Indian cos eye ship building as order flow seen rising2 min read . Updated: 25 Sep 2007, 01:20 PM IST
Indian cos eye ship building as order flow seen rising
Mumbai: Indian firms are increasingly getting into ship building and repairing as shipbuilding orders are expected to rise significantly to meet the boom in seaborne trade and increased offshore oil exploration.
The local industry is expected to expand to $20 billion (Rs79,637 crore) by 2020 from close to $5 billion now, a report by maritime consultants i-maritime Consultancy Pvt Ltd said, which is about 1% by value of total global shipbuilding orders.
Besides subsidies given by the Indian government to local shipbuilders, which is a big incentive, a major part of the world shipping fleet is very old and due for replacement, Chief Financial Officer Dhananjay Datar of ABG Shipyard said.
“There is a clear visibility of growth of the industry in this part of the world," said Datar, whose firm is the largest private-sector ship-builder. Engineering firm Larsen & Toubro already has one ship building yard in Gujarat state and plans to invest about Rs15 billion for shipbuilding and a repair yard.
Gujarat-based Adani group is setting up a ship building and repair yard at a cost of about Rs10 billion. Earlier this month, a media report said Reliance Industries plans to spend $2 billion on shipbuilding and dredging.
Besides the location advantage that India enjoys since a large number of vessels sail through this part of Asia, Indian steel mills have started manufacturing steel plates used in shipbuilding, M.V. Kotwal, board member of Larsen & Toubro, said.
Earlier, shipbuilding steel used to be imported. Essar Steel is already manufacturing shipbuilding steel and plans to increase it with the commissioning of a 1.5-million-tonne plate plant in Gujarat next year.
The Indian government provided a 30% subsidy on value of ships built by Indian yards, which would sail under a foreign flag. This concession was for a 5-year period to August 2007.
The industry hopes this would be extended to help compete with their overseas competitors. This subsidy is also given to certain ships built for the local market.
Moving up value chain
Indian shipyards are moving up the value chain in terms of complexity and types of vessels being constructed, a report by Angel Broking said.
“India will build more specialised vessels than what China is building," analyst Surbhi Chawla of Angel Broking said.
ABG Shipyard and its competitor Bharati Shipyard, which builds sophisticated offshore platform supply vessels, have started building rigs. Asia has the world’s largest rig builders -- Keppel Corp and SembCorp Marine.
Larsen & Toubro plans to build high-end liquefied, compressed natural gas, chemical and specialised carriers while Adani group plans to build Panamax vessels.
“We are talking of the high-end segment since we have an established manufacturing competence of high-end technology types that we could put to use," Larsen’s Kotwal said.
Repair & Components
Indian ship builders are eyeing repair yards given the rise of the global shipping fleet as shipbuilding could be cyclical.
“The time taken for individual jobs is comparatively less and thus many jobs can be undertaken throughout the year to generate higher revenues and margins," ABG Shipyard’s Datar said.
Low-cost shipbuilding components, which were earlier imported, are now being manufactured in India, Anand Sharma, assistant consultant of i-maritime, said.
“In another five-seven years, other components could be produced just as was the case with the automobile industry in India," Sharma said.