By Howard M. Bunch, University of Michigan, 7/6/2003
I. INTRODUCTIONSeveral industrial sectors within India are at the cutting edge of technology, and world class in their sector capabilities. Sadly, the shipbuilding industry is not one of these sectors at the moment. It is uncompetitive in cost and in delivery time, and most of the major shipyards must be heavily subsidized to remain open. The reason for an investigation of the Indian shipbuilding industry would be to develop a better understanding of why it is so uncompetitive, and to project its future direction.
Many believe that India is on the threshold of establishing a more significant world presence; it has an outstanding system of higher education in technological areas, the population is hardworking, wide use of the English language supports international communication, and the country's location is at the center of major movement in economic and political change. The growing geo-political importance of the country has exacerbated the need for a better understanding of the country's industrial sectors, especially those that have a relationship with defense capabilities.
An overview of the economic history of the nation since Independence in 1947 is first presented. Next, there is a brief discussion of the maritime sector of the economy, followed by an evaluation of the nine major shipyards involved in new ship construction. Finally, conclusions are drawn as to the reasons for the industry's current condition, with projections as to its future.
II. INDIA'S ECONOMIC DEVELOPMENT SINCE INDEPENDENCE 1At time of India's independence in 1947, agriculture contributed 70 percent of Gross Domestic Product [GDP], and absorbed 80 percent of the work force. Decades of depressed economic growth had led to a stagnant living standard, intensified by a scale of poverty that reportedly affected 80 percent of the population. The only effective way to reverse this situation appeared to be a transition to an industrial economy, utilizing a "command economy regime."
The process of making the transition to an industrial economy had four major features: [1] emphasis on heavy industry, [2] leadership role of the public sector, [3] self-reliance, and [4] promotion of regional dispersion of growth. Shipbuilding was one of the industrial sectors heavily supported in implementation of this policy during the two decades after Independence, with major investments in public shipyards. [Specific instances are discussed in later sections of this paper.] Shipyards were an integral part of heavy industry; the government actively emplaced and expanded its ownership in shipbuilding operations, and the "local [i.e., India] purchase" of all material and equipment associated with shipyard operations was strongly encouraged.
The command economy regime prevailed, without significant change, for nearly two decades [1947-1965]. Toward the end of the period, major deficiencies had become apparent. The domestic industrial policy framework had created an economic environment in which the entrepreneurs had little motivation to reduce costs and improve quality. The continuing insistence on "Buy India" proved too costly because domestic costs of many products [including ships] were priced well above the international market. Too, quality of Indian products was considered suspect, especially for complicated, technically advanced industrial goods.
About 1965 some changes in the system began to occur, with the most important being the placement of increased emphasis upon the amount and quality of higher technical education and upon the emergence of community schemes for rural development. Public ownership of the industrial system, however, continued to increase, and by the 1980s accounted for 50 percent of total investment in India's economy. Also, the emphasis on local content continued without significant change, even though structural shortcomings of a "Buy India" policy were readily apparent to the nation's leaders.
India achieved a sustained and stable growth rate of about 3.5 percent/annum from Independence to 1980. In the early part of this period, the highest growth rate occurred in heavy industry [because of the focused government support]. Toward the end, however, the greatest increases were in consumer durables. Whatever the product category, the domestic content for India's goods was among the highest in the world [comparable to Soviet Union, China, and other command economy nations].
Major industrial reform was introduced into the nation in 1991. The action was instituted to correct continuing high inflation, high fiscal deficits, and foreign exchange shortages. The causes for the crises were [1] the collapse of the Soviet Union, then India's largest trading partner, and [2] the sudden drying up of both the domestic and West Asian markets due to the Gulf War. As a result, balance of payments for the nation became almost unmanageable. The current account deficit nearly doubled in the last half of the 1980s decade; likewise, the debt service burden rose to nearly 30 percent of export earnings in 1990-91. In mid-1991 the country negotiated a structural adjustment loan with the International Monetary Fund that provided a mechanism for liberalizing and reforming its economic system.
"One of the principle objectives of structural adjustment was the reallocation of resources into the tradable goods sector, especially manufacturing, and raising its growth rate by the removal of anti-export bias through appropriate trade and industrial policy reforms."
2 This did not happen; in fact, there was a significant decline in the growth rate for almost all categories [intermediate goods was the singular exception].
"A central doctrine of the orthodox reform package is that only the retreat of the state would permit allocative efficiency through appropriate market signals, that in turn would promote improvements in productivity of capital and labor."
3 "In spite of the fall in public investment and expenditure ratios, public sector growth and surplus generation actually improved in the 1990s. . ."
4 The opposite effects from what was anticipated seemed to create uncertainty on the part of the state's planners. An example of this effect is seen in the shipbuilding industry: Several government studies had recommended privatizing two of the public shipyards [Hindustan Shipyard and Cochin Shipyard]. However there has been no action to date,
5 showing uncertainty as to how to interpret the cause/effect relationships between the public sector's role and improvement of the economy.
In spite of the unsettling direction of growth for "rate of goods produced," and the unexpected positive performance of public sector operations, there were two planned events that accelerated India's economic development, as expected. The first was the dramatic inflow of Foreign Direct Investment [FDI] to support capital expansion. FDI investment in 1991 was approximately US$200 million; in 1997 the investment had reached US$ 3.2 billion.
6 And the annual FDI investment continues to rapidly grow; in 2002 the inflow was reported at US$4.43 billion.
7 That is a compounded growth in excess of 32 percent/year for the 11-year period: 1991-2002.
The second major trend was the increasing importance of information technology on the nation's development. The growth of this economic sector has been spectacular since 1991. Investment in information technology has been growing at about 50 percent/year.
8 Equally as important as the primary investment itself, are the other stimuli that information technology brings:
- accelerated, leaner, more standardized business practices,
- increasingly complex transnational business alliances,
- hyper-competitive purchasing, worldwide, and
- soaring international trade in services.
