Mumbai: First it was the software companies. Then came auto parts makers. Now, it is the turn of ship equipment manufacturers.
Major marine equipment makers, including MAN Diesel SE, Wartsila Corp. and Rolls-Royce Plc., are eyeing India, some with firm plans to set up factories that make a range of equipment used in ships.
This new wave of businesses is an attempt to cash in on India’s rapidly growing shipbuilding industry, which is expected to grow, by some recent estimates, at 30% a year.
Mumbai-based consultancy firm i-maritime, which estimated the industry growth figures, pegs India’s share of the global shipbuilding order book at around 15%, or $22 billion, by 2020, from the existing level of 0.4%, aided mainly by cost competitiveness and ample supply of skilled manpower. India’s shipbuilding order book swelled from Rs150 crore in 2002 to about Rs15,000 crore in 2006, according to Union shipping minister T.R. Baalu.
“Indian shipyards currently import machinery and components. With the increase in shipbuilding volume, global manufacturers are expected to set up ancillary units locally,” predicts Ramesh Singhal, director at i-maritime.
Rolls-Royce Marine, a top power systems maker for the marine sector, will open a unit at Navi Mumbai in October that will assemble a variety of electrical components used in ship-making, both for the local market and also for exports, said a company official who didn’t want to be named. Rolls-Royce Marine makes diesel and gas turbines, propulsion, automation and control and power electrical systems for the marine market.
Germany’s MAN Diesel, one of the world’s top makers of large diesel ship engines, turbochargers and marine propellers, is looking for an Indian licensee to manufacture diesel engines for the firm here. MAN Diesel is the diesel engine division of Munich-based MAN AG, one of Europe’s leading makers of vehicles, engines and engineering equipment.
“We have received offers from a couple of parties to set up the engine-making facility in India. A final decision will be taken in three-four months,” said a MAN Diesel executive who didn’t want to be named as he’s not authorized to speak to the media.
“The technology will be ours and... somebody will make the engines here,” the executive said. It is unclear where the licensee will be located and what levels of investment are being envisioned. MAN Diesel has adopted the licensing route to manufacture engines in several parts of the globe.
There is one wild card in the Indian shipbuilding scenario, however. These global ship equipment makers’ plans come at a time when there is a bit of uncertainty over whether a 30% subsidy, provided by the government to shipyards, will expire on 14 August as scheduled, or be extended.
Existing and new shipbuilders, such as Larsen & Toubro Ltd, which has plans for a Rs2,000 crore shipyard, have been lobbying the finance ministry to not oppose an extension that the ministry of shipping would like to grant.
Still, “it is strategically very important for equipment makers to set up shop in India”, says Dhananjay Datar, chief financial officer at Mumbai-based ABG Shipyard Ltd, the country’s largest private sector shipbuilder. “It is very natural. They will have no choice. It will lead to faster deliveries and better pricing.”
Meanwhile, in the absence of locally available engines and other gears, Indian shipbuilders typically import them from factories located in Finland, Norway, Germany, Italy and the UK. But amid a global boom in shipbuilding, depending on overseas factories creates additional bottlenecks for Indian shipbuilders.
“Shipbuilding is getting delayed because there is a long time gap in getting delivery of engines from abroad,” says T. Madhusudan, deputy general manager, operations at state-run Dredging Corp. of India, which is based in Visakhapatnam. His company, Madhusudan says, has had to wait for as many as 28 months to get an engine after it was ordered.
At MAN Diesel’s factories, the delivery period for its engines is now 24 months. “We are booked till 2010,” said the executive. “We can cater to 2008 and 2009 requirements only in very special cases.”
“Given the global boom in shipbuilding, the demand for engines is very high. The delivery period for four-stroke engines is high and for two-stroke engines, it is even longer,” says Banmali Agrawala, managing director of Wartsila India Ltd, the Indian unit of the Finnish equipment maker.
Agrawala said his firm would look at manufacturing diesel engines in India, but added that volumes have to justify such an investment. “It’s purely a question of volumes,” said Agrawala. “We can’t set up that kind of a facility for small volumes.”
Wartsila’s plan for a factory in India will also depend on the development of a large supplier base for sourcing key components that go into engine making. “The moment we consolidate volumes and the supplier base gets developed, we can look at manufacturing,” said Agrawala.
Still, Wartsila India has set up a 100% export-oriented un-it at its existing Khopoli, Mah-arashtra, site for manufacture and export of marine reduction gear boxes, pumps, oil distribution boxes, high efficiency ship nozzles and has plans for further expansion, he said.
Wartsila has five manufacturing works and three engine building licensees in China, which accounts for 45% of the shipbuilding market, according to the firm’s website.