Burdened defence shipyards embrace private sector

A view of Mazagon Dock's modular yard in which it will build four frigates under Project 17-A 

By Ajai Shukla

Mazagon Dock, Mumbai

Business Standard, 23rd July 12

On Sunday, a day after handing over a brand new stealth frigate, INS Sahyadri, to the Indian Navy, Mumbai-based warship builder Mazagon Dock Ltd (MDL) has announced the formation of two joint venture companies, which would help it liquidate an order book that is too large for it to handle on its own.

A press release from the company today says that MDL “has signed Share Holder Agreements (SHA) for setting up Joint Venture (JV) with private shipyards - M/s Pipavav Defence & Offshore Engineering Co. Ltd. (PDOECL), Mumbai, and M/s Larsen & Toubro, for construction of surface warships and conventional submarines respectively.”

The release says that the JVs “will leverage the strengths of the respective JV partners in the public and private sectors to work out a collaborative strategy for taking the nation towards self sufficiency in warship construction.”

The release also specifies that MDL may explore additional JVs “with other leading shipbuilders” for “diversifying its product profile.”

MDL’s order book would be the envy of any warship builder. Under construction in MDL’s berths are three destroyers of Project 15A --- INS Kolkata, Kochi and Chennai --- which would begin joining the navy’s fleet early next year. Also on order are four more destroyers of Project 15B, which will be followed soon by four stealth frigates of the so-called Project 17A.

Meanwhile, in its highly secured East Yard, MDL is fabricating six Scorpene submarines, all of which are scheduled (after three years of delay) to join the navy between 2015 and 2018. Also looming on the horizon is Project 75I, which involves building six more conventional submarines in parallel with Project 75.

But India’s premier defence shipyard has neither the space nor the manpower to handle this workload. And so MDL wants to farm out work to the private sector, capitalising on newly created warship building capacities in shipyards built by Pipavav and L&T.

“We will synergise our capabilities with the infrastructure and expertise in the private sector. MDL began identifying a suitable JV partner last year. Some major players were dissatisfied with the process (protests from shipyards last year led the MoD to cancel MDL’s announced JV with Pipavav, and to issue guidelines for forming JVs in February). We restarted the process, following the MoD’s guidelines… and our team has now identified L&T as a partner for submarine building, and Pipavav for surface ships,” says MDL’s chairman, Rear Admiral (Retired) Rahul Kumar Shrawat. 

MoD sources tell Business Standard that another defence shipyard, Garden Reach Shipbuilders and Engineers, Kolkata (GRSE), is also exploring JVs with the private sector. GRSE is full to capacity with building four anti-submarine corvettes in Project 28. It will also built three stealth frigates (in cooperation with MDL) in Project 17A.

Observers of India’s shipbuilding programmes regard this shift of production to the private sector as inevitable. The Indian Navy, the fastest growing of the three services, has a growing requirement of warships as South Block pays increased attention to India’s maritime interests, a focus that is intensified by Washington’s “pivot to Asia” and China’s growing assertiveness in the Western Pacific. In line with this trend, several private shipyards --- including L&T, Pipavav and ABG --- have built capabilities.

  

But L&T, with its proud engineering pedigree and its accomplishment in the Arihant programme, hardly regards itself as a junior partner to MDL. L&T has long coveted the long-delayed Project 75I, which involves building six more conventional submarines for the navy in parallel with the Scorpenes. Says MV Kotwal, who oversees L&T’s defence business: “The JV can assist MDL with its current orders, but L&T is not foreclosing its options to pursue submarine orders independently. The MoD knows that India has two independent entities that are capable of building submarines: MDL and L&T.”

L&T also challenges the navy’s insistence on building the first two submarines of Project 75I abroad, with the next four being built in India. “L&T has invested heavily in skills and capital and the government must realize that the navy’s requirements can be met in this country. So the MoD should drastically cut down on importing naval platforms.