One would expect that these stimuli would result in significant cross-industry technology transfer. However, many industrial sectors [e.g., shipbuilding] do not appear to be participating in information technology enhancement at levels found in other Pacific Rim countries. And, significantly, there has been no apparent indication of any nationally organized effort to change this situation-at least for shipbuilding.
III. INDIA'S MARITIME ECONOMYContinuing economic development since 1991 has resulted in a more vigorous liberalized economy that is better integrated with the rest of the world. The country's Gross Domestic Product is about US$500 billion, and, if present trends hold, is projected to be the fourth largest economy in the world [after USA, Japan, and China] by the year 2020 [in terms of Purchasing Power Parity].
9 Consistent with that growth, there must be enormous increases in capacity for India's transportation network. This is especially true of the maritime sector: ports, shipping, shipyards, etc. Ninety-seven percent of the nation's international trade volume is carried by sea. India's location on the Indian Ocean favors maritime communication and trade; it also drives the nation's defense system to direct significant portions of its resources toward naval considerations.
Figure 1 displays India's Maritime Major Assets. As seen, the coastline, which is in excess of 7,500km [about 4,500 miles], affords two-direction access into the nation's interior because of its peninsular configuration.
Click here to see Figure 1. (Source: Roy-Chaudhury, India's Maritime Security, pg 16.)
Both coasts are active. There are three major entry/exit points that focus on energy products on each of the coasts, as seen in Figure 1. The other ports may also handle energy products but focus their attention on dry cargo. In 1998-99 about US$60 billion of cargo was handled at India's major ports, averaging 670 thousand tonnes daily. The Confederation of Indian Industry indicates that export/import activity has continued to rise. Recent data, for example, show an annual [April, 2002-March, 2003] value increase in excess of 16 percent both for exports and for imports.
10It is obvious to any observer of India's port operations that they are woefully inadequate to meet the current cargo thru put needs. The waiting time for a ship at a typical Indian port is typically DAYS, instead of HOURS or NO DELAY that would likely occur at many major ports of Pacific Rim countries. It was estimated in 1996 that investments of approximately US$3.9 billion would be required to meet port capacity requirements projected for 2005-6.
11 [Data were not found that indicated how much has been spent since that report appeared.]
A recent technical paper, prepared at Indian Institute of Technology, Kharagpur,
12 described an additional aspect of India's maritime infrastructure, when it noted the characteristics of the nation's merchant fleet. The fleet consists of about 500 ships, totaling approximately seven million Gross Registered Tons [GRT]. The fleet's average age is 18 years, and appears to be physically mismatched with the market needs. For example, there is a shortage of container vessels for the current and projected cargo movements via containers. Likewise, there is a shortage of vessels designed for India's short haul routes.
13 Only about 10 percent of Indian-flag vessels have been built in Indian shipyards, Reasons cited for this low share are: higher costs, and delays in delivery time. It was also pointed out that Indian shipyards have not developed standard designs that give them the ability to quickly respond to customer requirements.
14 The Indian government recognized the need to improve its shipping sector, and in 1998 appointed the Shipping Policy Committee to provide guidance in upgrading the system. In 1999 the committee recommended the industry be recognized as an "Export Industry," which would make it eligible for fiscal and funding benefits, e.g, accelerated depreciation of assets, extending maturity periods of government loans, and reserving certain cargo types for Indian-flag ships.
15The present Union Party government in 2002 decided to continue India's shipbuilding subsidy policy for another five years, and further expanded it to include support for private shipyards [the former policy only applied to public yards].
16 For the first time, the entire shipbuilding industry has been given subsidy support — a major event in the country's economic policy.
IV. INDIA'S SHIPBUILDING INDUSTRYThere are 28 established shipyards in India involved in new construction and repair. [See Appendix for a listing of these yards.] However, nine yards dominate the system. Seven of these are in the public sector, with the remaining two being privately owned. Four of the public sector yards are under the administrative direction of the Ministry of Transport; the Ministry of Defense administers the remaining three. These nine dominant yards will be briefly described, and are grouped as follows:
Ministry of Transport:
- Cochin Shipyard, Ltd, Cochin
- Hindustan Shipyard, Ltd, Visakhapainam
- Hoogly Dock and Port Engineers, Calcutta
- Central Island Water Transport Calcutta
Ministry of Defense:
- Garden Reach Shipbuilders and Engineers, Calcutta
- Goa Shipyard, Ltd, Goa
- Mazagon Dock, Ltd, Mumbai
Private Yards
- ABG Shipyard Group, facilities at Surat and at Magdala
- Bharati Shipyard, Ltd, Mumbai
India has a history of shipbuilding that stretches back to the Harrapan Civilization [approximately 2500BC]. The "modern era" began with the building of a dry dock at Bombay about 1750; a second was erected in Calcutta about 1780. During the 19th century, the industry was in a period of expansion and prosperity. However, for the last 100 years, the yards have been in a general decline, especially with regard to new construction. At present, the Indian yards build very few vessels for export, and, as noted earlier, supply only about 10 percent of the Indian shipping industry's needs.
17 The Indian yards have not enjoyed any of the effects of the current worldwide, new construction commercial shipbuilding booms. Table 1, shown later, lists the commercial ships [over 1000Dwt] on order as of June, 2003 at Indian shipyards. Note there are only 11 ships in the list, with only one of those [the 29,000dwt Cochin ship] over 20,000Dwt. The listing was culled from a total tabulation of 42 craft, with the omitted all being under 1000dwt in size. The conclusion is that Indian yards' markets are essentially smaller craft, with larger vessels being the exception.
Only three ships and two dredges are on order with the Ministry of Transport's yards; four of which came from India's public sector organizations. Prospects have been somewhat better for the private yards; ABG's current order book consists of five ships over 1000dwt, all for foreign owners. ABG received an order from a Norwegian shipping company in 2001 for a 10,000-ton newsprint carrier. Earlier, an order was received from a German company for four 10,000-ton dry cargo vessels.
