Indian Shipbuilding Industry

EXECUTIVE SUMMARY

This project is an initiative to study on as INDIA has all resources to come in top 10 positions in shipbuilding industry like CHINA but INDIA is not competitive that much so here we find which factors are responsible for INDIA lagbehind country like CHINA in shipbuilding industry.

Also I study on, how can we fill up this gap & find new opportunities for INDIAN SHIP BUILDING INDUSTRY globally.

'Historically, it has been observed that the nations that have industrialized later have grown at a faster pace and in a shorter time frame. Western Europe grew with a growth rate of 1-2% over an extended two centuries and half. Subsequently, as the maritime epicenter shifted to North America, the growth rates inched to 3-4% in the late 19th and first half of 20th century. Japan grew with 7-8% in its growth phase in 1950s-60s. The emerging Asian tigers grew by 9-10% in 1980s till mid-90s. China is growing by 13% since 1990.' We expect the epicenter of maritime trade to touch India in the near future.

In a way, the Indian shipbuilding industry is fortunate that the overworked East Asian yards have inadvertently offered it an entry point into this lucrative market.

Most importantly, India's dream sail could face the storm of global competition, particularly from China, which claims to dethrone S. Korea to become Numero Uno in the business. With India just at 1% presently, no quantum of expansion here will be enough to completely protect itself from an oversupply scenario building up globally.

1. INTRODUCTION

Why it is important to be competitive in today's global business environment? The reason is that industry competitiveness is the key not only to grow but also to survive. If Indian Shipbuilding industry needs to emerge as key facilitator and accelerator towards economic development, it needs to be competitive in a global market place.
Indian shipbuilding industry, as we would discuss later, has all the ingredients to become competitive in a global market place. However, it requires vision, determination, innovation, and above all considerable planned diligence ' to achieve this competitiveness in its entirety.
Global shipping industry pitching for an unprecedented demand for new shipbuilding, a window of opportunity which was not available earlier has been created for the Indian shipbuilding industry.

The Indian shipbuilding industry had always been dogged by low capacity, poor productivity and lack of modernization. Thanks to the gradual shift of shipbuilding from Europe to Asia, today contrary to expectations the Indian Shipbuilding order books stand at 1.3 million DWT. This has been possible on account of the shipbuilding boom and both foreign/Indian Shipping Companies are coming forward to place new building orders on Indian Yards.
The Indian shipbuilding industry is on a high growth trajectory and is expected to grow at a compounded growth of 30%. Though India has not yet become a significant player in the global shipbuilding business, it has gained a strong foothold in the niche offshore segment.
India's share in the world market has gone from an insignificant low of 0.1% in the beginning of 11th Plan to 1.3% in 2012.
Nevertheless, the industry is still in its nascent stage and dependent on government support for subsidy. The industry is expected to become self-sufficient in 10-years' time and will no longer require subsidy thereafter. It is clear that India can grow in the shipbuilding sector in a healthy manner if shipbuilding is recognized as a strategic industry.
2. SCOPE OF THE STUDY

The dissertation report has a futuristic scope for Indian shipbuilding industry to emerge as key facilitator and accelerator towards economic development; it needs to be competitive in a global market place. So we can actually go for justifying our need and demand for shipbuilding industry thereby ascertaining its economic and operational feasibility.

The project also provides a wide scope for shipyards to cater the needs of shipbuilding & ship repairing facilities thereby studying the current competitive factors which affect Indian shipbuilding industry to enhance shipbuilding operation in India.


3. OBJECTIVES

' This project has been undertaken to study on competitive factor affecting Indian shipbuilding industry needs to emerge as key facilitator. It should be noted that here we study on all possible competitive factor faced by Indian shipbuilding industry have been taken in account for the completion of the project.
' Establishing a level playing field in world shipbuilding
' Improving research, development and innovation investment
' Developing advanced financing and guarantee schemes
' Promoting safe and more environment-friendly ships
' Securing the access to a skilled labour force
' Building a sustainable industry structure
' The report would also give a basic idea of why Indian shipbuilding industry lags behind Country like China, Korea, Japan & how we can fill up this gap?

