Mumbai: Two years after the government mooted an alliance of four public sector firms to ease dredging bottlenecks at Indian ports, the group has now suggested inducting a foreign equity partner into the alliance.
The proposal, advised by consultant Ernst and Young, is, however, awaiting clearance from the shipping ministry.
The ministry had mooted the idea of forming a dredging company involving state-run Shipping Corp. of India Ltd, Jawaharlal Nehru Port Trust, Cochin Shipyard Ltd and Mumbai Port Trust to overcome capacity constraints locally to undertake big dredging works at ports in a tight global market.
Growing demand: A hopper dredger from Royal Boskalis Westminster, the world’s largest owner of dredging ships. India needs at least 100 dredgers in five years to meet increasing demand. (Photo: Bloomberg)
“The alliance has suggested inducting an international partner with 26% equity partnership for sharing technology expertise. But the ministry has not yet taken a call for several months,” said a person familiar with the development who didn’t want to be named.
“The delay in getting approval for the new firm will be detrimental to its interest as private players are entering the business with much vigour,” said a senior executive from Shipping Corp. who also didn’t want to be named. The new dredging firm would be India’s second state-run one after Dredging Corp. of India Ltd, in which the Union government holds a 78.56% stake.
“Considering the current market conditions and the lead time required for construction of dredgers, the entry of the new state-run dredging entity now looks a distant proposition. By the time it starts operations, the dredging market would have evolved into a different revenue dynamics,” said Atul Kulkarni, senior manager at consulting firm Deloitte Touche Tohmatsu India.
Private shipping firms, such as Mercator Lines Ltd, Essar Shipping Ports and Logistics Ltd, Sical Logistics Ltd and Marg Ltd, have already entered the business and more firms are planning to buy dredgers.
Dredging is the process of deepening a port’s channel with a special kind of ship called a dredger so that bigger ships can come calling to unload and load cargo. Shipping cargoes in bigger ships leads to economies of scale for exporters and importers as larger quantities can be transported at a time.
A study by London-based maritime consultancy firm Drewry Shipping Consultants Ltd has shown a 37% reduction in cost by using a vessel that can carry 10,000 twenty-foot containers than a ship with a 4,000 twenty-foot equivalent units, or TEUs, capacity. A TEU is the standard size of a cargo container and is a common measure of capacity in the container shipping business.
According to government estimates, the industry needs at least 1,000 specialized staff to operate dredgers along the country’s coast in three-four years. The country needs at least 100 dredgers in five years to meet the growing demand.
“When the idea was first proposed, the only major competitor to the PSU (public sector unit) dredging alliance was the Dredging Corp. of India. Now, it will have to compete with domestic private companies as well as the Indian units of international companies,” a Mumbai-based analyst said, who requested anonymity becayse he is not authorized to speak to the media.
Royal Boskalis Westminster NV, Van Oord Dredging and Marine Contracting Co. NV, Jan De Nul NV, Great Lakes Dredge and Dock Co. of the US and Dredging International NV are the leading international dredging companies.