International Journal of Civil Engineering and Technology (IJCIET)

Volume 9, Issue 7, July 2018, pp. 715–723, Article ID: IJCIET_09_07_074

Available online at http://www.iaeme.com/ijciet/issues.asp?JType=IJCIET&VType=9&IType=7
ISSN Print: 0976-6308 and ISSN Online: 0976-6316

© IAEME Publication Scopus Indexed

AN ANALYSIS OF INDIAN SHIPBUILDING AND

REPAIR INDUSTRY
A. Prem Anandh
Assistant Professor, Department of Naval Architecture & Offshore Engineering,
AMET University, Chennai, India

MSP Raju
Associate Professor, Department of Naval Architecture & Offshore Engineering,
AMET University, Chennai, India

ABSTRACT
In the arena of construction, Ship construction is the major and highly complex
industry market compare to other civil construction in India. India’s strong GDP
growth of about 7 percent continued to grow (2) which is supported by Government
initiative like MAKE IN INDIA and other subsidy schemes through state government
which increased the Indian ship construction and repair economy. SWOT analysis
shows India has a favorable trend for new ship construction and scrapping industry in
near future. This paper will give over all description and economic perspective analysis
of ship construction in India.
Key word: Ship construction, MAKE IN INDIA, Ship Repair, Economy, SWOT,
Scrapping industry.
Cite this Article: A. Prem Anandh and MSP Raju, An Analysis of Indian Shipbuilding
and Repair Industry, International Journal of Civil Engineering and Technology, 9(7),
2018, pp. 715–723.
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1. BACKGROUND- WORLD ECONOMIC GROWTH OF SHIP

CONSTRUCTION
International seaborne commerce continues to be predominantly decided by the growth of
global economy and trade. In spite of the fact that the interconnection over the commercial
profit & Merchandise market look like fluctuating due to a noticeable falloff in growth ratio of
trade to over GDP in latest years, but still there is a strong requirement of Maritime trade
continued to be mostly depend on performance of International economy.
While comparing the global economic growth of year 2016 there is a decrement in GDP of
2.2% from 2.6% in the year of 2015 & further more during 2001-2008 of 3.2%(2) .This declined
growth has a explicatory factors like negative trend in international trade policy and continued
conflict on low merchandise rate on both investment and exporting commodity.

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 A. Prem Anandh and MSP Raju

1.1. WORLD SEABORNE TRADE

In line with developments in the global economy, in 2016 the requirement of shipping services
is improved to a noticeable extend, comparing global trade enlarged from 1.8%(of 2015) to
2.6%, Which is lesser than average of 3% registered over past 40years.With reference to the
figure-1 the overall volume crossed 10.300 million tons, reflecting increment of 260 million
tons of cargo, in that half was to tanker oils and gas exchange (2) (Refer figure.1). Strong import
demand of China in 2016 endured to assisting world maritime seaborne exchange, even though
overall growth was offset by finite expansion in the import demand of other developing
regions(6)

Figure 1 International seaborne trade, selected years (Millions of tons loaded)

Data Sources: Review of Maritime Transport, for 2006–2016, the breakdown by cargo type
is based on data from Clarksons Research, Shipping Review and Outlook and Seaborne Trade
Monitor.
In 2016, international seaborne tanker trade for crude oil, refined petroleum and gas
products were continued to grow amid a surplus of oil market supply and lower oil prices. When
comparing growth of previous year, the Overall capacity attained 3100 million tons, which
shows a positive growth of 4.2 % (2). Need of oil for inventory building continued for crude oil
& refined oil product which impacts in high storage level.
These favorable market situation were further supported by need of crude oil imports in
India, China as well as in USA. High level of exported petroleum products from India and China
With reference to various economic reports the countries like Republic Korea, India and
Europe reported steady increase in necessity for diesel oil import mostly for transportation use.

1.2. INTRODUCTION TO ECONOMY OF INDIAN SHIPBUILDING:

The Indian shipbuilding industry has around 27 shipyards, out of which 8 shipyards are in public
and others are private. In addition to Ship repair and new constructing activities, the demand
for semi-submersibles and port auxiliary vessels is projected to develop in view of rising
shipment in coming years.
The twelfth 5 Year Plan published by Planning Commission lists “Shipbuilding and Repair”
as one of the vital zones. The Indian shipbuilding overall turnover of public as well as private

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 An Analysis of Indian Shipbuilding and Repair Industry

shipyard sector crossed 3.8 crores in 2015. Government-owned Hindustan and Cochin Shipyard
Limited are the primary shipyards in India. Private shipyards are larger in the count, but are
hardly limited by size and capacity of shipbuilding and also ship repair. The Indian shipbuilding
industry is estimated to double from its 2022 revenue of Rs 20,000in the next five years (8).