TABLE 1. COMMERCIAL SHIPS ON ORDER [over 1000dwt]
AT INDIAN SHIPYARDS, JUNE, 2003
| Ship Type | Size [dwt] | Indian Owner | Builder |
|---|
| Tug/Supply | 1300 | No | ABG Shipyard |
| Supply Tug | 1300 | No | " |
| Tug/Supply | 1300 | No | " |
| Tug/Supply | 1300 | No | " |
| Support Vessel | 1000 | No | " |
| Tanker | 1100 | Yes | Bright Engineers |
| Tanker | 1200 | Yes | Central Island |
| Dredge | 2664 | Yes | Cochin Shipyard |
| Cargo | 29000 | No | " |
| Passenger/Cargo | 1560 | Yes | Hindustan Shipyard |
| Dredge | 1050 | Yes | " |
Source: Fairplay Solutions, June 2003
Things have been better for ship repair. It is estimated that the industry's repair activity is about $200 million/year; there is optimism that activities will further improve because of stricter norms and regulations being imposed on the ship operators. Indian shipyards have a competitive advantage resulting from low labor costs, availability of a trained and skilled labor force, and proximity to international shipping lanes.
In spite of the positive note just expressed, many feel that the ship repair industry is in a dismal state for the following reasons
18:
- lack of new investments in machinery and equipment,
- deterioration of existing machinery and equipment,
- use of obsolete methods and systems,
- lack of suitable training for upgradation of skills,
- life emphasis on professional management techniques,
- supply bottlenecks for raw materials and spares,
- over dependence on public sector,
- cumbersome government procedures, and
- extremely low labor productivity.
The above criticisms, though expressed relative to ship repair, apply equally to new ship construction operations in the yards, especially those under the administrative control of the Ministry of Transport Yards under the direction of Ministry of Defense appear to be receiving much greater funding support, and their plants are in better condition.
As mentioned earlier, there are three shipyards administered by Ministry of Defense: Garden Reach Shipbuilders, Goa Shipyard, and Mazagon Docks. The Garden Reach yard is primarily engaged in repair and engineering activities, such as the manufacture of compressors, pumps, generators, and diesel engines. About two-thirds of its production is for the civil sector. Goa Shipyards was acquired in 1964, and is a subsidiary of Mazagon Docks. It specializes in ship repair and engineering work. Mazagon Docks was acquired in 1960 and is India's major shipyard, capable of building frigates, submarines, cargo and passenger ships. About 60 percent of Mazagon's operations are directed toward the commercial sector.
19 The three yards are in process of forming a consortium of Indian Defense Shipyards to market military products, including ships, into the international market. The consortium will be managed by M/S RITES, Ltd, a New Delhi consulting organization.
20 It was earlier mentioned that the government agreed, in 1998, to provide additional funds to the public yards to make them more competitive in the international market. A subsidy of 30 percent was instituted to support construction of ocean going vessels, and was applied to both domestic orders and foreign deliveries. The subsidy was to be available for a five-year period, and has been extended for another five years. It will now also include private yards in its subsidy support.
21The perception is that the shipbuilding industry has suffered from an extensive public ownership, and the government would like to change its position by reducing that ownership.
22 However, it recognized the importance of first securing economic stability, and therefore implemented the subsidy program, described in the preceding paragraph. The subsidy program has been complemented with a financing guarantee program for 80 percent of a ship's cost. Import duties are being reduced on equipment and spare parts; however, the system still favors Indian manufacturers. The regulations also make it difficult to freely move spare parts into [and out of] the country.
The literature suggests that labor legislation has created significant barriers for making the shipyards more efficient. It is almost impossible to shed jobs and to rationalize work standards and processes. The result is a bloated employee count that continues to grow in spite of low output. The private shipyards are reportedly dealing with the problem by heavy use of subcontractors.
The use of the tenders system is dominant in India, and all purchases by the government are by this process. This fact is of importance when discussing India's shipbuilding industry because a majority of the major yards are under government control. The results are market distortions within the industry. First, the government has built-in preferences for working with Indian suppliers. Second, low-bid selection dominates the process, and little consideration is given for previous performance or experience. Finally, personal contact and political muscle are great advantages, and corruption is reportedly widespread.
23 V. THE NINE MAJOR YARDSA. Cochin Shipyard24 25Cochin Shipyard, Ltd
Cochin 682015, India
Tel: 91-484-361181, 361165; Fax: 91-484-373902
E-mail: info@cochinshipyard.com
Rear Admiral R. Wig, Chairman and Managing Director
Cochin is one of the largest shipyards in India, and is the only yard capable of building ships up to about 125,000dwt. It was established in 1972 under technical collaboration with Mitsubishi Heavy Industries of Japan. The yard has the distinction of having the International Standards Organization [ISO] 9001 certification for shipbuilding, ship repair, and marine engineering training.
The shipyard is located on 190 acres, and is configured with two docks and three quays. The new construction dock is 255m long by 43m wide. The repair dock is 270m long by 45m wide. The facility has the largest hull fabrication shop in India; it covers over 300,000 square feet of area.
The company has consistently shown a profit. In the latest reporting year [2000], there was a net income [including subsidy] of US$9.5 million.
B. Hindustan ShipyardHindustan Shipyard, Ltd
Gandhigram, Vishakhapatnam 530005, India
Tel: 91 891 530 005
Fax: 91 891 577 502
E-mail: hsl02@itpvis.ap.nic.in
D. K. Varma, Chairman and Managing Director
The Hindustan Shipyard was established in 1941. The government took over operation of the facility in 1952, and acquired ownership in 1962. The facility was the first yard in India to be awarded ISO 9001 certification for quality assurance. The shipyard has a workforce of about 5000 that are capable of processing about 1600-1700 tons of steel/month. [By contrast, Avondale Shipyards, New Orleans, LA, employs about 6000 workers, and can process over 5000 tons of steel/month.] The main features of the yard are:
- three slipways of 30,000dwt capacity, each
- building dock of 80,000dwt capacity
- outfit jetty and ship quay of 457 meters length
- a two-berth wet basin
The yard has constructed a full range of commercial vessels from oil tankers to passenger vessels, off shore supply vessels, and drilling platforms. Additionally, it has manufactured railway bridge girders, and structural materials for industrial plants.
