India’s Leading Shipyard Signs US$54M Deal with German Shipping Company for Cargo Vessels

Geostrategic Importance of Shipbuilding

In addition to the economic considerations, indigenous shipbuilding bears huge relevance to India’s geopolitical realities.

The waters of the Indian Ocean Region (IOR), which India regards as its backyard, holds 40 percent of offshore oil reserves, 65 percent of strategic raw materials, 31 percent of gas, etc. Furthermore, the IOR is home to 30 percent of the world’s population, potentially providing a large consumer market.

All these factors make the IOR an area of interest to extra-regional powers who maintain a significant naval presence in the area with the purpose of controlling choke points to the Red Sea, Persian Gulf and the Malacca Straits.

Among these extra-regional powers, most concerning to India is China and its growing naval presence in the IOR as well as its naval cooperation with Pakistan and its relentless efforts at creating more and more overseas bases after Karachi and Gwadar in Pakistan, Djibouti on the Horn of Africa, and now possibly Ream in Cambodia.

In the face of this growing Chinese naval presence in the IOR, it is imperative for India to bolster its maritime power to not only protect its coastline but also its various interests in the Exclusive Economic Zone (EEZ) such as fishing and extraction of hydrocarbons, minerals and other seabed resources, etc.

Therefore, expansion of shipbuilding becomes essential for India, as indigenous shipbuilding capability constitutes a major chunk of a country’s maritime power. In fact, India’s biggest geopolitical challenger, China, serves as a great example in this regard.

China is at present the biggest naval power in numerical terms after overtaking the US Navy in fleet size sometime around 2020. One of the major contributors to this success is China’s commercial shipbuilding industry, the largest in the world.

In the last two decades, China has presided over a tremendous increase in its shipbuilding output. In the year 2001, China ranked 3^rd among the global shipbuilding industry and its shipbuilding activity was just 6%, which has now reached 50% of the total global shipbuilding output according to China Association of the National Shipbuilding Industry (CANSI), which reported that Chinese shipbuilders delivered 42 million DWT of ships in 2023.

With this spectacular growth in its shipbuilding output, China’s commercial shipbuilding industry was able to acquire the capital and technological know-how through foreign contracts that enabled the construction of increasingly sophisticated models of all types of naval ships and weapons systems, thereby subsidizing and supporting the military shipbuilding efforts of the country.

However, a country’s maritime power is not limited to its firepower, and Chinese leaders do understand this, as is evident from their successful efforts to capture the global shipping industry by leveraging China’s vast shipbuilding industry.

China, on the back of its ability to churn out more vessels than any other country as well as its increasing share in global ship leasing and financing market, boasts the largest commercial fleet in the world by gross tonnage, and second largest after Greece in terms of cargo capacity.

As per the United Nations Conference on Trade and Development’s (UNCTAD’s) Review of Maritime Transport 2023, Chinese shipowners claimed 11.04% share of the world fleet when measured by value, second to Greece with 11.8%. China took sixth place in the leading flags of registration and in the year 2022, the Chinese flag registered at the 2^nd fastest growth rate of 5.4%.

With such level of dominance in global supply chains, China possesses the capability to bring its adversaries to their knees during wartime. For instance, the US economy relies heavily on shipping networks that are increasingly under Chinese control for a substantial portion of its imports.

A US Congressional advisory body has issued a warning that China could use shipping data to track and interfere with the movements of US cargo, including its military equipment, much of which is carried on commercial vessels.

Lessons From China’s Shipbuilding Story

When it comes to developing domestic shipbuilding capacity, India could draw some lessons from the growth of China’s shipbuilding industry, especially the major reforms that China initiated in its military industry in 1999, which created huge shipbuilding capacities for both military and commercial uses.

As part of these reforms, Corporations of five military industries involved in nuclear, astronautics, aeronautics, shipbuilding and weapons sectors were overhauled to create 10 new military corporations, which gave birth to two Corporations for Ship-Building – China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Corporation (CSIC).

Among the objectives of these reforms, was the implementation of Chinas ‘military-civil fusion’ (MCF) strategy which involves combining the military, civilian and commercial resources of the country to promote the country’s all-inclusive national power.

These reforms basically consolidated China’s shipbuilding infrastructure including shipyards and research institutes under two large government-owned holding companies that are CSSC and CSIC, which enabled their subsidiary commercial and defense shipbuilding enterprises to utilize infrastructure and labour optimally and distribute the workload in such a way as to avoid overhead costs. (Rear Admiral Monty Khanna, AVSM, NM, How Does China Build Its Warships At A Fraction Of Our Cost?, link)

This also allowed seamless sharing of knowledge such as lessons and best practices learnt during the construction of ships from one facility to other, which shortened the learning curve across China’s entire shipbuilding sector significantly. This helped China to increase the scale of ship production greatly, as it enabled multiple shipyards to construct the same/similar class of ship.

This is a very useful lesson for India, considering a very well-known fact of how GRSE had to relearn several lessons relating to the Brahmaputra-class (Type 16A or Project 16A) guided-missile frigates for the Indian Navy, an enhancement of the Godavari class programme executed by Mazagon Dock Shipbuilders Limited (MDL) based in Mumbai. This was because MDL was obviously not forthcoming when it came to sharing its experience with GRSE, its commercial competitor.

Consolidation of China’s shipyards also enabled single point sourcing of equipment which led to standardization of equipment across diverse classes of ships as well as streamlining of logistics and reduction of training burden. This also resulted in the creation of economies of scale due to large order quantities.

India could follow a similar roadmap to success in shipbuilding. The Indian Navy has cultivated its own in-house design capabilities as well as developed domestic sources of equipment. The advances in ship design and construction technology that have been realized as a result of the Indian Navy’s efforts could be incorporated in commercial shipbuilding sector instead of the latter trying to re-invent the wheel.

Furthermore, the ancillary industry supporting the Indian commercial shipbuilding companies has remained neglected and underdeveloped due to poor demand from the shipbuilding industry. As stated earlier, 60-70% of the cost of a vessel is for raw material and electronics, engineering and electrical equipment.

A substantial portion of these critical component such as propellers, marine gas turbines, high-capacity main engines, shafting, gear boxes, high-capacity diesel generators, control systems, etc are largely imported.

However, the ancillary industry providing raw material to the defense shipbuilding is comparatively better developed than the one providing for commercial shipbuilding because of the Indian Navy’s indigenisation drive. So, the commercial shipbuilders could make use of these ancillary industries supported by the Indian Navy.

 

Tanmay Kadam is a geopolitical observer based in India. He has experience working as a Defense and International Affairs journalist for EurAsian Times. He can be contacted at tanmaykadam700@gmail.com