Life Cycle Costing Model for Equipment for Indian Naval Shipbuilding Programme

Abstract

Indian Navy has embarked upon an ambitious fleet expansion and modernization programme to be a ‘modern and multi-dimensional Navy’. Further, India has leapfrogged into the league of select few nations capable of building Aircraft Carrier and Nuclear Submarine. Indian Navy has plans to induct 200 new ships by year 2030. A majority of these platforms will see indigenous design. While the warships and submarines have indigenous design, a large volume of equipment and systems going in the platforms are imported. The Indian industry is gearing up for indigenous development of these equipment and is competing with foreign equipment manufacturers for winning the contracts. Whereas, the International navies e.g. USA, Canada, Australia, etc., evaluate the competing suppliers on the basis of ‘Total Ownership Cost’ or ‘Life Cycle Cost (LCC)’ of an equipment, in Indian Navy, the contracts are decided on the equipment acquisition cost alone. This is an erroneous process as the ‘Operation & Maintenance (O&M) costs’ of an equipment is significant given the equipment life cycle of 25–30 years. The O&M costs are much lower for an indigenously sourced equipment as compared to an imported equipment. Therefore, an indigenous supplier is at a disadvantage on one hand and the country pays up higher amounts in the operation cycle of the ships to foreign equipment suppliers on the other hand. The research study aims to develop a LCC model. The authors have undertaken a study towards this. The study has been undertaken by conducting unstructured interviews with senior personnel at Mumbai associated with naval shipbuilding and operations. The findings of this study will be carried forward in a study of larger dimension in near future. This paper aims to outline the study and its findings towards estimation of Life Cycle Costing process for Naval equipment.