The yard has continued to be unprofitable for a number of years, with recent losses of Rs 62.19 crore
26 [US$13.3million] in 1997-98, Rs 29.67crore [US$ 6.3 million] in 1998-99, Rs 31,6 crore [US$6.8 Million] in 1999-2000, and Rs 38.89 crore {US$8.3 million] in 2000-01. The accumulated loss sustained by the government in its ownership of Hindustan Shipyard is approximated at Rs 1,071 crore [US$230 million]. In a report prepared for the Indian Ministry of Shipping in 2001, the following statement was made: ". . .Given the location of the yard [Vishakhapatnam] and the facilities for ship building and ship repairs that it has acquired with substantial government support, efforts should be made to secure a strategic partner for the company and disinvest GOI [Government of India] holdings."
27C. Hooghly Dock and Port EngineersHoogly Dock and Port Engineers
Martin Burn House, 2nd Floor, 01RN
Mukherjee Road, Calcutta 700001, India
Tel: 91 33 243 0417
Tlx: 021 5519 HDSLIN
E-mail: hdpeltd@cal2.vsnl.net.in
M. M. Kuila, Chairman/Managing Director
Hooghly Dock and Port Engineers is one of the oldest shipyards in India and has two production units: the Salkia Works and the Nazirgunge Works. Both operations have facilities for ship repairs and for new construction. The installed capacity in shipbuilding is 1100 tons/annum, and in ship repairs about 125 ships/annum. In 2001 the yard's management decided to increase emphasis on ship repairs, and revamped a repair unit at Kiddeport, near the Kolkata Dock System.
The operation has consistently suffered losses due to old and dilapidated machinery, low productivity, and shortage of building space and working capital. The government has been giving assistance for modernization of the two new construction units. During the last five years, a total of Rs 21.42 crores [US$ 4.6 million] has been infused into the facilities. In addition, there have been funds put forth to covers salaries and wages of employees. In spite of the infusions, the company has continued to lose money, with accumulated losses being Rs 167.07 crores [US $ 35.8 million] through March 31, 2000. The net worth of the company has been negative for over 10 years. The company has valuable land around Calcutta, and it has been recommended that the operation be closed, and the real estate sold.
28D. Central Island [Rajabagan] Dockyard29Central Island Water Transport Corporation
4, Farlie Place, Calcutta 700001, India
Tel: 91 33 2200718
Fax: 91 33 4796962
E-mail: ciwtc@cal-3vsnl.net.in
S. C. Dua, Chairman and Managing Director
The Central Island [Rajabagan] Dockyard is situated about three miles downstream [on the Hooghly River] of the Calcutta Dock System. The facility has three dry docks for construction and repair of small- and medium-size vessels. The operation has integrated facilities for hull fabrication, casting operations, machining, repair, and outfitting of machinery and equipment. There are about 1700 employees.
The yard was established in 1972, and consistently turns a small profit from its operations. In 2000, the net income, which was largely from ship repair, was Rs 39 crore [US$ 8.3 million]. It has been recommended that the operation be privatized as quickly as possible, there being no strategic or commercial rationale for public ownership.
E. Garden Reach Shipbuilders and Engineers3043/46 Garden Reach Road, Calcutta 700 024, India
Tel: 91 33 4698132
Fax: 91 33 4698150
Rear Admiral Vohra, Chairman and Managing Director
The company was originally organized in 1884 as a small factory on the Hooghly River, near Calcutta. It was taken over by the government in 1960. The enterprise was gradually expanded and modernized to meet growing maritime needs — especially those of the India Navy and Coast Guard.
The company has six facilities in and around Calcutta, and one operation in Bihar. Most of the facilities are ISO 9000 qualified. There is a 160-meter dry dock for new construction and repair. The dock can handle ships up to 26,000dwt. In addition to the dry dock Garden Reach has another building berth [162m x25m] and two slipways [90m x 77m and 55m x 44m] with supporting cranes. There is a repair and overhaul shop for overhauling medium- and slow-speed diesel engines.
There are approximately 9,000 employees in the total Garden Reach operation, making it one of the two largest shipyard employers in the country. As mentioned earlier, the yard is under the administrative control of Ministry of Defense. It has consistently shown an after-tax profit over the years. In 2001-02, its latest reporting year, the net profit was Rs 15.93 crore [US$ 3.4 million]. That number is slightly below the average for the annual profits reported through the previous decade.
According to JANE'S
31 there are two naval vessels currently under construction at Garden Reach. The first is BETWA, a 5000-tonne frigate with steam turbines, scheduled for commissioning in 2003. The second is KARMUKH, a 1350-tonne corvette, also scheduled for commissioning in 2003.
F. Goa Shipyard, LTD32Vasco-da-Gama, Goa 403 802, India
Tel: 91 834 512152
Fax: 91 834 513260
Rear Admiral Sampath Pillal, Chairman and Managing Director
The Goa Shipyard [GSL] was established in 1957 as a small barge-building yard. Today it is a completely integrated facility and participates in the design, development, construction, and commissioning of a complete range of commercial and military ships. It is also engaged in repair and modernization. Its workforce is about 2150 persons. The yard is publicly owned, and under the administrative control of Ministry of Defense.
GSL has three large self-supporting all-weather building bays. The largest of the three can accept a hull of 105m x 12m x 8.5m, and a maximum weight at launch of 1000tons. There are also four slipways with the largest capable of launching a ship of 2500 tons. There is an outfitting jetty with a length of 180meters. The yard has a shipbuilding capacity for producing 5.25 ships/year; however, utilization has consistently been well under that number.
In the latest reporting year [2000-01], total revenue was Rs 190 crore [US $40.7 million]. Net profit, after tax, was Rs 4.9 crore [US$ 1.05 million], which was a slight improvement from the preceding year. At the beginning of the 2001-02 year, work was underway on an advanced offshore patrol vessel, a hydrographic survey ship, a missile craft, a damage control simulator, and three fast patrol vessels. Total backlog was Rs 463 crore [US$ 99.1 million].