This paper describes the need for revival of Indian Ship Building Industry.Also suggest about new opportunities to Indian shipbuilding industry for become more competitive.


4. RESEARCH METHODOLOGY
The Research Methodology adopted during the dissertation project for collection of the data and information for preparation of this report was 'Market Survey by visiting and interviewing Companies officials as well as data available in the market' through websites, various market reports, journals, personal interviews, briefing sessions etc. This report gives brief information on Committee meetings with DGH, shipping Companies, their activities, future plans and logistic requirements.

The research design is based on descriptive study with detailed interpretation of market overview at both global and domestic level. The current shipbuilding industry strength of some major country is also considered. There has also been an insight into the order books of the shipyards in India which actually gives the realistic status of vessel demand-supply gap.

The shipbuilding & repairing industry is taken into consideration which acts a major force influencing the market demand and supply of the vessel in the national and international market.

The methodological study undertaken for the project completion also gives an overview of the future idea of the shipyards around the globe.

5. GLOBAL SCENARIO OF SHIPBUILDING INDUSTRY
Globally shipbuilding is a USD 36.3 billion industry. The global shipbuilding order book recorded a 29% CAGR over the period of 2007-2012. An upward trend has been witnessed in the world order book as a percentage of world fleet indicating a strong demand outlook.

Table.1 Projected order book turnover

Fortunes of shipping and shipbuilding industries seem to be linked to each other or at least move in tandem. For nearly three decades in the post World War II era, both the industries were dominated by European nations and United States. Historically, shipbuilding industry suffered from the absence of global rules and a tendency of over-investment due to the fact that shipyards offer a wide range of technologies, employ a significant number of workers and generate foreign currency income (as the shipbuilding market is dollar-based and a global one).
However, high labor costs in the yards of Europe and USA, one of the major determinants in this cost competitive industry, has led to a gradual shift of the center of shipbuilding to these Asian nations over the last two decades.
Today shipbuilding has become an attractive industry for developing nations. Japan used shipbuilding in the 1950s and 1960s to rebuild its industrial structure, Korea made shipbuilding a strategic industry in the 1970s and China is now in the process to repeat these models with large state-supported investments in this industry.
The tidal shift in shipbuilding activities, from Europe to Asia, has opened up huge opportunities for Indian yards, and both public and private ship-builders are capitalizing on them.

6. SCENARIO OF INDIAN SHIPBUILDING INDUSTRY

Shipbuilding in India is very fragmented. Though there are more than 32 shipyards of various sizes, commercial shipbuilding is controlled primarily by 8 shipyards, of these 2 have been added to the list recently.

Fig2. Indian Shipbuilding classification

The top 8 yards contribute more than 95% to the Indian shipbuilding order-book and they also contribute more than 95% to the delivery of ships by value. They are ABG Shipyard, Bharati Shipyard, Chowgule & Co., Cochin Shipyard, Hindustan Shipyard, L&T Shipyard, and Pipavav.
These 8 shipyards built ships in the medium size segment and specialized segment requiring imported equipments and machinery, whereas, the rest of the 24 smaller shipyards procure their equipments and machinery locally. Majority of the smaller shipyards are based in small clusters in Gujarat, Goa, and West Bengal.
There have been some cases of consolidation in the shipbuilding industry in India. ABG Shipyard bought Vipul Shipyard, Bharati Shipyard bought Pinky Shipyard. ABG Shipyard has also taken control of Western India Shipyard.
The 8 leading shipyards in India have mostly focused on specialized vessels in the past. With expansion plans in place they have increased their focus on cargo ships in last two years; they also build ships for coast guard.
Offshore Oil & Gas segment has a substantial share in the Indian Shipbuilding order book. As offshore exploration and production market has been less affected by global downturn, Indian shipyards have not seen major cancellations in the segment.

