Shipyards investing in new building and repair facilities in specified industrial corridors may get land for nearly free, as the Centre looks to encourage the industry in India's coastal states.
Land and common maritime infrastructure may be provided to such shipyards on lease for 60 years that can be extended further, the ports and shipping ministry proposed in greenfield shipbuilding cluster development scheme guidelines released on Monday. While a nominal lease rent would be charged, the Centre and the states would not include the land cost as part of the lease to be received from the cluster participants.
Shipbuilding firms, particularly the global giants, insist on availability on land and associated infrastructure to commit greenfield investments. With land cost being absorbed by the Centre and the states, investments for putting up a shipyard and associated risk could be reduced substantially.
A greenfield shipyard with an approximate 0.5 million GT (gross tonnage) annual capacity in India would require investment of over ₹15,000 crore, as per estimates from the ministry of ports, shipping and waterways. The guidelines speak of three to four shipbuilding clusters in coastal states, with only one in each state. Each one will have a manufacturing capacity of about 1.2 GT.
Mint reported in August about a government plan to attract investment worth ₹75,000 crore ( ₹25,000 crore each) in three shipbuilding clusters. It also reported in July that state-run firms were looking to tie up with global shipbuilders. India is also looking to Japan and Korea for shipbuilding initiatives.
Under the greenfield shipbuilding cluster development scheme, the land parcel earmarked for the cluster will be transferred to a special purpose vehicle (SPV) set up as an equal joint venture of the state and central government, or wholly owned by the central government or any of its agency, by the respective state government at ₹1. The guidelines also specifies that in cases where government land is not available, the same may be acquired by the state government at its own cost. This would be in addition to any industrial/maritime policy support that may be provided by the state government to attract investments in the shipbuilding cluster.
The SPV will develop common infrastructure, manage operations and maintenance activities of the cluster, provide access to common maritime assets to cluster, develop internal roads, rail spurs, and utilities and also attract investments from shipyards and ancillary industries.
The selected shipyard will invest in yard-specific infrastructure, equipment, and operations on a commercial basis and pay an agreed annual lease or concession fee to the SPV. This would be a nominal amount as cost of land would largely be borne by the state government.
A query sent to ministry of ports, shipping and waterways remained unanswered.
Providing land on a near-zero cost serves as a strong structural incentive to global shipbuilders, said Pushpank Kaushik, chief executive officer (CEO) and head of business development (subcontinent, middle east and South-East Asia) at Jassper Shipping, a Hyderabad-based shipping and logistics company.
"For long, the capital intensive- savings and the problem of acquiring the land required to set up a shipbuilding facility have posed as strong deterrents to establishing any such facility in the Indian mainland. When combined with other infrastructural support, it can be said without a doubt that the cost competitiveness provided by India over already existing bases like China, South Korea, and Vietnam has improved significantly,” Kaushik added.
Another person from a shipbuilding and ship owning entity said on the condition of anonymity that getting overseas investment in greenfield shipbuilding facilities would not be easy, given that global shipbuilders have concentrated their operations and scaled it up in specific geographies for long and would not be easy to move into new geographies unless it provided support even for buying ships. He, however, welcomed government guidelines that he termed as industry-friendly.
The scheme envisions the creation of multiple clusters which are likely to be three to four in number (each with 1.0-1.2 million GT capacity), limited to one cluster per state. Besides, the government guidelines provides each shipbuilding cluster would be assigned 2,000 acres of land, with 1,000 acres kept for one or more shipyards and balance 1,000 acres for putting up other ancillary and associated industry, institutions etc.
Also, least one of the Anchor Shipyard(s) should have a design capacity of minimum 0.5 million GT per annum, which is to be achieved within a maximum period of 10 years from the date of commissioning of the Shipyard. The Anchor Shipyard(s) will also be required to submit a binding undertaking not to divest, transfer, lease or repurpose the Anchor Shipyard for any non-shipbuilding use for a minimum period of ten (10) years from the date of project completion, except with prior written approval of the National Shipbuilding Mission.
“While it is clearly a transformation in intent, it has to be delivered. The crucial factors to focus on are facilitation of regulatory approvals, marine talent, funding for tier 2 and tier 3 suppliers, and harmonization at both the central and state levels. However, these steps are a definitive step in the right direction. Along with India’s strategic location, the growing volume of freight movement, and the focus on green and cleaner shipping and alternate fuel options, the above-mentioned policy could accelerate the country’s transition from being a consumer to a manufacturing and logistics leader in the maritime industry globally,” Kaushik said.
India currently has shipbuilding capacity of just about 100,000 GT. According to the Maritime Amrit Kaal Vision 2047 (MAKV 2047), India aims to be in the top 10 in ship ownership and shipbuilding by 2030 and in the top five by 2047. Thus, by 2047, India needs to increase its ship ownership (Indian flagged ships) 7-times to 100 million GT (from about 14 million GT now) and shipbuilding output 40-times to 4.5 million GT by 2047.