Evaluate life cycle costs for acquisitions with large tickets by the Indian Navy

Copyright © HT Digital Streams Limit all rights reserved. Alok Bhag who reads 4 min Read 09 Jun 2025, 12:33 pm is all defensive projects, including warship building, has a multiplier effect on the country’s economy. Summary As warship building continues to equip the Indian Navy, we are staring at major expenses. Let us reform how this power acquires high-end platforms and weapons. The cost calculation must be responsible for the cost of a warship over its entire life cycle. It will drive native and accelerate our plans. The Indian fleet started with aggressive shipbuilding. Indian shipyards were active, with a large number of ships and submarines to order. The shipbuilding cycle has significantly reduced in India and platforms are used quickly. Although shipping design and construction are predominantly indigenous, India still imports high -tech equipment of the so -called ‘move’ category (which includes high -power trucks, gas turbines and drive cars and the like), ‘Fight’ category (radars, rocket systems and so on) and special category systems for specialized platforms, aircraft and submarine. However, initiation efforts in these categories are currently on a fast lane. Also read: Why we should celebrate the three new warships that join India’s naval fleet -military hardware projects usually require large amounts of financing. Let’s look at the costs associated with warship projects. Official data is difficult to achieve, but we have an indication of numbers. According to Defense News, Visakhapatnam class destroyers, which were commissioned between 2021 and 2025, were built at a cost of about £ 36,000. Their indigenous level was set at 70%, indicating an import account in the £ 10,000 crore area. The next generation of destroyers in the pipeline is expected to cost around £ 85,000; It has an import component of about £ 20,000 crore (less than 25%), as projected. The volatility of the current geopolitical situation will demand that more and more ships be built quickly. Debates on India’s defensive requirements indicate that one or two aircraft carriers will be needed, along with a larger number of submarines. Can the country afford such high budgets for upgrading the Navy? Probably not. Also read: Warming: ‘Be Indian, Buy Indian’ is a useful mantra for strategic autonomy, but all defense projects, including warship building, have a multiplier effect on the country’s economy. Prasanna Tantri and Aditya Kuvalekar argued in the Times of India on May 18, 2025, that government spending on defense projects in India could deliver a fiscal multiplier of about 2. This means that every rupee spent by the government on these projects must be added to £ 2 to the annual production of India. Tantri and Kuvalekar propose the use of long -term loans to finance India’s defensive expenses. This article takes their argument forward to represent ways to finance war building projects of the Indian Navy. From a life cycle perspective, warship equipment has two cost components: the one-time acquisition costs and the continuous costs for operational and maintenance (O&M). With 25-30 years of shipping life, O&M costs are usually much larger than the acquisition costs. New-tech equipment can be imported or developed by an Indian supplier. While advanced systems can be purchased from foreign suppliers, an Indian supplier will need to make significant capital investments in research and development (R&D) and establish a manufacturing setup with competent manpower. As the projectors under the current system go exclusively according to acquisition costs, Indian suppliers cannot compete with their foreign counterparts at the price, as the latter does not have to bear heavy capital costs. Also read: China’s latest fleet exercises have shown how far it can project the cost of power acquisition, traders are because it is covered by the capital budget, while O&M costs fall under the revenue statement. We have no structural or regulatory provision for the evaluation of the two costs. But these two costs can be clubed in ‘Life Cycle Cost’ (LCC) by following the principles of Life Cycle Management (LCM). The US Navy and some other fleet forces follow LCM and Integrated Logistics Support (ILS) principles for evaluating a high cost project in the early draft or design stage to decide on the best option. There is a strong case for the Indian fleet to adopt LCM and ILS processes and consider LCC for obtaining expensive equipment and systems, especially at a time when India is investigating the opportunities for import replacements. Research studies indicate that Indian suppliers would be much more cost-effective for equipment for new technology as LCC. The basic logic of this is clear: R&D costs can be amortized on the life cycle of the equipment. The Navy benefits from support during the life cycle of the equipment through local maintenance contracts and to wall relief facilities, while the setup and training of the country smooth the induction of platforms. It also helps to age upgrading planning for aging. Tender decisions must therefore be made on an LCC base. There is much debate about the affordability of aircraft carriers and submarines. Once LCC becomes the norm to compare the suppliers of the suppliers, the picture will change. Equipment providers, assured of an income stream across the life cycle of a ship, will recalculate their offers. This can lead to a new funding model. By ensuring Indian suppliers an income stream for 25-30 years, the country can expect them to bear a large part of the initial acquisition costs of equipment against the insurance. In this way, the capital cost of the Ministry of Defense can be significantly reduced, making the fiscal space for the induction of more ships. Partnerships with private suppliers such as L&T, the Tata Group, Adani Group, Kalyani Group, Mahindra Group and many others can make a big difference to India’s preparations on the defense of the Navy. The key is to get away the pre-funding of capital-intensive warship construction. The author is an Indian naval veteran with a PhD in Life Cycle Management of Navy Warship equipment. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #Fatement #Defence Sector Read next story