G. Mazagon Dock LimitedDockyard Road, Mazagon, Bombay 400
010, India
Tel: 91 22 860561 Fax: 91 22 866237
E-mail: mdimktg@bol.net.in
Rear Admiral D. V. Taneja, Director, Shipbuilding
Mazagon Dock [MDL] is the largest shipyard in India, employing over 10,000 workers. The yard has designed and constructed surface combatants [6700ton destroyers], submarines, cargo vessels, tankers, tugs, dredges, and offshore structures. The yard has ISO 9001 accreditation.
MDL has the skills to implement CAD/CAM/CIM using the latest design software, operating from a number of workstations. There is an impounded wet basin with dimensions of 274m x 26.2m x 9.14m. Additionally, there are three slipways, with two capable of handling ships up to 27,000dwt, and the third having a capacity of 16,000dwt. Steel fabrication facilities include 600-ton rolls, latest technology welding systems, and bending and shaping machines. In addition, MDL is authorized to use the facilities at Mumbai Port Trust. These facilities include a 305m dry-dock, and a 152m dry-dock.
An indication of the capabilities of the yard is evidenced by the fact that the Indian Navy has designated it as the facility to build two attack submarines that would be delivered by 2005.
33The yard is under the administrative direction of the Ministry of Defense. No financial numbers relating to MDL's operation were found during the literature search.
H. ABG Shipyard Group [includes a yard at Surat and at Magdala]
ABG Shipyard Group
5th Floor, Bhupati Chambers
13 Mathew Road, Opera House
Mumbai 400 004
Tel: 022 363 5253 Fax: 022 364 9236
E-mail: abgshpyd@gia-sm01.vsnl.net.in
Mr. R. Nakra, Managing Director
ABG is the largest privately owned shipyard in India, and is considered the most efficient. Its annual sales/employee monetary statistic is about Rs 750,000 [apx US$16,150], a number much better than that at any other yard in the country.
34 [As a comparison, the average revenue per employee in the U.S. shipbuilding industry is about $115,000.]
The company has two docks at its disposal. One is a graving facility located at the ABG yard in Surat, the second is a ship-lift located at the Magdala operation. [The Magdala yard may not still be in operation.]
I. Bharati Shipyard, Ltd35Bharati Shipyard Ltd
Combay Mutual Building
Sir PM Road, Mumbai 400 001 India
Tel: 91-22-2661194; Fax 91 22 2660601
E-mail: bharati@bom5.vsnl.net.in
Mr. V. Kumar, Director, or Mr. P.C. Kapoor, Director
Bharati Shipyard is one of the two leading shipyards in the private sector. It is engaged in the design and construction of sea and coastal craft up to a maximum of approximately 25 meters in length. The wet basin is reported to have a capability of accommodating up to eight vessels simultaneously.
The yard has three slipways, with a 58 meter span gantry crane. The yard also has a full-fledged design organization that performs its own designs, and also offers its capabilities to other organizations.
One of its major products is tugs; over 40 have been delivered in the last few years. One was the largest built in India.
VI. CONCLUSIONS OF THE LITERATURE INVESTIGATIONIt is universally acknowledged that India's shipyards are not internationally competitive on any reasonably applied measure. An Indian maritime consulting organization cited the following as the reasons for this condition,
36 and it is concluded they are appropriate:
- lack of new investments in machinery and equipment,
- deterioration of existing machinery and equipment,
- use of obsolete methods and systems,
- lack of suitable training for upgradation of skills,
- life emphasis on professional management techniques,
- supply bottlenecks for raw materials and spares,
- over dependence on public sector,
- cumbersome government procedures, and
- extremely low labor productivity.
It appears that the Indian government recognizes this situation, and also recognizes the strategic importance of making improvements. This is a positive sign. There is still confusion [both in the government and in industry] however, as to the best ways to plan for, and effect, the needed changes. The standard litany for improvement for the past decade has been to reduce public ownership, with the common belief that the private sector could improve the efficiency of any operation. But statistics seem to indicate that the solution is not that simplistic in India, and that there are other approaches that should also be considered.
The original purpose of this study was to examine the paradox that exists in India in which some specific sectors, especially information technology, have become world-class in their competitive structure, while others, like shipbuilding, have languished. One of the conclusions is that India has generally ignored this paradox, and has made no focused effort to transfer its information technology into the lagging sectors. Evidently the country's planners decided that available [and limited] resources, when applied, could produce more marginal benefits to the nation by being expended in the information technology sector than in the less competitive industries.
Importantly, however, India has been taking onboard the concepts of an internationally minded, global society — especially since 1991 — and is transforming itself into a strong player on the world stage.
37 It is expected that the government will accelerate its support of the lagging industrial sectors because of their critical importance to the nation's long-term, overall prosperity. The maritime industry will be at the forefront of that acceleration to assure the emplacement of the necessary transportation infrastructure needed for India's global society transformation, and future economic growth. The specifics of the maritime sector's support will include [1] acceleration of the transfer of information technology into shipping and shipbuilding activities, [2] action to reduce the negative effects of laws and governmental processes on industrial efficiency, [3] major investment in supporting public infrastructure, and [4] increased emphasis on education programs associated with shipping, ship acquisition dynamics [including both the commercial and military sectors], and ship design/production integration.
India's shipbuilding industry will reduce some of its competitive disadvantage by 2010, but complete elimination of that gap will probably take 20-25 years [or longer],
38 and must be accompanied by transformation of the sector's operating structure, physical facilities, the supply base, and the supporting education system.
Prepared by:
Howard M. Bunch, Emeritus Professor
Department of Naval Architecture and Marine Engineering
University of Michigan
Retirement Address:
1121 West Avenue D
San Angelo, TX 76901 USA
Tel: +1-325-482-8585 Fax: +1-325-944-0994
e-mail: hbunch@umich.edu
____________________________________
1 All India Management Association, Indian Business: Strategies for Competitiveness, 1st Edition, 1999. Amexcel Publishers, Ltd., New Delhi, ISBN: 81-7446-158-2. This book was the singular reference for the entire section. Where specific quotations occur, they are independently cited by page number.