2. SHIPBUILDING SUBSIDY SCHEME

2.1. Introduction to Subsidy
The Indian Government has publicized rupees 4000 Crores Shipbuilding Financial support
Policy of ten years to encourage Local shipbuilding. Financial support will be accepted to
Indian Shipyards equal to 20% of the lower of “Contract Price” or the “Fair Price” of the
individual ship built by them for a span of at most 10 years launching from 2016-17.(9)
This rate of 20% will be reduced by 3% once a year for three years. The quantum of financial
benefit of a vessel shall be the product of the appropriate rate of financial benefit prevailing on
the date of Contract and the least contract price or the fair price when changed into Indian
Rupees. Provided that, at the time of the release of financial benefit, if the actual payment
received for a vessel is lesser than the contract price, such payment shall restore the contract
price in the formulae for estimation of the financial assistance.
In the beginning, The Indian government had unfolded shipbuilding subsidy scheme for all
shipyards of India on 25th October 2002. The scheme concluded on 14th August 2007. The
Government decided in March 2009 to make a disbursement for shipbuilding subsidy for
shipbuilding agreement signed up to 14th August 2007 for which budgetary readiness was made
up to 31st March 2014 (3).Among 228 shipbuilding contracts signed in the course of 2002-2007,
subsidy amounting to Rs. 1142 Crore has been paid out for a building of 121 ships. A new
shipbuilding financial benefit policy has been publicised for orders secured during April 1,
2016, to March 31, 2026. (10)
The subsidy was focused at pitching the distortions of the domestic economic environment
which impact native shipbuilders adversely over and above aiming the impact of indirect and
also direct promotion provided to the shipyards in overseas. Refer Table: 1.
With observing the upper hand drift of world ship building, the Indian shipbuilding industry
has been able to take benefit of this Government support to stabilize its existence in world
shipbuilding.

Table 1 Shipbuilding –Total Subsidy disbursed in term of Public Vs Private sector (Rupees in crore)
Years Public shipyards Private shipyards Total
2002-03 25.36 Nil 25.36
2003-04 10 Nil 10
2004-05 15 Nil 15
2005-06 101.53 Nil 101.53
2006-07 110.52 Nil 110.52
2007-08 169.96 19.28 189.24
2008-09 131.71 Nil 131.71
2009-10 107.4 71.8 179.2
2010-11 70.91 128.19 19.1
2011-12 5.77 116.65 122.42
2012-13 Nil 220 220
2013-14 Nil 179 179
2014-15 Nil Nil Nil
2015-16 Nil Nil Nil

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 A. Prem Anandh and MSP Raju

3. INDIA ENJOYS COMPETITIVE ADVANTAGES

India appreciates considerable benefit which has boosted evolving countries such as China and
Vietnam into the leading edge of global shipbuilding. Few of the primary assets that can
influence shipbuilders in India are:

LOW LABOUR COST

Cost of Labour is a primary driving factor in shipbuilding nations, as it totalled for more than
10 per cent of the overall cost. Indian labour is relatively cheaper than Korean and Chinese
labour. More importantly, Indian labour cost is increasing at half the rate in China, which
implies that India might continue to have an edge over China in the future. Figure.2 shows the
difference in labour cost around the world in US dollar.

Figure 2

STRONG DOMESTIC DEMAND

Indian shipping trade is flourishing on the back of economic growth at the rate of close to 7 per
cent. Domestic shipping lines are multiplying their fleets and have placed orders with global
yards. There is also a strong thrust in basic zones such as power and steel companies are looking
to grab ships to control transport from international mines. The Government's new ingenuity in
Coastal and also Inland Water Transportation is likely to further raise demand for new ships.

SUPPORTING INDUSTRY INFRASTRUCTURE FOR SOME COMPONENTS:

India has domestic industries which can manufacture some of the unprocessed materials needed
in shipbuilding. Precisely, India has competitive steel manufacturing, light engineering and
IT/ITES (Information Technology/Information Technology Enabled Services) industries which
can give the necessary resource at reasonable costs. Now a day’s these industries not
manufacturing for the shipbuilding sector, due to a shortfall of sufficient scale of ship
construction in the country.

LONG COASTLINE
India owns a long coastline of exceeding 7,500 km long with a number of deepwater ports
serving as positive locations for setting up shipyards In spite of these advantages are nullified
by governing hurdles Indian yards face systemic disadvantages in several areas which turn
down their natural competitiveness and negatively impact their opportunity of achieving in a

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 An Analysis of Indian Shipbuilding and Repair Industry

worldwide shipbuilding industry. Shipbuilders of India meeting a cost drawback of around

30%-40 % of the production cost of a ship on basis of these aspects.

