India’s biggest private sector shipbuilder ABG Shipyard Ltd will invest about $100 million (Rs394 crore) to set up a factory at Dahej in Gujarat that will make diesel engines for ships through a technical collaboration with Germany’s MAN Diesel.
“We are finalizing the details of the proposed tie-up with MAN Diesel and will make an announcement shortly,” said Rishi Agarwal, managing director of ABG Shipyard.
MAN Diesel is the world’s biggest manufacturer of large diesel engines. The company designs and manufactures two-stroke and four-stroke diesel engines, generating sets, turbochargers and marine propellers.
Mint had reported on 12 July that MAN Diesel was looking for an Indian licensee to manufacture diesel engines in the country.
MAN Diesel is the diesel engine division of Munich-based industrial group MAN AG, one of Europe’s leading makers of vehicles, engines and engineering equipment.
The engines made at the Dahej factory will cater to the captive needs of ABG, which has a shipbuilding order book worth Rs7,121 crore, and also supplies to other shipbuilders, Agarwal said.
With local yards adding capacities and new players entering the sector, it is expected that ship engines will find a major market in India.
Indian shipbuilders typically import engines from Finland, Norway, Germany, Italy and the UK.
Dhananjay Datar, chief financial officer at ABG, said manufacturing engines locally would not only cut delivery times, but also result in cheaper engines.
The Indian shipbuilding industry has grown in recent years, in part because there is a growing demand for ships globally and traditional shipbuilding nations, such as Japan and South Korea, have turned down orders for relatively smaller ships.
Many of these orders have then come to Indian shipbuilding companies.
Local builders such as ABG, Larsen & Toubro Ltd (L&T), Bharati Shipyard Ltd, Cochin Shipyard Ltd, Hindustan Shipyard Ltd and Mazagon Dock Ltd are currently building around 240 ships worth Rs18,000 crore.
However, in absolute terms, India’s share of the global shipbuilding industry by value is around 0.5%. The country’s share in the global market could go up to 15%, or $22 billion (Rs86,680 crore), by 2020, according to a report by Mumbai-based consultant i-maritime Consultancy Pvt. Ltd.
The share of Indian shipping in the country’s overseas trade is 13.7%.
“Indian shipowners need to invest over $ 20 billion over the next 5-10 years just to retain this 13.7% share,” said Yudhishthir D. Khatau, managing director of one of the world’s top LPG carriers, Mumbai-based Varun Shipping Co. Ltd.
Khatau said Indian cargo growth may absorb one-third of all global new shipbuildings over the next five years.
To meet the growing demand, Indian shipbuilders are boosting capacities by acquiring smaller yards or building new ones.
ABG is building a new yard at Dahej, the first phase of which will start operations in April next year.
L&T plans to set up a mega yard at Kattupalli, in Tamil Nadu, with an investment of close to Rs3,000 crore.
Bharati also plans to set up a new yard at Dhamra, in Orissa, through a joint venture with Apeejay Shipping Co. Ltd.