2 Ibid., pg 22-23.
3 Ibid, pg 24.
4 Ibid, pg 25.
5 E-mail correspondence, Govardhana Rangan, Dow Jones India Representative, 4June03.
6 Ibid, pg 26-27.
7 Press Trust of India, New Delhi. February 11, 2003.
8 Op Cit, All India Management Association, pg 129.
9 Roy-Chaudhury, India's Maritime Security, Institute for Defence Studies and Analysis, New Delhi. 2000. 208pp. ISBN 81 86019-29-4.
10 "State of the Economy for Quarter Ending March 2003,: Confederation of Indian Industry, New Delhi.
11 "The India Infrastructure Report: Policy Imperatives for Growth and Welfare" [1996]
12 "Misra, S.C., O.E. Sha, and R.E. Gokarn, "Modularized Ship Designs for Competitive Construction in India," Transactions, Vol 110, 2002, SNAME, pgs 279-299. ISBN 0-939773-38-4. [This paper shows an awareness of the importance of standardization and modularization of ship design as an important first step in becoming internationally competitive. It also reveals some of the infrastructure problems facing the shipbuilding industry if it is to change. The absolute need to address questions of manufacturing optimization in PARALLEL with questions of design is ignored; indeed, the text seems to indicate that manufacturing questions are only formerly addressed at the end of the design process. [see Figure 2 in the manuscript]. Other comments in the manuscript confirm the relegation of production optimization questions to the contract design phase, or later.].
13 Ibid.
14 Ibid.
15 M. Ramachandran, "India's Shipping Industry, Critical Issues," Yojana, January, 1999, pg 18.
16 P. Manoj, "Modified subsidy policy to cover private shipyards," Financial Daily Business Line, Sept 19, 2002.
17 cf ante, Misra, S.C., et al., pg 5.
18 Report of 'i-maritime Consultancy', an undated web page document believed to have been prepared in 2001. [http://www.imaritime.com/shipyard/repair/default.htm].
19 GLOBAL ARMS TRADE, " Chapter 10: The Defense Industry of India," undated [estimated as about 1992 from the dates of the references therein]
20 Goa Shipbuilders, Ltd Directors Report, 2000-01, pg 3 [http://www.goashipyard.co.in/html/directors_report.htm]
21 cf ante, P. Manoj, Financial Daily Business Line.
22 It must be stated, however, that the reduction of its involvement has been confined to reducing its subsidy support. Privatization of two shipyards, though approved several years ago, have not moved beyond the planning stage.
23 "Finding Market Opportunities in India, Part II," Norwegian University of Science and Technology, undated [estimated as 2000, on basis of reference dates], [http://www.stud.ntnu.no.studorg/ib/India/Shipbuilding.htm]
24 Cochin Shipyard Annual Report, 1999
25 http://www.cochinshipyard.com
26 A "crore" is 10 million Rupees [Rs], and is the equivalent of approximately US$ 214,000.
27 "Rationalization of the Functions, Activities, and Structure of the Ministry of Shipping, 2001," pg 11 [http://expenditurereforms.nic.in/VSexpenditurereforms/shipp9.pdf]
28 OpCit, pg 13.
29 http://www.ciwtc.com/rajabagan.html
30 http://www.grse.nic.in/vsgrse/
31 Jane's Naval Construction and Retrofit Markets, November, 1999.
32 http://www.goashipyard.co.in/
33 "Jane's Defense Weekly," 30 Apr 97.
34 N. Sharma, "MoST draws up revamp plan for HDPE," India Express, 1/22/98
35 http://www.indian-ocean.org/ind_doc/services/15a.htm
36 Cf ante, page 6.
37 Refer to the book, The Tipping Point, by Malcolm Gladwell [Little Brown and Company, New York, 2000. ISBN: 0-316-31696-2] for an expanded discussion of the accelerated growth rate that suddenly occurs in a society when a critical point is reached. It is believed that tipping point has occurred in India relative to its transformation into a global society.
38 The amount of time to make a competitive transformation should not be surprising. Both Japan and Korea required over 20 years to achieve a dominant market share in commercial ship deliveries. And both countries made very large, focused commitments to the effort. In each of those instances, the governments essentially decreed [by law, administrative edict, sector protection and MASSIVE financial investment] that the industry would succeed. And both did. Japan went from about three percent penetration in 1950 to over 50 percent share in 1970, and Korea went from zero penetration in 1975 to about 40 percent market share in 1999.
VII. APPENDIX: LISTING OF INDIAN SHIPYARDS [source:
http://www.projectsmonitor.com/detailnews.asp?nswsid=5320]
There are 28 shipyards in the country. These include 7 in the Central public sector, 2 under state governments and 19 in the private sector.
The Public Sector yards are: Hindustan Shipyard Ltd, Visakhapatnam; Cochin Shipyard Ltd, Kochi; Hooghly Dock & Port Engineers Ltd, Kolkata; Central Inland Water Transport Corporation, Kolkata; Mazagon Dock Ltd, Mumbai; Garden Reach Shipbuilders & Engineers Ltd, Kolkata; and, Goa Shipyard Ltd, Goa. The two shipyards under the state governments are: Alcock & Ashdown Co. Ltd, Gujarat, and The Shalimar Works Ltd, Kolkata.
Project Monitor lists these and other shipbuilding units.
ABG ShipyardActivity: Shipbuilding and structural fabrication.
Bhupati Chambers,
5th Floor, 13 Mathew Road,
Mumbai-400004.
Tel: 22-3635253;
Fax: 22-3649236;
E-mail: abgshpyd@gia-sm01.vsnl.net.in
Aggarwal Shipping GroupActivity: Purchase and sale of demolition vessels.
334, Madhav Darshan,
Waghawadi Road,
Bhavnagar, Gujarat-364001.
