| Shape up or ship out
New Delhi, Dec.1: The government has drawn up a Rs 10,000-crore proposal to set up two new world class shipyards and modernise the existing shipyards of the country most of which are in bad shape.
A major chunk of this money is expected to come from foreign direct investment (FDI) and the private sector.
Sources said the proposal was discussed at a recent inter-ministerial meeting as part of the Prime Minister’s ambitious ‘Sagar Mala’ project aimed to give a fillip to the nation’s maritime sector.
The proposal envisages an investment of Rs 6,000 crore for building two major international size shipyards which could exploit the advantage of the country’s cheap labour force to build very large ships that are currently in demand. It has been estimated that an outlay of Rs 2,800 crore would be required to upgrade the existing shipyards in the public sector over the next 10 years while the private shipyards would need an investment of Rs 1200 crore.
While the government is expected to make available a budgetary support of Rs 2,000 crore to modernise the public sector shipyards, the rest of the Rs 8,000 crore is expected to flow in through FDI and private companies.
Among the existing shipyards, the proposal earmarks an outlay of Rs 200 crore for modernising the Hooghly Dock and Port Engineers Ltd. This includes an investment of Rs 100 crore for the construction of slipways with winches and lock gates at Salkia and Nazirgunj.
With the exception of the Cochin shipyard all the other 20 shipyards in the country are either running into losses or merely breaking even. Due to lack of orders, the present capacity utilisation of Indian shipyards ranges from a meagre 20 to 50 per cent.
Indian shipping companies such as SCI and Great Eastern have also placed their orders for new ships with South Korean shipyards. These companies also send their larger ships for repairs outside the country as the indigenous shipyards are too small. The shipping ministry is keen to reverse this trend.
In fact, only Cochin Shipyard Ltd (CSL) has the capacity to build large ocean-going ships.
However, even this capacity of 130,000 DWT will have to be expanded as current shipbuilding orders are mainly for VLCCs with the smaller Aframax tankers constituting only a minor proportion of the demand. The proposal envisages an investment of Rs 1700 crore for CSL.
The Sagar Mala project is expected to generate a demand for 2,250 new vessels in the inland water transport segment and another 200 ships for carrying the country’s coastal cargo.
According to official estimates, this increased demand will require a steel fabrication capacity of 3.2 lakh tonnes per annum while the present capacity of all the Indian shipyards is a mere 40,000 tonnes per annum. This would require a capacity expansion of 800 per cent for the indigenous shipbuilding sector. This excludes the capacity of the defence shipyards which essentially cater to the requirements of the Indian navy.
Official estimates accessed by The Telegraph project the revenue for the shipbuilding industry to shoot up to Rs 3,200 crore per annum from the current level of Rs 450 crore.