India requires an efficient ship repair industry as more than 55 per cent of the country’s existing fleet is over 16 years old and the demand for repairing services is on the rise. At present, most ships sail to Dubai, Colombo and Singapore, among other destinations, for repairs, and this increases time and costs for fleet owners. So far, only about 20 per cent of the market potential in the domestic segment has been captured. The untapped potential of this market is a result of the fact that the major Indian yards are focused on shipbuilding and the smaller yards lack the capacity for carrying out ship repair. Further, key original equipment manufacturers (OEMs) have a very weak presence in the country.
Given India’s strategic location on the international trade route, the country can offer ship repair and maintenance services to ships plying from the west to the east along the route. This represents an increasing market potential for the ship repair business, as ship owners may well prefer to have their ships repaired en route, without having to deviate from their trade routes.
Industry dynamics
At present, India has over 13 functional repair docks located across the major ports. In terms of market share, the domestic ship repair industry has a minuscule share of about 1 per cent in the global market.
On average, the country’s ship repair industry incurs costs that are 30 per cent higher as compared to its global counterparts. This is mainly due to inadequate mechanisation at repair yards and the lack of local ancillary units. Moreover, not only are the costs higher, but the services offered are also not at par with international standards.
Besides logistics, the turnaround time for ships at Indian repair yards is high. When compared to global counterparts, a delay of 1.3-1.5 times has been recorded in delivering ships after repairs have been carried out. There are also delays in mobilising materials and services for ship repair due to the absence of an ancillary set-up and the need to import the majority of the spare parts.
Ship repair infrastructure, particularly in the port sector, has not seen much growth in the past few decades and investments in this segment have been lower than desirable. In contrast, we see that ports in Saudi Arabia, San Francisco and Rotterdam are maximising their revenues through the long-term lease of dry docks. The focus on ship repair as an industry within the port sector has been limited, resulting in almost negligible capacity addition.
Areas of concern
The key drivers of an efficient ship repair ecosystem include asset modernisation and capacity addition, while leveraging the strategic positional advantage and creating adequate social infrastructure and a ship repair cluster with ancillary support. Other drivers are the presence of a rich vendor and subcontractor pool and ongoing skill management and enhancement. The Indian ship repair industry lags far behind on these parameters, especially in comparison to its international counterparts. A number of reasons can be attributed to this. Besides poor operational efficiency, the yards do not have adequate infrastructure to cater to global ship repair requirements. Besides, there are huge cost and time overruns resulting from unsystematic project management. Other issues include poor ancillary support, lack of a strategic vision, quality issues with subcontracting and an absence of skilled manpower.
Summing up
Given the growing cargo traffic and the resultant increase in the number of vessels visiting Indian ports, the demand for ship repair services will only go up, thereby presenting an opportunity to build new dry docks and set up ship repair facilities.
Indian ports should leverage their strategic positional advantage and facilitate ship repair units and set up ship repair clusters.
On the policy front, there is a need for a dedicated policy framework for the ship repair segment with a specific focus on improving the quality of services offered and incentivising OEMs to set up workshops in India. This will attract investment and not only lead to capacity building but also increase efficiencies due to competition, eventually leading to accelerated development of ship repair infrastructure.
Based on a presentation by K.N. Sreejith, General Manager, Ship Repair, Cochin Shipyard Limited, at a recent India Infrastructure conference