea 1,538 units with 43.7 million cgt, Japanese shipyards had an order book of 1,096 ships with 21.6 million cgt.

When measured in cgt, China accounted for 38.3 per cent of the global shipbuilding order book at the beginning of February, South Korea 31.7 per cent and Japan 15.6 per cent. They were followed by the Philippines (2.1 per cent), Vietnam (1.4), India (1.4) and Brazil (1.3).

In terms of building capability, India, according to the Union Shipping Minister, has the potential and the capacity to deliver high-value products. “Our shipbuilding inherent strengths like low labour costs, strong domestic demand, well-established steel and manufacturing industry and availability of technically qualified manpower,” says Minister G K Vasan. Add to this, the history of 4,500 years in seafaring and shipbuilding. 

Despite the present economic slowdown, the offshore segment is robust with new orders, says Mantrana Maritime Advisory. “The offshore segment caters to nearly 40 per cent of the order book of Indian yards and most of these orders are from government companies such as ONGC, SCI, Indian Coast Guard and Navy. Those received prior to the recession are slated to be delivered by 2011-12,” it says. Of the 74 ships estimated to be delivered by 2014, many orders are nearing completion, Mantrana adds.

In fact, Cochin Shipyard is being hailed for the timely delivery of six bulk carriers to Clipper Group of Denmark and five platform supply vessels to Deep Sea Supply of Norway. Other European offshore companies that have been placing orders in India include Bourbon Offshore, Lamnalco Group, Halul Offshore, Maridive Oil, Reederei Vogemann and Opielok Reederei of Germany. But private shipyards that cater to commercial shipping segment have been having a hard time. Most of them have deferred their expansion plans thanks to the global financial crunch and lull in shipping. 

Why are we where we are?

Experts are nearly unanimous in their opinion that Indian shipbuilding industry, that caters to commercial & defence vessels, dry docks and repairs, lacks a strong push from the government. If China is a thriving shipbuilding nation with 1,519 yards, both big and small, as against just 32 in India, it is because the Red Dragon is led by its state leadership which is promoting shipbuilding as part of its larger industrialisation and urbanisation programmes.

“But the shipbuilding industry in India is stuck in the government agenda,” observes Mark Williams, Research Manager at Braemar Seascope, a leading sale and purchase shipbroking company. Lack of a focussed drive in taking the industry forward has left it uncompetitive. This has led to gaps in manufacturing, technology, resources and skill development in the shipbuilding/ship repair sector. 

The ‘so-so’ quality of our shipyards, as the world sees it, can be attributed to lack of consistent quality, cost and timeliness in Indian yards, says Robert Allan, Canada's leading naval architect. “Demand is always there for quality product at a reasonable price,” he adds. This is reason enough for Indian fleet owners too to acquire vessels from overseas yards. 

The overheads of domestic shipyards are no doubt high owing to import duty on raw materials like steel and alloys, agrees Capt Deepak Tewari, Chairman of Container Shipping Lines Association. This cost, he says, is obviously passed on to the buyers. However, capable technology, design, construction and delivery too place a role in determining the choice for shipowners, he adds.

To ensure competitiveness in cost and quality, the government has been giving subsidies for five years. However, in the face of global recession, the subsidy scheme was stopped in August 2007 and since then the Indian shipyards, admits the Ministry, have been languishing for want of new orders.

“While during 2002 and 2007, the order book increased fourfold from 0.3 million dwt to nearly 1.3 million dwt accompanied by an impressive increase in global market share, after 2007 the share in the new orders has progressively declined from 0.67 per cent in 2007 to 0.02 per cent in 2009 and 0.13 per cent in 2010,” the vision document quotes a Clarksons report. This takes us to the crux of the issue.

Where can we be?

It is time for Indian yards to be flexible, adaptable, keep labour force employed and have more people come into shipbuilding, notes Robert Allan. To fill the existing gaps, a mission-based approach is the need of the hour, advises the NMCC. “A continuing mechanism needs to be evolved to synergise the efforts of the naval authorities under the Ministry of Defence and the Ministry of Shipping for meeting long-term requirements of the country,” it says.

Also, there is a need for incorporating modern ship design and operational changes besides identifying initiatives for continued growth, opines Raghavan Ashok, Country Manager, India of American Bureau of Shipping. ABS has been developing standards for design, construction and periodic survey for global shipping. “Smart production technologies, increased collaboration with suppliers and services, commitment to quality & service, safe & efficient infrastructure and more importantly emphasis on education and training can go a long way in taking Indian shipbuilding to new heights,” he exhorts. 

Skill development and specialised training is indeed essential, says Dr Vijayan, Vice Chancellor of Indian Maritime University. “Keeping in view the demand for professionals in ship construction and design, IMU is introducing a four-year Bachelor of Engineering in Shipbuilding from the next academic year. The response to our three-year BSc in shipbuilding and repair courses in our Cochin campus is good. We wish to add quality to our programmes by offering hands-on training to our students in shipyards in Malta. A tie-up is being worked out,” he adds.

Given the present economic situation and demand for alternative modes of transport in India, “Developing inland waterways and coastal shipping can help Indian shipyards cater to the small vessel segment, says Gurmit Singh Bhalla, Chairperson of ICC Shipping Association. The government can consider extending subsidies to coastal ships of 35 metre size, he says.

As shipbuilding industry is labour-intensive, skill-specific and dependent on ancillary industries, agencies like the National Skill Development Corporation could promote vocational courses for unemployed youth thereby leading to significant employment generation, say experts. 

“Government support is (also) critical till the Indian shipbuilding industry gains critical volumes to remove its scale-related disadvantages and remove its dependence on imports for procuring raw materials,” observes KPMG.

In the final account, a national leadership focussed on steering the industry to the next level of competency and competitiveness through steadied measures can take India to the league of thriving shipbuilding nations.