He said over 140 such vessels, armed with weapons and ammunition, are operating and posed serious security implications.
Addressing the annual Navy Day press conference, he also sought a "reversal" of high risk areas for merchant ships plying in the piracy-prone zones, saying such an extension in these zones has resulted in incidents such as the killing of two Indian fishermen by Italian marines near Kerala coast.
"Floating armoury is a matter of very serious concern. This is entirely unregulated... This has very serious security implications for us including the infiltration of terrorists.
The Navy Chief was talking on the issue against the backdrop of seizure of the American floating armoury MV Seaman Guard Ohio off the coast of Tuticorin in Tamil Nadu.
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He said the government has also received reports about the presence of "combatants from some countries who on a temporary basis take up these employments and become private armed guards".
He said over the years, these armouries providing escort to the merchant vessels plying in piracy prone areas have become a "loose-knit structure" and the "unregulated manner these ships are operating, there is no track of which ship is coming and what guards it has, what arms does it have and where they are going".
He said like the merchant vessels operating under the International Maritime Organisation framework, these floating armouries have to be brought under the regulation and all the littoral states must be aware of the identity of such ships, the number of weapons and guards present on them.