MUMBAI: Mediterranean Shipping Company S.A., the world’s biggest container shipping line, has started preliminary talks with the Ministry of Ports, Shipping and Waterways to identify a suitable greenfield location to construct a shipyard for its inhouse shipbuilding and repair needs as lack of shipbuilding slots globally force it to look at alternatives, multiple sources said.
At the suggestion of the Ministry, Geneva-based MSC also held talks, a few days ago, with Swan Defence and Heavy Industries Ltd, for building and repairing ships at the yard located in Pipavav, Gujarat, a government official with knowledge of the discussions said, asking not to be named.
“MSC is looking to invest in a greenfield shipyard in India,” the government official said. “It has an association with a Chinese shipyard, which acts as a captive facility where they have been building and repairing their own ships,” he said.
To comply with the global environmental rules, MSC will have to retire many ships on its fleet in the coming years. It currently runs a fleet of 860 container ships with a capacity to carry 25.5 million twenty-foot equivalent units (TEU’s) a year.
“MSC has a huge requirement for building ships over the next five years which no shipbuilder can deliver due to capacity crunch. All top yards are full till at least 2028. So, where will they go to order their ships? That’s why they are looking to invest in setting up a new yard in India for their own captive needs,” the official said.
The Indian unit of MSC and the Cyprus-based MSC Shipmanagement Ltd, the world’s biggest in-house ship management company which manages only MSC-owned vessels, are involved in discussions with the Ministry officials and private yards on the plan.
MSC did not respond to a mail seeking comment.
A second source, an industry official briefed on the discussion, said that the plan was in the very early stages.
“Many ships run by MSC call at Indian ports. The container line is on the lookout for a good shipyard to repair ships. There are no good repair facilities in India, and every time it has to go to Dubai, Colombo, etc. It is willing to look at a yard where repair facilities are readily available. At the same time, it is discussing the possibility of building ships in India, but that is in the very initial stages,” the industry official said.
“Shipbuilding is something that MSC is evaluating very carefully but slowly. But ship repairs, yes, and quickly if there is a good yard,” he added.
MSC’s move to consider building and repairing ships in India comes on the back of a strong push by the government to promote the shipbuilding industry for which a policy package containing fiscal and tax incentives is being finalised.
MSC is the second major global container shipping line to look at India as a potential destination to build and repair ships.
Copenhagen, Denmark-based integrated logistics company, A.P. Moller-Maersk A/S, which also runs Maersk Line, the world’s second biggest container carrier, said previously it is keen to build and repair ships in India, ET Infra reported on 10 December 2024, citing a senior official.
The proposed shipbuilding policy includes rolling out a ship recycling credit note scheme and a fixed rate of subsidy for local yards for ten years as the government looks to boost shipbuilding as part of a larger drive to step-up manufacturing.
According to the proposal, shipyards will get a 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 some Rs25,000 crores, to provide equity support to the shipyards for new ventures or for expansion of existing facilities, among other uses of the fund.
Like Maersk, a part of MSC’s attraction to look at building ships in India could be the credit note scheme.
Ship recyclers in Alang, Gujarat – home to the world’s largest stretch of shipbreaking beaches – have upgraded their facilities to comply with the International Maritime Organisation’s Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (HKC) which will enter into force on 26 June next year.
When the HKC takes effect, Alang ship recyclers reckon that global fleet owners will increasingly look at India for their green ship recycling needs.
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 the cost of construction of a new vessel at an Indian yard.
With this credit note, the fleet owner can go to an Indian shipbuilder for ordering a new ship and get a rebate in the shipbuilding cost to the extent of the credit note value.
The proposed maritime development fund, shipbuilding subsidy and the credit note scheme are key factors that are prompting entities such as MSC, Maersk and South Korea’s Hanwha Ocean Co Ltd to consider investment in setting up yards and building ships in India, the industry official mentioned earlier said.
“These global entities are eyeing India only because such policies are going to be framed. It will be good for India. Because, in the bargain, infrastructure will come up, employment will be created, the shipbuilding industry will take off and the economy will grow,” the industry official added.
