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India adopts 'Make in India' strategy for new warships

Warship Technology: July/Aug 2016

As of May 2016, the Indian Navy had a fleet of approximately 140 fully commissioned ships and submarines and another 100 or so small patrol craft. It is in the midst of an ambitious recapitalisation plan that aims to grow its force levels to over 200 ships and submarines by 2027 – preferably via the ‘Make in India’ industrial strategy which seeks to encourage private industry participation in India’s defence and aerospace industries, which historically have been the preserve of state-owned ‘public sector’ companies.

However, whether the Indian Navy can actually achieve the planned force levels by 2027 is open to doubt, given well known decision-making and procurement delays, supply chain management issues, shipyard delays as well as poor programme and cost management issues on several projects. Nevertheless, the Indian Navy is engaged in a robust newbuild programme – currently numbering over 50 vessels on order – that is “firmly anchored on self-reliance and indigenisation,” according to Indian naval chief, Admiral Robin Dhowan.

Near self-reliance
As highlighted above, there is a renewed emphasis on engaging Indian industry, especially the private sector, under the ‘Make in India’ initiative as the Indian Navy strives for near-self-reliance in the production of warships. “Hence, it is imperative to expedite the process of indigenisation and industry will have to play a major role in it,” noted Vice Admiral P Murugesan, the incumbent Vice Chief of the Indian Navy in March 2016. In this respect, the Indian Navy has mandated that shipyards outsource almost 50% of construction work on new warship projects. For example, GRSE and MDSL have to outsource 46% of their workload in the P17A frigate programme.

India’s new Defence Procurement Procedure-2016 (DPP-2016), released in late March 2016, has been revised to address the concerns of micro, small and medium enterprises (MSMEs) in the defence industry and to ensure greater transparency. In particular, the new procurement policy aims to streamline the pace of procurement through the newly introduced ‘Indigenously Designed, Developed and Manufactured’ (IDDM) provisions, which are designed to encourage the participation of SMEs. While foreign direct investment (FDI) is capped at 49%, cases for higher FDI will be considered on a case to case basis.

As of April 2016, some 48 naval vessels including two submarine rescue vessels and a large floating dock – with a total order value of around US$20 billion – were under construction or in the pre-production stage. The Indian Navy likes to point out that all of these – with the exception of the two British origin submarine rescue vehicles – are being built at Indian shipyards. Currently, naval shipbuilding is undertaken at five government (public sector) shipyards and four private sector shipyards who are relative newcomers to naval shipbuilding. However, the private shipyards – most of which seem to have financial troubles – only have around 5% of the existing orders on account of their recent entry into naval shipbuilding with relatively simple naval vessels – such as offshore patrol vessels and cadet training ships – with simple combat systems requiring a lower order outfitting and integration skills. On the other hand, private yards have received substantial orders from the Indian Coast Guard.

The above figures do not include two ‘strategic projects’ with a separate funding stream directly from the Prime Minister’s Office (PMO) and thus separate from the Indian Ministry of Defence funding stream for the naval ships. These are the nuclear-powered ballistic missile submarine (SSBN) programme – known as the Advanced Technology Vessel Programme (ATVP) – and a single 176m, 14,700tonne Ocean Surveillance Ship (OSS, missile tracking ship) project to a design by Vik-Sandvik India.

The SSBNs are being assembled at the navy-owned Ship Building Centre (SBC) in Visakhapatnam by Larsen & Toubro (L&T) Heavy Engineering with technical assistance provided by Russian specialists. The OSS is under construction at nearby Hindustan Shipyard. In addition to these, a 118m Technology Demonstrator Vessel (TDV) for India’s Defence Research & Development Organisation (DRDO) that is most likely to be manned by the Indian Navy is on order with Cochin Shipyard.

Excluding smaller ‘yard craft,’ which are mostly built at a number of smaller public and private sector shipyards, shipyards engaged in building naval vessels are four Ministry of Defence-owned yards – the so called Defence Public Sector Units (DPSUs) – Mazagon Dock and Shipbuilders Limited (MDSL), Garden Reach Shipbuilders & Engineers (GRSE), Goa Shipyard Limited (GSL), Hindustan Shipyard Limited (HSL) as well as the Ministry of Shipping-owned Cochin Shipyard Limited (CSL). A sixth public sector yard, the financially troubled Gujarat state government-owned Alcock Ashdown Gujarat Ltd (AAGL) has five incomplete survey vessels on hand as it seeks additional funds from the MoD to execute the order. The three private yards are Larsen & Toubro (L&T) which has been quietly engaged in the secretive nuclear submarine programme for many years as well as ABG Shipyard and Pipavav Defence and Offshore (now a part of Reliance Defence Ltd). A fourth, Bharati Shipyard, is struggling to complete Coast Guard and naval yard craft orders. A fifth private player, Shoft Shipyard, which has been a sub-contractor to Goa Shipyard, MDL and involved in the secretive nuclear submarine project, has recently obtained a licence to build naval vessels having delivered a number of yard craft, a catamaran torpedo trials vessel besides building OPV hulls and tugs for GSL.

Although already large, the Indian Navy’s newbuild programme is set to grow in scale in the coming years. The market over the next 10 years or so is estimated to be in excess of US$92 billion according to a December 2015 presentation by Pipavav shipyard. The report also suggests near-term opportunities worth around US$19 billion in the next five years. A tally of known projects adds up to around 140 new platforms that are either on order or slated for ordering in the near-term.

Crucially, private shipyards – in joint ventures with the DPSUs – are expected to be given a large part of the new orders involving the construction of more complex naval vessels and warships as the DPSU yards are at maximum capacity and experiencing considerable difficulties delivering existing orders on time because of capacity and human resource constraints. Because of the delays faced by private shipyards with ongoing projects, there will no doubt be a steep learning curve and many ‘teething problems’ faced by these yards as more complex warships are built. One issue that looms large is the financial solvency of private yards. For example, ABG is just emerging from financial restructuring and questions remain about Reliance’s ability to inject funds into Pipavav.

Further 90 platforms
Apart from the 52 or so aforementioned platforms, another 90 or so are in the pipeline, broken down as follows:

  • 23 platforms including the 12-ship mine countermeasures vessel (MCMV) programme are in the contract negotiation/ pre–production stage.
  • Ongoing talks for eight to 11 more platforms comprising two to three Scorpene submarines from France as well as three to four modified Project 11356 frigates and two newbuild Kilo-class submarines from Russia.
  • Lease of a nuclear attack submarine – most likely of the Akula-class – from Russia.
  • Another 39 vessels, including the six-boat next generation P-75I submarine programme and six nuclear attack submarines, for which Indian Ministry of Defence approvals have been obtained and orders are likely to be placed in the near future.
  • 15 more platforms for which RfIs have been issued, although they need to be approved by the Defence Acquisition Council before RfPs can be tendered for their construction.

In all likelihood, however, these orders are still some years away from fruition.

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