Indian shipyards have urged the government to revise the commercial terms of its ongoing commercial shipbuilding tenders, calling for a more balanced allocation of risks to encourage wider participation in the country’s indigenous shipbuilding programme.
The Shipyards Association of India (SAI) has proposed several changes to the tender conditions for the construction of Medium Range (MR) tankers and container vessels, including the introduction of an Exchange Rate Variation (ERV) clause, a cap on liquidated damages (LD), steel price indexation, rationalised bank guarantee requirements, and standardised payment and delivery schedules.
According to Sanjiv Walia, Chief Executive Officer of SAI, many of these provisions have already been incorporated in the Platform Supply Vessel (PSV) tender floated by Oil and Natural Gas Corporation Ltd (ONGC), demonstrating that the government’s procurement framework recognises the need for balanced contractual terms.
SAI noted that imported equipment accounts for nearly 40–50 per cent of the cost of a commercial shipbuilding project, exposing Indian shipyards to significant foreign exchange risks over construction periods of three to four years. The association has recommended adopting an ERV mechanism similar to that included in the ONGC PSV tender to address currency fluctuations transparently.
The association has also sought the introduction of a cumulative cap of 10 per cent on liquidated damages in the MR tanker tender, similar to the PSV tender, to ensure proportionate contractual risk while safeguarding the interests of ship owners.
On delivery schedules, SAI has recommended standardising timelines by fixing the delivery of the first vessel within 36–40 months and subsequent sister vessels at intervals of six to eight months, replacing the current four-month interval. It has also called for a uniform stage-payment schedule to improve transparency and enable fair comparison among bidders.
Highlighting the volatility in global steel prices, SAI has urged the government to introduce a steel price indexation mechanism for MR tanker contracts. Steel accounts for 25–35 per cent of a commercial vessel’s construction cost, and the association believes a recognised global steel price index would help mitigate the impact of market fluctuations during long-duration projects.
The association further recommended reducing bank guarantee requirements, stating that the existing MR tanker tender could require guarantees amounting to as much as 85 per cent of the contract value, significantly increasing financial pressure on domestic shipyards. It has also sought more balanced termination provisions and the adoption of progressive milestone-linked billing to improve project cash flow and reduce financing costs.
SAI said aligning the MR tanker and future commercial shipbuilding tenders with the contractual framework adopted for the PSV programme would create a more predictable and competitive environment for Indian shipyards while supporting the government’s long-term shipbuilding ambitions.
