Nurturing shipyards: the case of HSL

By Ajai Shukla

Business Standard, 26th May 15

Notwithstanding the National Democratic Alliance (NDA) government’s declared commitment to “Make in India”, its procurement decisions adhere to this only sporadically. The decision to buy 36 “Made in France” Rafale fighters is only the latest violation of “Make in India”. Much earlier, then defence minister Arun Jaitley had, in his first procurement meeting on October 29, ruled that Moscow would benefit from a Rs 1,800 crore order to refit two Kilo-class submarines in Russia, even though such refits have been --- and must continue to be --- done in India.

Mr Jaitley’s poor decision relates to the Rs 4,800 crore overhaul of six submarines. It allocates the refitting (which involves modernisation-cum-overhaul) of two Kilo-class boats (as submariners refer to their vessels) to Naval Dockyard, Mumbai, and two HDW-origin submarines to Mazagon Dock, Mumbai (MDL). Two more Kilo-class vessels, inexplicably, are to be sent to Russia for refit. Left out in the cold is the defence ministry’s recently acquired Hindustan Shipyard Ltd (HSL) in Visakhapatnam, which successfully completed refitting a Kilo-class submarine, INS Sindhukirti, last week. Also excluded was Naval Dockyard Visakhapatnam, which had earlier refitted two submarines ---INS Sindhudhvaj and Sindhuvir --- and is presently refitting INS Sindhushastra.

Leave aside the rhetoric of “Make in India”, which is proving increasingly hollow. Leave aside the need to build capability in India for repairing and refitting the Kilo-class, which might prove invaluable in wartime. Leave aside the fact that refits in Russia would be more expensive than in India, given that a crew of about 50 officers, sailors and their families would need to be stationed in Russia for two or three years (the duration of the refit), paying out living, education and medical expenses and a handsome deputation allowance. Besides all this, there is the fact that the defence ministry – at the navy’s urging – took over HSL from the Ministry of Shipping specifically to use it as a submarine yard. HSL was to be an alternative to Mazagon Dock Ltd, Mumbai (MDL), which was already burdened with building six Scorpenes (under Project 75) and is also a strong contender for building another six submarines under Project 75I, which is soon to be tendered.

Another twelve indigenous submarines will follow these twelve, according to the 30-Year Submarine Building Plan of 1999. Besides this, the navy’s existing 13 boats --- nine Russian Kilo-class and four German HDW Type 209 --- require periodic refits. All this can be done in India by nurturing Indian shipyards rather than a dependency on Russia. True, HSL took an unacceptably long nine years to refit INS Sindhukirti. But HSL provides figures to suggest that Russian experts cynically prolonged the refit to rule the Indian yard out of future refits. The defence ministry has apparently fallen into the trap, without considering that starving HSL of further refit orders would snuff out invaluable expertise built whilst refitting the Sindhukirti.

Another reason for entrusting HSL with Kilo-class refits is that the defence ministry’s logic for taking over HSL from the ministry of shipping in 2010 no longer holds good. Amongst other uses, HSL was to build nuclear submarines, which are currently assembled next door at the Special Boat Centre (SBC), a small Defence R&D Organisation (DRDO) facility. While MDL built conventional submarines, HSL’s protected location on the eastern coast and its deep-water harbour made it ideal for building larger nuclear submarines that are needed in growing numbers. The first nuclear ballistic missile submarine (SSBN), INS Arihant, will be followed by at least three more SSBNs. A line of nuclear attack submarines (SSNs) is likely, though not yet sanctioned. But a defence ministry committee recently determined that HSL cannot build nuclear submarines, because of nuclear hazard --- its workers live too close to the shipyard.

With HSL’s central logic undermined, if not entirely destroyed, the defence ministry seemingly lost interest in this shipyard. Three other defence shipyards --- Garden Reach Shipbuilders & Engineers, Kolkata (GRSE); the smaller Goa Shipyard Ltd (GSL); and the crown jewel, MDL --- are rich with orders that assure business for a decade to come. MDL has an order book of Rs 60,000 crore; GRSE has Rs 30,000 crore; even tiny GSL has Rs 30,000 crore in orders. HSL, in comparison has just Rs 1,885 crore in orders. With 10 per cent paid up front, MDL has mopped up Rs 6,000 crore in advances, which Rs 500 crore in interest each year. HSL, with almost no cash in hand and a negative net worth that makes accessing funds costly, is forced to bid cautiously in tenders, placing it at a disadvantage against yards with financial muscle.

While private shipyards must be supported, HSL cannot be thrown to the market wolves. Its geographical advantages are priceless. Visakhapatnam port is ten metres deep, far better for launching big ships than the four-metre-deep MDL and GSL, or GRSE, which is on a riverfront. Visakhapatnam harbour requires little dredging because no river flows into it, and a narrow harbour mouth prevents the sea from bringing in sand. HSL owns a full kilometre of water frontage in Visakhapatnam, including a massive 560-metre outfitting jetty that would please any shipbuilder. It is the MoD’s largest shipyard with a work area of 117.55 acres and living accommodation of 142 acres, significantly larger than metro-based dockyards like MDL (75.5 acres). HSL’s shipbuilding facilities include an 80,000 DWT (dead weight tonnes) covered dry dock that can take in an aircraft carrier, and three slipways, including two with capacities of 33,000 DWT and one of 15,000 DWT. 

Given the volume of shipbuilding needed for meeting the navy’s Maritime Capability Perspective Plan (MCPP), the defence ministry has business enough for HSL, as well as every warship-building shipyard. The MCPP envisages the growth of today’s 137-ship navy, with barely 50 capital warships, into a 160-ship navy with 90 capital warships. Even as new warships are built, the existing fleet requires maintenance and refit, necessarily in country. 

A quick survey of the load on defence shipyards shows how badly HSL is needed. Cochin Shipyard Ltd is occupied building India’s aircraft carriers. MDL and GRSE, which together cannot meet the requirement of capital warships like destroyers, frigates, corvettes and submarines, can be supplemented by Larsen & Toubro (L&T), which has valuable technical expertise and a new, 900-acre shipyard at Katupalli, Tamil Nadu. There is good infrastructure in other private sector shipyards, like ABG and Pipavav, but neither has ever built capital warships or submarines. Even so, there are adequate navy and Coast Guard orders for patrol vessels, survey ships, floating docks and diving support vessels. These are required not just for Indian maritime agencies but also for export to Indian Ocean countries as a part of naval diplomacy.

HSL, therefore, must be deliberately developed into a capital warship yard, given its location, infrastructure and recent expertise in refitting submarines. The defence ministry decision to send two Kilo-class submarines to Russia must be changed in favour of HSL. It must also be nominated to build the navy’s requirement of five fleet support ships, large vessels that HSL has experience in building. Perhaps most importantly, the defence ministry must alter HSL’s mindset as a sick shipyard, inherited from the Ministry of Shipping. Its accumulated losses and negative net worth must be made good and a stable cash flow ensured to allow HSL to operate like a corporation. The ministry’s fourth shipyard has the potential to come good; it cannot be allowed to fail.