The broad order book breakup of commercial shipyards in India is as follows


Fig 3

New building orders in the cargo segment has picked up between year 2006 and year 2008. A large proportion of new building orders in the cargo segment have been ordered by Indian firms, either directly or through their overseas subsidiary. As firms are optimistic on the firm utilization of these vessels for domestic cargo, they have rescheduled the delivery of these orders and have not cancelled, post financial crisis. Pipavav Shipyard received orders from Golden Ocean and Greek based Alba Maritime Services.
In 2008, Indian Shipbuilding Industry had followed global pattern. The new building orders at Indian Shipyard have increased from US$ 300 million in 2002 to over US$ 6 billion in 2008.
However, the flow of orders to Indian Shipyards has reduced since January 2008 and stopped post August 2008. A fewer new building orders have been placed since August 2008. Shipping Corporation of India has placed orders on Bharati Shipyard and Cochin Shipyard for building supply vessels. Bharati Shipyard also received orders from the coast guard. The established shipyards in India are occupied with work as they are booked till 2011. They have new building orders placed at them by financially sound firms. A large number of these orders are in the specialized segments, which have not yet been affected by global slowdown or credit crunch.
The turnover of the commercial shipyards has increased by 7 times from Rs 6 billion in the year 2002 to approximately Rs.40 billion in Fy-09. The newbuilding orderbook of shipyards in 2007 registered more than twenty-fold increase in six years whereas rate of ship delivery has followed similar growth due to infrastructure constraints.
Shipyards in India lacked infrastructure to build large ships. Private sector shipyards had capacity to build ships up to 20,000 DWT. Two public sector shipyards namely Hindustan Shipyard and Cochin Shipyard had capacity to build up to 75,000 DWT and 110,000 DWT ships. Expansion plans are underway to build large ships.
ABG has bagged several orders for building bulk carriers. It is also building Jackup rig for Essar Oil field services, whereas Bharati Shipyard is building Jackup rig for Great Offshore. It can be seen in the table below, Indian shipyards are expanding their capacity in the large vessel segment. ABG Shipyard, Bharati Shipyard would be building ships more than 100,000 DWT. Pipavav Shipyard is setting up largest shipyard capable of building VLCC.

Table 4.Growth in Shipbuilding orders ' Base Scenario (million Euros)

Shipyards 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
ABG 56 75 104 151 189 226
Bharti 36 51 66 94 113 151
Chowgle 28 33 39 47 56 67
HSL 19 47 75 75 75 75
CSL 45 60 75 75 98 123
Alcock Ashdown 9 19 24 28 38 47
Adani 94 113
Others 19 29 38 47 66 80
Total 213 314 421 519 730 884


Capacity dwt
Name Location Existing Expansion
ABG SHIPYARD Hazira & dahej,Gujarat 20,000 120,000
Alcock Ashdown Bhavnagar,Gujarat 12.000 NA
Chowgule &co ltd Goa 8,000 NA
Cochin shipyard Cochine,Kerala 110,000 Small ship
Hindustan shipyard Vizag,AP 70,000 NA
Larsen & Turbo Hazira,Gujarat 12,000 NA
Pipava shipyard Pipava ,Gujarat NA 300,000
Tebma shipyard Mangalore ,Karnataka NA 6,000

Table 5. Expansion Plan of some Indian shipyard

Among 8 shipyards listed above, India has two commercial shipyards under government control namely Hindustan Shipyard and Cochin Shipyard. Hindustan Shipyard is being taken over by Ministry of Defence, hence is unlikely to be used for building commercial ships in future.
Cochin shipyard has got new building order for building an Aircraft carrier. Hence, the shipyard has stopped taking orders for medium sized commercial ships, though it developed good credential by delivering Clipper group bulker carriers in time to and specification. It has taken orders for building OSV jointly with Tebma Shipyard. Building OSV does not conflict with the shipyard's existing Aircraft Carrier schedule. Cochin Shipyard is likely to continue building smaller ships, till Aircraft Carrier is delivered.
In addition to the above listed capacity expansion plans, several other shipyards are in various stages of planning.
Building ships for the offshore segment has substantial share in the new building of ships. As can be seen in the table below, Indian shipyards have only Rs 122 billion worth order book in the cargo segment, which has been most affected by the global slowdown. Thus the cases of order cancellation in India as compared to rest of the shipbuilding countries such as China are minimized.