THE MAJOR DRAWBACKS ARE AS FOLLOWS:

Statutory Burden
Shipbuilding grabs a complex set of tax and duties. The variance in the rate of duties and taxes
between India and other nations results in further cost accountability for Indian shipyards

Financing Costs
Financing costs assume larger consequence in shipbuilding due to its special constraints.
Leading shipbuilding countries have found auxiliary methods to ease the burden of these costs.
Indian shipyards have no similar direct support, face increased costs on account of financing.
• Bank Guarantees
• Working Capital

3.1. SWOT evaluation of the Indian shipbuilding industry

Strengths
• The launch of “Make In India”
• Government allowing 30% cash subsidies to new building yards in India.
• Large coastline for ships
• Strong labour force
• Low cost

Weaknesses
• Lack of building larger capacity ship yards
• Lack of trained engineers and skilled labours
• Government support and initiative for Shipbuilding is limited.

Opportunities
• Requirements of equipment and ancillaries in Indian new building shipyards.
• Demand for offshore oil exploration and production in Indian shores and abroad through
collaborations.
• Increase in demand in India for offshore platforms and their repair facilities.
• Professionals and R&D facilities.

Threats
• Order cancellation in new ship building due to untimely delivery by ship yards.
• Lack of government recognition
• Shipbuilding industry do not have countrywide presence

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 A. Prem Anandh and MSP Raju

3.2 NEW SHIPBUILDING: New building shipyards are predominantly active in defence
and commercial shipbuilding. Commercial ships are primarily constructed for European owners
and Defence ships are for Indian Navy. Shipyards mainly build vessels for European country
owners are ABG Shipyard, Bharati Shipyard, Modest, Pipavav Shipyard, L&T Shipyard,
Cochin Shipyard, etc.
3.3 SHIPBUILDING CAPACITY: Ship building capacity of a unit is described with regard
to the number of ships built and their carrying ability measured in terms of Dead Weight
(DWT).
Figure.3.1 a &3.1 b shows the shipbuilding capacity of private and public shipyards
respectively.

400
Capacity(;000DWT)

70 50
30 20

PPV BSL SKL L&T ABG

Name Of Companies

Figure.3.1.a Shipbuilding capacity of private sector

Figure.3.1.b Shipbuilding capacity of public sector

4. INDIA’S SHIP-REPAIRING INDUSTRY

Indian ship repairing industry comprises of about 7 ship repair units (SRU's), specifically
Alcock Ashdown & Co. Limited, Chennai Port Trust, Mumbai Port Trust, Hindustan Shipyard
Limited (HSL), Cochin Shipyards Limited (CSL), Garden Reach Shipbuilders (GRSE) and
Mazagon Dock Limited(MDL) who have been approved as the permanent SRU's

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 An Analysis of Indian Shipbuilding and Repair Industry

Amongst nationalised companies, Cochin Shipyard Ltd had the maximum capacity for ship
repairing (125 thousand DWT) accompanied by Hindustan Shipyard Ltd. (80 thousand DWT)
and Garden Reach Ship Building and Engineering Ltd (26 thousand DWT) in the year 2015-
16.
Private sector category, Larsen &Turbo Ltd had the maximum capacity for ship repairing
(400 thousand DWT) accompanied by Bristol Boat (54thousand DWT) whereas ABG Shipyard
Ltd &Bharati Shipyard Ltd had 30 thousand DWT ship-repairing capacities individually.Private
sector category, Larsen &Turbo Ltd had the maximum capacity for ship repairing (400 thousand
DWT) accompanied by Bristol Boat (54thousand DWT) where as ABG shipyard Ltd &Bharati
Shipyard Ltd had 30 thousand DWT ship-repairing capacities individually.

4.1. NUMBER OF SHIPS REPAIRED

In 2015-16 total 446 ships were repaired, by private (312 ships) and government (134 ships)
sector shipyards versus 482 in 2014-15. 67 Vessels out of 446 ships repaired by Indian
shipyards were foreign vessels.Figure.4 shows the difference in the number of ships repaired in
both Government and private sectors
In 2015-16 among the government sector, CSL had repaired the utmost number of ships (89
ships with earning of Rs. 355.52 crores) accompanied by Goa Shipyard Ltd. (26 ships with
earning Rs 170.95 crore) (4).
In the private sector, Chidambaram Shipcare Ltd. had the highest number of ships repaired
(155 ships earning Rs 14.06 crore) followed by Dempo Shipbuilding &Engg. Ltd. (73 ships
earning Rs 12.19 crore), Larsen& Toubro Ltd. (31 ships with profiting Rs. 44.82 crore) and
Sembmarine Kakinada Ltd. (26 ships repaired with an profiting of Rs 71.05crore.)