Tel: 278-525712-14;
Fax: 278-431368 & 411198;
E-mail: sanjay@agrawalship.com
Alang MarineActivity: Shipbuilding and repairs.
Gitanjali Complex,
2nd Floor, Mangalsinhji Road,
Bhavanagar, Gujarat-364002.
Tel: 0278-22887/889;
Fax: 0278-28809
Alcock Ashdown (Gujarat)Activity: Inland, sea-going and harbour craft.
Old Port, Post Box No.28,
Bhavnagar, Gujarat-364001.
Tel: 0278-426305/26;
Fax: 0278-428342
Anvin Fibre GlassActivity: Speed boats, pedal boats, rowing boats, kayaks etc.
Kettezhethu Kadavu,
Maradu, Kerala-682304.
Telefax: 484-301107;
Mobile: 98470-35907;
E-mail: anvinfibre@satyam.net.in
Arcadia ShippingActivity: Vessels and barges.
222 Tulsiani Chambers,
Nariman Point, Mumbai-400021.
Tel: 22-2831540/49;
Fax: 22-2872664;
E-mail: jesi@arcadiashipping.com
Ashit Shipping ServicesActivity: Barge operations.
1st Floor, Ashish Jyot,
Sanskar Mandal, Bhavnagar,
Gujarat-364002.
Tel: 278-564052-53, 563105 & 565494; Fax: 278-564051;
E-mail: mailbox@ashitshipping.com
Athreya ShippingActivity: Shipbuilders.
204, Damodar Chambers,
Opp. Syndicate Bank,
Vasco Da Gama, Goa-403107.
Tel: 834-513032;Fax: 834-511596;
E-mail: atreya_shipping@theoffice.net
B. Ahmed Hajee Mohiudeen & SonsActivity: Shipbuilding.
Thumbay, Mangalore-574170.
Tel: 08255-22755/355; Fax: 08255-22255;
E-mail: bawood@vsnl.com
Bharati ShipyardActivity: Tugs, ferries, fishing vessels, barges etc.
Bombay Mutual Building,
Sir P.M. Road,
Mumbai-400001.
Tel: 22-2661194/4178;
Fax: 22-2660601;
E-mail: bharati@bom5. vsnl.net.in
Bombay Boat Builders & Co.
Activity: Crafts, inflatables and marine engineering items.
Plot No.A-2 1231,
GIDC, Sarigam, Gujarat.
Tel: 83279
Butt's Clermont HouseboatsActivity: Supplier of houseboats.
A-2 South Extension,
Part-II, New Delhi-110049.
Tel: 11-6255383/9215;
Fax: 11-6254438;
E-mail: bashirb@hotmail.com
Central Inland Water Transport CorporationActivity: Inland water vessels at Rajabagan Dockyard.
4, Fairlie Place,
Kolkata-700001.
Tel: 33-2202321 (4 lines);
Fax: 33-2205364;
E-mail: ciwtc@cal-3vsnl.net.in
Chowgule & CompanyActivity: Ore carrying barges, grab and suction dredgers, deep-sea fishing trawlers, hopper barges etc.
Loutolim Yard,
Near Borim Bridge,
Loutolim, Goa-403718.
Tel: 832-777639;
Fax: 832-777046;
E-mail: cclsbd@goatelecom.com
Cochin ShipyardActivity: Leading shipyard.
The Public Relation Officer,
The Cochin Shipyard Ltd,
Kochi-682015.
Tel: 484-361181/366340;
Fax: 484-370897;
E-mail: info@cochinshipyard.com
Dempo Ship Building and EngineeringActivity: Ship designing from concept to commissioning.
Dempo House,
Campal, Panaji, Goa-403001.
Tel: 832-226281;
Fax: 832-225098;
E-mail: dsel@dempos.com
Garden Reach Shipbuilders & EngineersActivity: Modern warships, commercial vessels, small harbour crafts, and fast and powerful patrol vessels.
43/46, Garden Reach Road,
Kolkata-700024.
Tel: 33-4698100 to 8113;
Fax: 33-4698150
Goa ShipyardActivity: Shipbuilders and repairs.
Vasco-Da-Gama,
Goa-403802.
Tel: 832-512152 (5 lines), 513954 & 512359;Fax: 832-513870 & 513943
Goodwill Engineering WorksActivity: Boat building.
73, Casa Major Road,
Egmore, Chennai-600008. Tel: 44-8232067;
Fax: 44-8261208
Hooghly Dock & Port EngineersActivity: Two units-Salkia and Nazirgunga works.
Martin Burn House,
2nd Floor, 1, R.N. Mukherjee Road,
Kolkata-700001.
Tel: 33-2430417/0419;
Fax: 33-2430418;
E-mail: hdpeltd@cal2.vsnl.net.in
Hindustan ShipyardActivity: Commercial and naval combat ships.
Gandhigram, Visakhapatnam,
Andhra Pradesh-530005.
Tel: 891-578450 to 69;
Telefax: 891-577502;
E-mail: hsl02@itpvis.ap.nic.in
Maldan EngineeringActivity: Water sports and small boat building.
F-10, Shantinagar Co-op. Industrial Estate,
Vakola, Santacruz (East),
Mumbai-400055.
Tel: 22-6132299 & 6182132;
Fax: 22-6117687/3682;
E-mail: maldan@bom2.vsnl.net.in
Marine Engineering WorksActivity: Shiphouse frames.
Near Dhobi Talao Vakharia Bunder,
Bilimoria,
Gujarat-396321.
Tel: 02634-86325
Matha MarinesActivity: Fibre glass vessels.
Nettoor, Ernakulam,
Kerala-682304.
Tel: 484-700567;
Fax: 484-370498;
Mobile: 98460-25021
Mazagon DocksActivity: Destroyers, frigates, missile boats, corvettes, submarines and survey vessels for the Navy; offshore patrol vessels and pollution control vessels for the Coast Guard; cargo ships, passenger ships, dredgers, tugs, fishing trawlers and barges for shipping companies; and, offshore supply vessels, multi-purpose support vessels, platforms, pressure vessels and packaged skids for the oil and energy sector.
