Ahmedabad: After making its mark in the port business, the Adani Group is now looking to set up a ship-breaking business at Mundra in Gujarat. The company made a detailed presentation on this last month to some state government officials, according to two people close to the development.
The billionaire Gautam Adani-led group had in the recent past entered the ship-breaking business in the US before exiting from it about three years ago.
Adani’s proposed ship-breaking yard will fall within the special economic zone (SEZ) limit of Mundra Port. Adani Ports and Special Economic Zone Ltd aims to set up the yard in about 40 hectares of land close to a boundary of the existing Mundra West Port, according to the presentation.
If all goes as planned, Adani plans to set up the ship-breaking yard in the next one or two years with an initial target of dismantling and recycling 40 ships every year, said a top Adani Group official. He did not want to be identified.
Nearly 20 hectares land will be used for actual breaking of ships and the rest would be used for other infrastructural facilities.
Getting regulatory clearance may be a challenge as the state government is of the view that port regulator Gujarat Maritime Board (GMB) had entered into an agreement with Adani for developing port and related activities at Mundra and ship breaking is an altogether different business, said the Adani official cited earlier. He refused to divulge financial details of the project.
“GMB is in the process of hiring consultants for coming out with a new policy for privatization in ship-breaking industry,” said a GMB official requesting anonymity.
“We are reviewing the matter and will decide on it in due course of time,” a state government official said. He too didn’t want to be identified.
Gujarat is home to the Alang ship-breaking yard, considered to be the world’s largest, according to GMB’s official website. However, environmentalists and other experts have pointed to the highly polluting nature of the industry besides the lack of safety measures being followed in the area. Partly because of these reasons, some of Alang’s business have moved to other areas of the world such as Bangladesh.
The Ahmedabad-based company is also in the process of setting up a liquefied natural gas (LNG) terminal at Mundra in association with Gujarat State Petroleum Corp. (GSPC). APSEZ will have a 25% stake in the project while GSPC will hold 50%. At least four companies, including Torrent Power Ltd, Reliance Industries Ltd’s joint venture with BP Plc, GAIL (India) Ltd and Petronet LNG Ltd are in the race to pick up the remaining 25% stake in the project.
Adani’s plans to enter the ship-building business by setting up a shipyard at Mundra have been deferred. A company called Adani Shipyard had been floated by the Adani Group in 2005 towards this end. “Unlike ship-breaking, ship-building requires skilled expertise. We could not find an appropriate joint venture partner to execute our ship-building business hence we have put the plans on a backburner for now,” said the first Adani official cited earlier.
According to an industry expert, as many as 100 ship-breaking companies are active in Alang and the turnover of the industry is about Rs.10,000 crore per year giving employment to over 50,000 workers. The expert declined to be named.
The entry of firms such as Adani into the industry will introduce more modern techniques of ship breaking that will be more environment friendly, according to Ramesh Singhal, chief executive officer at i-Maritime Consultancy, a firm that provides consultancy in the maritime and shipping sector. Trends for India’s ship-breaking industry, situated at Alang, are counter-cyclical to those for the global shipping industry.
“Bouts of weak global freight rates make it expensive for shipowners to operate old ships. This generates a surge in ship-breaking activity. India, Bangladesh and Pakistan accounted for about 75% of the ships recycled last year,” Singhal said. “There are serious concerns regarding the constant depreciation of rupee which has dented the profit margins to a great extent at Alang,” he added.