The Hindu Business Line : Private shipyards riding on freight market boom

SIZE does matter — at least as far as the Indian shipbuilding industry is concerned. While the big public sector shipyards in the country are smarting under a frail order book position, their smaller counterparts in the private sector that are engaged in building smaller vessels are being bolstered by a surge in demand.

Interestingly, the private shipyards are getting an increasing flow of orders from foreign companies for smaller vessels, as worldwide the big shipyards are full with new building orders. "While the PSU shipyards engaged in building large vessels are non-competitive in the global market due to their cost over-runs and Government restrictions, it makes sense for foreign ship owners to place orders for smaller vessels on Indian yards due to the cheap labour costs and efficient working," an industry analyst pointed out.

There are about 30 to 35 shipyards in the private sector in the country, of which Bharati Shipyard, ABG Heavy Industries, Western India, Chowgule and Stebma, are the leading players. Most of them, especially Bharati Shipyard and ABG Heavy Industries, are sitting on rich order books.

While the ABG shipyard has an order book of Rs 1,300 crore involving some 25 ships, Bharati Shipyard doubled its sales of ships from Rs 610 crore in 2003-03 to Rs 1,213 crore last fiscal. "Only recently we bagged two contracts from the Bourbon Group of France for supply of two multi-purpose long-platform supply vessels, the contract value for each vessel being $7.9 million. The vessels are scheduled for delivery in June 2006 and September 2006," an official of Bharati Shipyard said.

The healthy trend is prompting many private shipyards to think in terms of expansion or acquiring other shipyards. ABG, for example, is investing Rs 375 crore for setting up a new shipyard in Gujarat. "Work has already started and it is expected to be operational by 2006. We see interesting possibilities in the shipbuilding and ship repair market in the coming months," Mr Rishi Agarwal, Managing Director of the company, told Business Line.

Along with the shipbuilding industry, the ship repair industry is also riding on an upbeat market. "This is so especially in the wake of the growing fear of pollution and stricter norms and regulations on ocean-going vessels. We expect a further spurt in ship repair orders in the coming years," says Mr S.K. Shahi, Chairman of SKS (Ship) Ltd. The company is planning to set up a new ship-repair unit with Danish collaboration.

While it is the boom in the freight market that is the primary driver of growth in the shipbuilding market, the cheap labour costs in India are also prompting foreign companies to have their ships built here. The labour cost per worker in India is at present estimated at $1,192 per year, while it is $10,743 and $21,317 per day in Korea and Singapore (both leading shipbuilding nations) respectively.

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