Dockyard Road, Mumbai-400010.
Tel: 22-3703029;Fax: 22-3738147;
E-mail: mdimktg@bol.net.in
Modern Maintence Products302/303, Gupta Bhavan, Ahmedabad Street,
Carnac Bunder, Mumbai-400009
Tel: 375 3442, 375 3445
Fax: 373 8854
E-mail: mmp@vsnl.com
National Ship Design and Research CentreActivity: Ship design/consultancy.
Gandhigram, Visakhapatnam,
Andhra Pradesh-530005.
Tel: 0891-578360-64;
Fax: 0891-577754;
E-mail: info@nsdrc.com
N.N. Shipbuilders & EngineersActivity: Shipbuilding, propellers, shafts, fittings etc.
602-B, Poonam Chambers,
Worli,
Mumbai-400018.
Tel: 22-4925514/1368;
Fax: 22-4936353;
E-mail: Panamax@bom5.vsnl.neLin
Overseas Maritime AgenciesActivity: Shipbrokers, tug boat and barge owners.
3, Shivam Complex, Modi Compound,
Near Relief Talkies, Pannch Batti,
Bharuch, Gujarat.
Tel: 2642-51650;
Fax: 2642-51652;
E-mail: overseas@worldgatein.com
Samudra Engineering CompanyActivity: Fibre glass boats, ski boats, speed boats, pedal boats, para sails, tourist boats, rowing boats, fishing boats, ambulance boats and sea canoes.
P.B. No.10, Chemical Industrial Estate,
Aroor, Alapuzha district,
Kerala-688534.
Tel: 478-874027 & 875279;
Fax: 478-872942;
E-mail: samudra@md2. vsnl.net.in
Sancoale ShippingActivity: Barges from 500 DWT to 2300 DWT; supplier of self-propelled barges for lighterage in India; and, arranges barges for inland navigation to mine-heads and plant jetties.
Below Hotel La-Paz,
Opp. Municipal Garden (East),
Vasco-da-Gama, Goa-403802.
Tel: 832-512651/504 & 515446;
Fax: 832-511751;
E-mail: prakash@sancoale.com
Sesa GoaActivity: A captive fleet of 11 barges with a total floating capacity of 20,000 DWT.
Sirsaim, Tivim, Bardez,
Goa-403502.
Tel: 0832-298357;
Fax: 0832-298439
Siddarth Engineering ServicesActivity: Barge building.
Near Laxmi Petrol Pump,
Vaddem, Vasco, Goa.
Tel: 832-512106 & 510871/2/3;
Fax: 832-510113;
E-mail: sales@siddeng.com
Sunny Water Sports ProductsActivity: FRP rowing boats, carbon fibre oars and paddles.
A1/A1, Indraprastha Apartments,
Laxmi Nagar,
Chinchwad, Pune-411033.
Tel: 20-768344/398 & 760364;
Fax: 20-762150;
E-mail: info@sunnywatersports.com
Super Marine ServicesActivity: Tug and barge building.
Super House, 109/117,
Next to Anoop Tele Building,
Reay Road (West), Mumbai-400010.
Tel: 22-3723307;
Fax: 22-3734492;
E-mail: super@bom4.vsnl.net.in
Tebma ShipyardsActivity: Ocean-going vessels, launches, dredgers, tugs, work boats, floating cranes and barges.
2nd Floor, Khaleeli Centre,
149 Montieth Road,
Chennai-600008.
Tel: 44-8553050/3052;
Fax: 44-8553655;
E-mail: tebma@vsnl.com
The Shalimar Works (1980)1 Foreshore Road,
Shibpur, Howrah,
Kolkata-711102.
Tel: 33-6686056/477
United ShippersActivity: Ship and barge owners.
United India Building, 2nd Floor,
Sir P.M. Road, Fort,
Mumbai-400001.
Tel: 22-2662232/2334; Fax: 22-2664887;
E-mail: sales@unitedshippers.com
Wadia Boat BuildersActivity: Motor boats and launches in wooden, fibre glass and steel.
453/1, Hanuman Street,
Post Box No.85,
District Bulsar, Bilimora,
Gujarat-396321.
E-mail: info@ourbilimora.com
Western India ShipyardActivity: Largest composite ship repair facility in the private sector.
P.O. Box No.21,
Mormugao,
Goa-403803.
Tel: 0832-520252-7;
Fax: 832-520258;
E-mail: wisl.commercial@vsnl.net.in
Demand drivers: Being a global industry, the fortunes of the shipbuilding industry are closely tied to the growth in world trade. The demand for ships can be classified into incremental demand and replacement demand. In case of incremental demand, growth in world trade increases the demand for vessels, which in turn leads to higher freight rates. The resultant higher freight rates trigger the demand for new vessels from the shipping companies. In case of replacement demand, the demand for vessels is dependent upon the age profile of the existing fleet as well as steel prices. Every ship has a useful life (25 to 30 years) after which it becomes uneconomical to operate them. Replacement demand is triggered when ships approach the end of their useful life. Higher steel prices also decide the extent of replacement demand as they lead to an increase in value of ships to be scrapped. 
Major players in the shipbuilding countries: Global market environment in the shipping industry has undergone fundamental changes over the last two decades. For nearly three decades in the post World War II era, shipbuilding industry was dominated by Europe and the US. Shipbuilding being a labour intensive industry, the cost of labour plays an important determinant in a country’s competitiveness position vis-à-vis others. With rising labour cost, shipbuilding activities have slowly moved away from ‘high wage’ Europe and US to low-wage Asia. Over the past 25 years, we have observed the decline of shipbuilding capacity in Europe coinciding with the growth of Japanese shipbuilding. As can be seen in the chart, the share of European Union has declined from 28% in 1983 to 7% in 2005. With the rising labour cost in the late 1980s, Japan was forced to scale down its shipbuilding activities and Korea emerged aggressively. In the past few years, China is taking away an increasingly larger market share of the new building contracts. 