Vinod Mathew

SHIPBUILDING has never been rated high up in the corporate ladder, say along with those in the genre of telecommunications, information technology or even energy, especially in India.

And no one really expects the state of affairs to undergo a sea change soon. However, the stipulation by International Maritime Organisation (IMO) that all the single hull structure oil tankers should retire and convert into double hull structure by 2007 may usher in renewed interest in the `unglamorous' shipbuilding sector as the pie at stake is worth $250 billion.

Also, the demand for LNG, CNG and other product carriers is burgeoning — each LNG carrier costing in the $ 180-280 million range. The other major factor contributing to the shipyards' load the world over is the rising demand from sectors such as naval force, coastguard and Customs.

The world requirements are growing and cumulative demand between 2007 and up to 2017 is estimated to be whopping $1.2 trillion, and the matching ship repair and ship refitting facilities also are very essential to create and for which, almost, if not ditto facilities, are required to be created to service those huge oil tankers, aircraft carriers, containerships, oil and gas assets.

It was, perhaps, lack of vision on the part of the government and an even worse apathy from the private sector that has left India in the lurch as far as setting up to think of creating modern and efficient shipyard sector.

India faced challenge in the international market when Korean yards in 1990 almost declined to accept Bank Guarantee from the State Bank of India for delivering ships to the Shipping Corporation of India and others due to an adverse forex position, that was precariously low at $800 million. The other aspect that triggered demand was the effect that India and China had on world trade following their entry into WTO.

Currently, the entire shipowners' fraternity worldwide is in deep shock as it suddenly realised too many orders come chasing too little state-of-the-art and large shipyard facilities worldwide resulting in delay in delivery even by paying more.

For the first time, Indian companies have started daringly buying the VLCCs and some of them are talking about acquiring even ULCCs.

India Inc is now mulling an investment of $2 billion towards buying oil tankers and container ships. But acting as a damper is a steep 80-90 per cent price rise over the last two years, which has forced them to play a waiting game. A

VLCC that was available in the market only two years back at $ 65-70 million now commands a price tag of $115-125 million.

For instance, the SCI itself has plans to acquire ships worth a billion dollar, which include at least four ULCCs, six LRI product carriers, two Suezmax tankers, two capsize vessel for the bulk cargo, four Panamax vessels and six handymax vessels also for the bulk cargo. Besides, they are also in the queue for acquiring at least two large container ships with a capacity of over 4,500 TEUs each.

The downside is that major shipbuilding yards across the world are now chock-a-block with orders for deliveries up to 2012.

All Indian shipyards, even without much of modern facility or efficient deliveries, are fully booked.

Major players such as Great Eastern Shipping, Essar Shipping and other major shipping lines are also in the race for acquiring oil tankers, large container ships and other vessels.

Thus, Essar Shipping sold off its fleet of five Suez Max vessels for a consideration of $256 million, having sold off the vessels between January and April 2005.

Now, it is finding it hard to replace the fleet. Acting as a hurdle is the prohibitively high rates that prevail for VLCCs and Suezmax vessels and this may deter Essar Shipping from firming up any acquisitions in the immediate future.

India now has about 10 shipyards of medium and small size in nature in the country compared to the international standards, including three in the Defence sector.

The list includes Mazagon Dock Ltd (Mumbai), Garden Ship Builders & Engineers (Kolkata), Goa Shipyard Ltd (Goa), Cochin Shipyard Ltd (Kochi), Hindustan Shipyard Ltd, Vizag Hoogly Docks (Kolkata) while the private sector has three major yards — Bharati Shipyard (Maharashtra), ABG Shipyard (Gujarat) and Pipavav Shipyard (Gujarat).

While all the above shipyards are trying to expand their facilities by 2007, they will still be well short of world-size parameters.

However, it is the Pipavav Shipyard situated on the Gulf of Cambay, built at a cost of Rs 800 crore, that is poised to put India on the global shipbuilding map.

It is understood that the promoters, SKIL Infrastructure Ltd, is negotiating the sale of stake in the Rs 800-crore Pipavav Shipyard Engineering Ltd (PSEL). Rated to be among the six largest shipyards in the world.

Those ahead of this virgin facility in India are Hyundai and Samsung (Korea), Aker Masa (Norway), Izhar (Spain) and Damen (Holland) and at least two of them are understood to be in the fray to pick up equity in Pipavav Shipyard.

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