MUMBAI: India is wooing the world’s top shipbuilders such as South Korea’s HD Hyundai Heavy Industries Co Ltd, Hanwa Ocean Co Ltd and Samsung Heavy Industries Co Ltd for technical collaboration and joint ventures on the back of a big bang shipbuilding policy which is expected to be cleared by the Cabinet soon.
A high-level official delegation led by T K Ramachandran, Secretary, Ministry of Ports, Shipping and Waterways just returned from a visit to top yards in South Korea to understand the ship construction methods and processes followed by the world’s second biggest shipbuilding nation and to discuss potential technical collaborations and joint ventures between the two countries, multiple sources briefed on the trip said.
Ramachandran was accompanied by R Lakshmanan, Joint Secretary, Ministry of Ports, Shipping and Waterways (looking after shipbuilding), Madhu Nair, Chairman and Managing Director, Cochin Shipyard Ltd and Capt B K Tyagi, Chairman and Managing Director, Shipping Corporation of India Ltd.
“The meetings with top officials of South Korean yards were very positive. They have expressed keen interest to forge collaborations and tie-ups with Indian yards,” said an official.
“Some formal agreements are expected to be signed in this regard when Sarbananda Sonowal, Union Minister of Ports, Shipping and Waterways visits South Korea in March next year,” the official said, requesting anonymity.
To be sure, two representatives from Hanwa Ocean (formerly Daewoo Shipbuilding & Marine Engineering Co Ltd) participated in a 4 July meeting held by the Ministry of Ports, Shipping and Waterways to discuss ways to rejuvenate the local shipbuilding sector.
Executives from the state-owned Export–Import Bank of Korea (KEXIM), also visited India in the last week of October to explore collaborations in the maritime sector, including shipbuilding and repairs.
While Indian shipyards have the know-how for building conventional ships of small and medium size, they are yet to foray into building large sized vessels such as Very Large Crude Carriers (VLCC), Capesize bulk carriers (length around 250 metres), Suezmax tankers and Large/Ultra Large container vessels due to limited infrastructure, shipbuilding industry sources said.
Further, average construction time for vessels in Indian shipyards is much higher compared to their South Korean or Japanese counterparts. Indian shipyards also lack technical expertise in building specialized ships such as LNG/LPG carriers, Floating Storage Regasification Units (FSRUs) and car carriers etc. Lead time taken by Indian shipyards for procuring major equipment and machinery is higher compared to South Korean/Japanese shipyards adding to the construction timeline of a vessel and substantially eroding profit margins, an industry source said.
“The feasibility of deeper engagement/mutual collaboration with the South Korean shipbuilding industry should be explored considering the urgent need to augment/modernize Indian tonnage,” the official mentioned earlier said.
“The main thrust areas for collaborations/joint ventures with advanced shipbuilding nations such as South Korea could be on areas where sub-optimal capabilities and capacities of Indian Shipyards can be augmented, including ship design, real-time planning and milestone monitoring tools, setting up of efficient production lines / production management, processes simplification / automation / digitalization in welding, training activities, shipyard infrastructure expansion, technology transfer for specialized vessels, establishment of ancillary units and green shipping to reap real benefits of collaboration,” the official noted.
Pilot projects in collaboration with South Korean shipyards may be undertaken by top Indian Shipyards which can be replicated subsequently by other local shipyards, he said.
South Korean yards are known for high productivity in terms of man days per ton. “There can be a collaboration to understand the methodology adopted by Korean shipyards to achieve high productivity at Indian shipyards,” the industry source said.
Training on ship building methods and project monitoring methods followed by South Korean shipyards will also help Indian shipyards.
Soft loans to develop shipyard infrastructure in India may also be explored through South Korean lending agencies.
Developing collaborations with South Korean equipment manufacturers to develop a strong supply chain will foster maritime industry in India in the long run, the industry source said.
“All these would help Indian shipyards capture a larger share of the global shipbuilding and ship repair market,” he added.
India holds less than 1 percent of the global shipbuilding market but aims to break into the top 10 ranking by 2030 and top 5 by 2047.
Globally, more than 50,000 ships are to be built over the next 30 years as the shipping industry pivots towards green technology to cut emissions.
The Ministry will seek Cabinet approval for a new shipbuilding policy that includes introducing a ship recycling credit note scheme, a fixed rate of subsidy for ten years and setting up three maritime clusters in Andhra Pradesh, Gujarat and Odisha as it goes all out to grab a larger share of the global shipbuilding market, officials said.
Under the proposed ship recycling credit note scheme, a credit note equivalent to 40 percent of the scrap value of a ship being dismantled in an Indian ship breaking yard would be given to a fleet owner – both Indian and global – with the credit note being reimbursable against cost of construction of new vessel at an Indian yard.
According to the proposal, shipyards will get 20 percent extra as subsidy on the cost of constructing a normal ship, 25 percent as subsidy for building special category vessels including oil, gas, chemical tankers and container ships and 30 percent subsidy for green vessels and other vessels with futuristic technology.
The rate of subsidy will be fixed for the duration of the scheme that will run through March 2034 with possible extension up to 2047 to give long term “visibility” to the yards while booking orders.
The government also proposes to set up a Maritime Development Fund (MDF), with an initial corpus of Rs25,000 crores, to provide equity support to the shipyards for new ventures or for expansion of existing ventures.
The government will be the anchor for the MDF. It will tap into the surplus funds of major ports to become investors into the MDF, besides other non-banking finance companies (NBFC’s), and financial institutions, both domestic and foreign.
Given India’s growth trajectory, estimates suggest that, in the next couple of decades, the country would be accounting for roughly 20-25 percent of the global seaborne trade.
“This definitely throws up a huge opportunity for us as a country,” the official said. “Can we own more ships and through that can we generate more service GDP for the country and more jobs for the country. Subsequently, this essentially would lead to a larger demand for shipbuilding as we want more ships. We have two options – one is to buy ships from outside and second is to manufacture ships on our own,” the official said.
The government’s vision is how do we expand the shipbuilding capacity so that whatever ships are needed for the country, we are able to manufacture it to a large extent within the country.
“Even if we are able to address, not the full size, but 20-25 percent of the market size, that itself translates into, as per one of the studies, roughly $237 billion worth of the shipbuilding market over the next 25 years. This is a substantial business opportunity for us as a country and for the industry,” he added.
The idea, according to the official, is to look at the entire ecosystem in a holistic manner so that all “parts and pieces” of the value chain are addressed.
“So that we are able to seize the opportunity as a country and the industry is able to participate and we are able to make India stronger and shipping becomes a key aspect if India has to become a strong economy going forward,” he added.
