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India’s Fleet Of Flying Dutchman

July 28, 2013

“Shipbuilding is the construction of ships and floating vessels in a specialized facility known as the shipyard”. Shipbuilders are often called shipwrights.” Shipbuilding and repair of ships comes under the specialized segment of engineering referred to as the “naval engineering”. Ship breaking refers to the dismantling of a ship.

With an increase in consumer demands and overseas trade, Indian shipping industry is expanding at a very fast rate. Shipping volumes to and from the ports have increased considerably. The Indian shipping industry is a mammoth, with its fleet of 650 ships with a Gross Registered Tonnage (GRT) of 6.65 million tons. Of this massive fleet, 260 ships are engaged in overseas trade while the rest cater domestic purposes. The exponential growth of tugs, survey and pilot vessels which are essentially the property of the maritime board indicates that the Indian shipping industry is growing at a frenetic pace and is fast reaching a position to attract profitable business opportunities. India’s emergence as an economic power evidently necessitates the country’s growth as a strong maritime power. The prediction that India will become the fourth largest economic power by 2020 further enhances this criterion as evident from the data that 77% of the Indian foreign trade by value and 90% by volume depend on the shipping industry keeping in mind the fact that Indian foreign trade accounts for one fifth of the country’s GDP. The enormous scope of the Indian shipping industry is further bolstered by the fact that our stake in the world trade scenario is a meager 0.62%.

However, the Indian merchant ship fleet is inadequately small, catering to only 1% of the ‘world shipping tonnage’ and are equipped to carry a dismal one sixth of India’s foreign trade. Besides, maritime terrorism is a constant threat to foreign trade. Hence, the protection of our maritime interests calls for an increased number of warships to counter maritime terrorism both effectively and internationally with a stern attitude. The comprehensive report of the Naval Headquarters to the Government, promising extending of exhaustive cooperation, starting from modernization of the shipyards to supplying latest technological support in naval engineering is undoubtedly encouraging. In spite of the deterring factors, India has secured its position among the countries that build its own warships and submarines. The Indian shipbuilding industry has already touched a three figure capacity but the room for improvement is still huge as evident from the fact that in spite of our achievements in shipbuilding, we still lag significantly behind the countries with their own shipbuilding industries. Some of the challenges currently faced by the Indian shipbuilding industry are discussed below.

Let’s start with the current statistics of the Indian ship building industry:
• Number of shipyards in India- 30-40 (actively operational 27)
• Market size of shipbuilding at present – US$ 5 billion
• Market size of shipbuilding expected in 2025 – US$ 25 billion
• Number of ships being built at present – 250
• Shipbuilding capacity at present (in terms of cargo carrying capacity) – 2.8 million ton
• Shipbuilding capacity by 2012 (in terms of cargo carrying capacity) – 4 million ton
• Shipbuilding capacity by 2017 (in terms of cargo carrying capacity) – 19 million ton
• Percentage of ships built for exports – 75%
(source: Internet)

Some of the impending factors are, our ship building industry is inadequate to the point of pathetic, evident from the fact that Indian ships are less than 0.5% of the global fleet. Shipment being the most economic method, 80% of the international trade of India depends on the shipping industry which indicates that our economic growth is directly proportional to the efficiency of the shipping industry to cater to foreign trade. The predicament of the Government’s Hydrocarbon Vision 2025 is also alarming requiring an import of 62 million tons of natural gas in 2012 and 84 million tons by 2025. This calls for the necessity of extra foreign owned LNG and crude carriers, as the Indian shipping industry is incapable of meeting the capacity to carry such huge tonnage of natural gas. The shares of Indian merchant shipping in foreign trade, essentially seaborne, have dipped drastically from 36% from the late 1980s to 14% in 2005-2006. This can be attributed to the old rusty hulls that need immediate scrapping within the next five years. The rapid rise in the international trade along with the awareness of the low productivity of the Indian shipping industry, the shipping companies such as SCI is compelled to place order for six tankers worth US$400 million to Korea’s Hyundai Shipyard. Such actions are bound to affect the domestic shipbuilding concerns in a negative way and promoting foreign and overseas shipyards. Besides, low productivity increases the building and launching period of ships, rendering our shipping industry noncompetitive in comparison with China, Japan and Korea, countries which accounts for nearly 77% of global shipping.

Navy and the Coast guards also suffer in a similar way, since they are unable to implement their plans of replacement and expansion due to the low productivity of the shipping industry as evident from the fact that our three Defense PSU shipyards were completely unable to meet the demands of the Navy. The concept of indigenous warship manufacturing is still highly unstable which instigates Indian Government to buy Soviet era frigate, warships and aircraft carriers from Russia in considerable quantities.

A comprehensive report from The Associated Chamber of Commerce and Industry in India (ASSOCHAM) on the ship building industry of India, ‘Shipbuilding Industry in India: An overview’ reveals that, “The Indian shipbuilding and ship repair industry is likely to reach Rs9, 200crore from the current level of just over Rs7, 310crore. India accounts for just about 1% of the global shipbuilding industry worth about Rs7.3lakh crore but is growing at a compound annual growth rate (CAGR) of about 8%”. According to D.S. Rawat, secretary general of ASSOCHAM, “Lower costs of labor, availability of skilled workforce together with the robust demands in the domestic market along with a growing steel industry are certain factors that build up a strong case for shipbuilding sector in India”. Union minister of Shipping, GK Vasan’s decision of investing US$ 737,939.5 million on behalf of the Indian Government for the port sector developments definitely proved to be a shot in the arm for the Indian shipping industry. It’s high time for the Government, shipping industry and the Navy to pull up their socks and tap the immense potential of the Indian shipping industry. Or else we will have to be satisfied with overseas shipping yards, borrowed foreign cargo carriers and second hand rusty warships.


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