Figure 4

4.2. FISCALPOSITION OF SHIPBUILDING AND SHIP REPAIRING

COMPANIES
The fiscal review of the shipbuilding/ship repair companies in terms of gross earning implies
that amongst government companies, the highest income earned during 2015-16 was Rs. 35552
Crore by Cochin Shipyard Ltd, followed by Hindustan Shipyard Ltd of Rs. 15042.89. In terms
of income, the maximum profit was earned by Goa Shipyard Ltd (17094.97) Shalimar Work
Ltd (RS127.84crore) (5)
In private sector, the highest income earned during 2015-16 was by Larsen& Toubro Ltd
(Rs 4484.8 crore) followed by ABG Shipyard Ltd (Rs. 2081 crore) and Pipavav defence (Rs700
crore)

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 A. Prem Anandh and MSP Raju

5. MAKE IN INDIA- SHIP BREAKING

Four countries particularly India, Bangladesh, Pakistan and China - altogether totalled for 94 %
of ship demolishing in the year 2016. Unified nations conference trade and development data
confirm a constant trend of industry consolidation (2), where various countries specialize in
different maritime divisions. It also validates the rise in participation of evolving countries in
several maritime sectors.
Turkey prolonged market niche for scrapping some gas carriers and also some ferries and
passenger ships. All other countries altogether totalled for 1.8 per cent of the world total.
Figure.5 shows the Reported tonnage went for scrapping, and most of vessel types and countries
where scrapped in the year 2016 (Thousands of gross tons).Key demolition figure is provided
in table 2.0.

Table 2

Reported tonnage sold for scrapping, major vessel types and countries where demolished,
2016(Thousands of gross tons).

Figure 5 Data Source: UNCTAD secretariat estimates, based on data from Clarksons Research.

CONCLUSION
The study of various aspects of the global and the Indian shipbuilding industry clearly shows
that India needs to look at multiple areas including in the areas of a Regulatory framework,
Investment policies, Trade policies, Fiscal policies, Infrastructure, R&D, Skill, Financing,
Process, Collaboration and Technology. The Indian ship breaking industry is worth Rs 5,500
crore and can raise to Rs 11,000 crore by 2022 and Rs 18,000 crore by 2026, based on the report
of shipping ministry-commissioned by management consultancy AT Kearney(11).The Indian

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 An Analysis of Indian Shipbuilding and Repair Industry

commercial shipbuilding market economy has the potential to grow five times over the next
decade.

REFERENCES
[1] Statistics Of India’s Ship Building And Ship Repairing Industry 2015-16- Government of
India Ministry of Shipping Transport Research Wing (Statistics of india's Ship building and
ship repairing Industry 2015-2016, 2017)
[2] UNCTAD (2016). Trade Facilitation and Development: Driving Trade Competitiveness,
Border Agency Effectiveness and Strengthened Governance. (United Nations publication.
Geneva.http://unctad.org/en/PublicationChapters/rmt2017ch1_en.pdf
[3] T. Subhashini, N. Kumar, V. Thanikachalam and P. Maheswari, Greener, Safer-Sustainable
Energy Efficient Shipping using Solar Power Optimizer by MPPT. International Journal of
Mechanical Engineering and Technology, 8(4), 2017, pp. 156– 164
[4] http://pib.nic.in/newsite/PrintRelease.aspx?relid=147643
[5] https://economictimes.indiatimes.com/cochin-shipyard-
ltd/infocompanyhistory/companyid-4529.cms
[6] http://www.financialexpress.com/india-news/whopping-5-individuals-in-india-have-
annual-salary-income-above-rs-100-crore/983730/
[7] http://www.germes-trans.com/chinas-debt-management-shipping-industry/
[8] http://www.stats.gov.cn/enGliSH/PressRelease/201503/t20150311_692835.html
[9] http://planningcommision.nic.in/aboutus/committe/wkgrp11/wg11_shipbild.doc
[10] https://www.marinelink.com/news/shipbuilding-looks-india419883
[11] http://taxheal.com/subsidy-for-ship-building-industry.html
[12] http://www.dailyshippingtimes.com/news-upload/upload/fullnews.php?fn_id=17049
[13] Daily shipping times dated on 16.06.2017

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