This paper explores the possibilities for increasing energy efficiency of ship propulsion systems by the use and appropriate control of adjustable speed drives based on pulse width modulation voltage source inverters (PWM VSIs) and induction motors (IMs). A passenger ship moved by two twin propulsion units using IMs with a rated power of 7,000 kW is chosen as case study. Each IM is supplied by an AC-AC power converter in a back-to-back configuration, based on three-level neutral point clamped (NPC) VSIs. To increase the overall efficiency of the propulsion drive, the IM side control is integrated with a suitable electrical loss minimization technique (ELMT). A complete dynamic model of the IM propulsion drive is developed, including the IM model taking into account the iron loss, the power converter model with PWM, and the control system with the ELMT. Results show the capability of the ELMT to significantly increase the overall efficiency of the IM by about 10% at full load.