Table6. Indian shipyard order book by ship segment

In addition to 8 commercial shipyards which dominate commercial shipbuilding industry, there are a few upcoming small shipyards. These will be able to build small and specialized ships.
These shipyards are Dempo Shipyard, Shoft Shipyard at Bharuch, Modest Infrastructure at Bhavnagar, Startek Shipyard, etc. These shipyards could diversify into building OSV and other small specialized ships.
Indian Navy and Coast Guard are likely to place orders for combat vessels and service ships such as tugs, barges, and patrol vessels. Naval projects in India are driven by government budgets. With a breach in India's coastal security recently, government is putting more emphasis on up-gradation of Naval and Coast Guard fleet. More ships are likely to be ordered in this segment.
7. DETAILS OF MODIFICATION PLAN OF 2 MAIN INDIAN SHIPYARD

1) HINDUSTAN SHIPYARD LIMITED

Hindustan Shipyard Limited (HSL) is a premier shipbuilding yard established in the year 1941 by SCI India Steam Navigation Company. The Govt. of India took over the shipyard in the year 1952 and was corporatized in 1961. The yard has capacity to construct and repair ships upto 80,000 DWT and 70,000 DWT respectively. The yard has 19 ships under construction. The order book position for the Shipbuilding is Rs. 1157 crores and the yard is pursuing with prospective customers for around 30 vessels more worth Rs 3000 crores. However the existing infrastructure is fairly old. Majority of the equipments have already outlived their age and require replenishment and replacement in addition to additional investment to modernize the existing infrastructure to bring HSL to international standards
Right from the inception of HSL, it has been incurring losses due to various reasons such as lack of adequate working capital and stoppage of credit facility by Banks/Financial Institutes due to an negative net-worth, poor productivity, excessive manpower and management inadequacies and poor infrastructural facilities..
HSL is the largest shipyard located on the east coast and has strategic importance for the National Maritime Sector and defence purpose. Recently, shipbuilding activities has been on the upsurge and it has been decided in the Ministry to revive the Yard to take advantage of the recent upsurge in the shipbuilding sector. Accordingly, a rehabilitation proposal was submitted to BRPSE and as advised by BRPSE, the proposal has been appraised by an independent consultant (IL&FS). IL&FS has proposed a rehabilitation package of Rs.814.5 crores. It has also recommended investment linked commercial arrangement with customer(s) as the viable alternative for sustainable and profitable operations of HSL. The report of IL&FS has been sent to BRPSE for their consideration before it is submitted to Cabinet for approval.

Table 7.PHASING OF EXPENDITURE of HSL

S.N Main features of Revival Package 2005-06 2006-07 2007-08 Total
1. Grants to liquidate State Bank of India's liabilities 255.46 0.00 0.00 255.50
2. Plan Assistance for up-gradation for Plant and Machinery 0.00 23.50 23.50 47.00
3. Loan for liquidating outstanding creditors 12.50 25.00 0.00 37.50
4. Grants for payment of statutory dues 12.50 0.00 0.00 12.50
5. Grants to liquidate Minimum Alternate Tax (MAT) liability. 115.80 0.00 0.00 115.80
6. Grants for Sales Tax liability 12.30 0.00 0.00 12.30
7. Grants for Voluntary Retirement Scheme (VRS) 37.00 45.00 46.00 128.00
8. Grants for completion of projects on hand 33.00 35.00 0.00 68.00
9. Write-off of Government of India's loan and interest thereon 0.00 94.10 0.00 94.10
10 Waiver of Government of India's Guarantee fee 0.00 43.80 0.00 43.80
Total 478.56 266.44 69.50 814.50

