October 12, 2008
Private shipbuilders to invest INR 18,500 crore in India
It is reported that India’s private shipbuilding companies are planning to invest about INR 18,500 crore in the next 5 to 7 years. L&T and Pipavav Shipyard lead the list with a capital expenditure program of INR 3,000 crore each, followed by Good Earth Marine Group with INR 2,000 and ABG Shipyard, Adani Group and Bharati Shipyard with INR 1,500 crore each.
L&T is poised to build a new USD 500 million shipyards fit to build very large crude carriers, with a proposed capacity of five VLCCs and 20 Panamax vessels. Similarly, ABG’s new shipyard at Dahej will build Handymax initially, but later move into the VLCC space. Bharati is building a large facility in Mangalore on a Greenfield site to complement its four existing yards. Pipavav is planning to enter the offshore fabrication market through a tie up with Punj Lloyd, which recently picked up substantial shares in the company. Even shipping companies are planning to get into shipbuilding. Shipping Corporation of India plans to set up a facility with a JV and talks are on with some Korean shipyards, while Mercator Lines has put up on its drawing board plans to build a USD 247 million yard at Palghar in Maharashtra.
A study by KPMG said that “As the industry continues to move from its existing nascent stage to a rapidly growing industry, it will yield huge benefits to the economy. The economic impact of shipbuilding is very similar to infrastructure sectors such as roads and ports rather than conventional manufacturing. With its large technical pool, one of the major potential upsides of the shipbuilding sector can be the relocation of design and engineering activities from the existing expensive locations of Europe and the US, replicating the trend witnessed in the IT sector.”
According to the KPMG report, during the last 5 years, the private sector shipyards had invested about INR 843 crore as compared to INR 43 crore between 1997 and 2002. Between 2002 and 2007, these yards have managed to bag orders worth INR 14,877 crore as against INR 816 crore in the previous 5 years. However, the industry is still far from realizing its full potential. The present boom in global shipbuilding demand presents significant opportunity for India to consolidate its presence in the global market.
