One of India’s major state-owned shipbuilding company has been awarded a USD 54 million contract by a German shipping company for building 4 commercial ships of 7,500 Dead Weight Tonnage (DWT) each.
Kolkata-based Garden Reach Shipbuilders & Engineers (GRSE) has signed an agreement with Carsten Rehder Schiffsmakler and Reederei GmbH & Co., KG Germany for the construction and delivery of four multi-purpose vessels, with an option to build another four ships in near future.
The vessels will be 120 metres long and 17 metres wide with a maximum draft of 6.75 metres. Each of them will have a cargo carrying capacity of 7,500 metric tonnes, GRSE said in a statement.
“The vessels will have a single cargo hold each to accommodate bulk, general and project cargoes. Containers will be carried on hatch covers. The ships have been specifically designed to carry multiple large windmill blades on deck,” the company’s statement said.
The aforesaid contract is approximately worth USD 54 million (INR 450.69 Crores) and is to be executed within 33 months (or 2 years and 9 months).
State-run GRSE is a ship building and repairing company under the administrative control of the Indian Ministry of Defence (MoD). In addition to commercial vessels, the company also builds warships and other vessels for the Indian Navy and the Indian Coast Guard.
Furthermore, the shipyard has also been exporting warships since a decade. India’s first warship to be exported, the CGS Barracuda, an Offshore Patrol Vessel exported to Mauritius in 2014, was built by GRSE.
In 2021, PS Zoroaster, a Fast Patrol Vessel built by GSRE was exported to Seychelles. The ship returned to GRSE earlier this year for a refit that has been completed.
The shipyard is currently working on six patrol boats and a TSH dredger for Bangladesh. Last year, GRSE delivered the MV Ma Lisha, a passenger-cum-cargo ocean-going ferry to the Cooperative Republic of Guyana, which is the largest and most advanced ferry in that country at present.
It is worth recalling that Prime Minister Narendra Modi, while addressing the Global Maritime India Summit 2023, had said that India is going to become one of the top five ship-building nations in the coming decade.
For the past nine years, the Indian government under the leadership of Prime Minister Modi has been undertaking systemic measures to foster self-reliance in the shipbuilding sector, and for the overall development of the country’s maritime sector.
These measures, which will be discussed in detail in the next section, are part of the Modi government’s larger ambitions to make India one of the top 3 economies in the world, and they stem from the realisation that strong maritime capabilities are essential for India’s economic growth and overall standing in the world.
This is because, throughout history, ships have been instrumental in realizing economic prosperity through trade and commerce as well as projecting military power, and most powerful nations were those who managed to control the seas.
Current State Of Indian Shipping And Shipbuilding
India’s shipbuilding capabilities have not been able to keep up with the country’s surge in trade, which also includes imports of energy and exports of refined oil products, forcing it to rely on foreign carriers for its shipments.
Maritime transport happens to be the prime medium of India’s international trade, carrying almost 95% of country’s trade by volume and 68% by value. Of this, only about 8% was carried on Indian-flagged or owned vessels in 2018, per a report authored by India’s National Productivity Council (NPC) and KPMG.
According to the unnamed Indian government officials cited by Reuters, Indian companies paid freight costs of $85 billion in the financial year 2019/20, of which $75 billion was paid for use of foreign vessels.
At present, India has a fleet of around 1,500 large vessels which includes tankers, gas carriers, container ships and dry bulk carriers.
Per a report by the National Maritime Foundation (NMF), a government-funded Indian think tank, over 50 percent of this fleet, both in terms of number and gross tonnage, is more than 15 years old, with almost 35 percent crossing the 20-year mark. To put this in perspective, we must see the age of Indian fleet in comparison to the average age of the international fleet, which is 15.06 years.
Therefore, at least 50 percent of India’s current overseas fleet is going to need replacement in the next decade.
Going by the latest statistics put out by the Ministry of Ports, Shipping & Waterways (MoPSW), the Indian shipbuilding industry comprises a total of 42 companies, of which seven are in the public sector with six of them being under the Central Government and one under a State Government.
The overall capacity of public sector shipbuilders is over 2 lakh DWT, of which, the Cochin Shipyard Ltd. (CSL) possess the maximum ship building capacity (110 thousand DWT) followed by Hindustan Shipyard Ltd. (HSL) (80 thousand DWT), Goa Shipyard Ltd. (GSL) (4.5 thousand DWT) and Hooghly Cochin Shipyard Ltd. (HCSL) (3.5 thousand DWT).
The remaining 35 private sector shipyards have a capacity of around 1 lakh DWT, in which, Shoft Shipyard Pvt. Ltd. (SSPL) possess the maximum ship building capacity (10 thousand DWT) followed by San Marine, Mandovi Drydocks Ltd. (MDD), Chowgule & Co. Ltd. (C&CL) and Waterways Shipyard Pvt. Ltd. (WSPL) (8 thousand DWT) each and Yeoman Marine Service Ltd. (YMSL) (5 thousand DWT).
While India certainly has the potential to become one of the top shipbuilding countries in the world, it has a long road to travel.
For instance, shipyards in China, South Korea, and Japan delivered 38.1, 24.8, and 22.5 million DWT of ships respectively in the year 2021, whereas the Indian shipbuilding industry delivered an anaemic 0.03028 million DWT (30.28 thousand DWT) during 2020-21. Not much has changed in two years, as even at the end of Financial Year (FY) 2022-2023, both the public and private sector companies delivered a total of 206 ships with 0.03253 million DWT (32.53 thousand DWT).
The Indian government has undertaken several measures to ramp up the shipbuilding sector in the country, most notable among them, is the Shipbuilding Financial Assistance (SBFA) approved in 2015, which offers financial support to Indian shipyards up to 20 percent of the lower of contract price or the fair price or actual payments received of each vessel built and delivered by them within three years, or six years in the case of specialised vessels. This SBFA was meant to be valid for ten years from 2016 to 2026.
Furthermore, there is the Right of First Refusal (ROFR) policy which mandates the government agencies and CPSUs to prioritize Indian shipyards for vessel acquisition or repairs until 2025, with some guidelines to enable small shipyards’ participation.
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