Table 8.MODERNIZATION OF HSL

S.No Name of the item 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Total
1. Renewals & Replacements and modernization of workshops 15.00 15.00 15.00 0.00 0.00 0.00 0.00 45.00
2. Advanaced cutting machines & welding station and robotic equipment 0.00 7.50 7.50 5.00 0.00 20.00
3. Improvements in Design Office, software IT related areas & ERP 0.00 5.00 5.00 0.00 10.00
4. Advanced paint ship 0.00 5.00 0.00 0.00 5.00
5. Slipways improvements
0.00
10.00
15.00
0.00
15.00
15.00
5.00
60.00
6. Improvement in offshore Yard 0.00 0.00 0.00 5.00 5.00 10.00
7. Improved training facilities & up-gradation of trades 0.000 0.00 0.00 1.00 1.00
8 Infrastructure facilities for SRF Division 0.00 3.00 7.00 10.00
9. Heavy duty crane 0.00 30.50 25.00 4.00 13.00 27.50 100.00
Total 15.00 45.50 80.00 36.00 24.00 28.00 27.50 261.0
In order to modernize HSL to international standards so that it can compete globally, the NMDP has envisaged a plan outlay of Rs.261 crores towards Investment for the Shipyard for the period 2004-05 to 2011-12. Out of this, provision of Rs.45.50 Cr and Rs 80.00 Cr has been considered for Renewals & Replacements of Machinery and Equipment in RE 2005-06 and BE 2006-07 respectively and the balance has been planned to be spent progressively In the remaining period up to 2012. This is in addition to. Rs 47 crores projected in the Financial Restructuring proposal under the consideration of Gol. The details of the different projects projected for this purpose is as follows. Individual details of sub-schemes are below the summary table.

2) HDPEL

M/s Hooghly Dock & Port Engineers Ltd. (HDPEL), a Government of India undertaking was nationalized in 1984 and continued to incur losses post nationalization. It was on the verge of closure in 1994. Post nationalization built / delivered 56 vessels viz Tugs, Dredgers, Floating Dry dock, Light House Tender Vessels, Oil Pollution Control Vessels and Passenger Vessels etc. for Ports IWAI, A&N Administration. The yard is also undertaking repair work of small / medium type vessels etc. for Coast Guard, Ports, IWAI & A & N Administration.
Taking into account the performance of the company of having delivered 14 vessels in the last five years and able to achieve operating profit in 2001-2002 and 2002-2003 and also considering various socio-economic and political implications and strategic importance being the only yard in the Eastern Sector for repairs and construction of medium type vessels, the Ministry decided to take up the rehabilitation of the company through a Rehabilitation and Restructuring proposal. Without implementation of restructuring package, it would not be possible for the yard to survive.
Accordingly, the proposal prepared by HDPEL was considered by the Board for reconstruction of Public sector Enterprises (BRPSE) in its 17th meeting held on 8th July, 2005. The board advised for submission of revised and realistic proposal duly appraised by an Independent consultant. The Board further advised that the projections made in the revival proposal should be benchmarked against the best year's performance of HDPEL and that the revival proposal should be bankable.
M/s IL &FS Infrastructure Development Corporation Ltd. (IL&FS IDC) appointed as consultant has proposed to take up the assignment in two phases. Phase-I being review of the Restructuring Plan and Phase-II envisaged preparation of detailed Restructuring Implementation Plan and also provide assistance in implementation.

The gists of the recommendations of plan are:-
' During initial period, minimum order is required to be committed by the Ministry and should constitute part of the Rehabilitation-cum-Restructuring package.
' VRS should target at reducing the employee strength from 746 to about 400.
' Up-gradation of Plant /Machinery and equipments.
' Liquidation of liabilities.
' Availability of working capital.

Table 9.PHASING OF EXPENDITURE of HDPEL:

Sl. No. Component

Year-I Year-2
Year-3
Total
(A) Components which require cash
outgo from Government Exchequer
(i) Grant in-Aid assistance for liquidating State Bank of India (SBI)'s outstanding due
(Non-Plan support) 28.87 3.15 -- 32.02
(ii) Grant-in-Aid assistance for VRS
(Non-Plan support) 21.00 -- -- 21.00
(iii ) Grant-in-Aid assistance to liquidate Statutory dues & other liabilities
(Non-Plan support) 4.93 -- -- 4.93

(iv) Equity infusion for up-gradation of Plant, Machinery & Equipment
(Plan Support) 15.00 10.00 10.00 35.00
(v)
Equity Investment for Working Capital
(Plan Support) 8.00 8.00 -- 16.00
(B)
Component which do not require cash outgo from Government Exchequer
(Book Adjustment entry)
(vi) Writing off of Government of India Loan & Interest
(Non-Plan support) 93.71 93.71 93.72 281.14
TOTAL 171.51 114.86 103.72 390.09

Sl. No. Project detail Budget
-ary Support RE 2005-06 BE 2006-07 BE 2007-08 BE 2008-09 BE 2009-10 Total Outlay
(Rs.In Crores)
1. Construction of slipways at Salkia works. BS -- -- 10.00 10.00 15.00 35.00
2. Renovation existing drydock at Salkia Works BS -- 0.50 3.50 3.00 3.00 10.00

3. Strengthening of Building berth etc. at Salkia works. BS -- 1.50 15.00 5.00. 3.50 25.00
4. Construction of New Fitting out jetty, material handing facility at Salkia works. BS -- 0.30 7.00 5.00 2.70 15.00
5. Installation of New Machines in workshop at Salkia works. BS -- 0.75 4.00 2.00 3.25 10.00
6. Construction of slipways and other facilities at Nazirgunge works. BS -- 2.50 12.00 10.00 10.50 35.00
7. Augmenting workshop facilities at Nazirgunge works. BS -- 2.00 4.00 2.00 2.00 10.00
8. Modernization of shipyards fabrication / welding process (Salkia & Nazirgunge works) BS -- 7.34 2.66 -- -- 10.00
9. Construction of New Fitting OutjJetty at Nazirgunge works. BS -- 0.30 7.00 4.00 3.70 15.00

10 Installation of computer facilities, development of training institute including MOT trainees. BS -- -- 2.50 2.50 -- 5.00
Total BS -- 15.19 67.66 43.50 43.65 170.00

MODERNIZATION OF HDPEL
In order to modernize HDPEL to international standards so that it can compete globally, the NMDP has envisaged a plan outlay of Rs.170.00 crores toward investment for the shipyards for the period 2004-2005 to 2008-2009. The details of the different projects projected for the purpose are as follows:-

8. COMPITITIVENESS OF INDIAN SHIPBUILDING INDUSTRY

8.1) COMPARISISON BETWEEN INDIAN & CHINA SHIPBUILDING INDUSTRY
A comparison of productivity shows that while China may be well ahead of India in total ship building, its productivity is almost the same as India and this is one area that India can take a lead on the strength of its IT industry and setting up new modern shipyards.
Country Completions
M DWT (in%) Employees Productivity DWT /Person
Japan 23.2 80,000 290
Korea 23 71,800 320
China 8.8 158000 56
India 0.6 12,000 50
Comparing India and China:
A comparison of productivity between India and china shows that while China may be well ahead of India in total ship building, its productivity is almost the same as India and this is one area that India can take a lead on the strength of its IT industry and setting up new modern shipyards.
China India
Shipbuilding & Repair Yards 492 28
Manufacture of Equipment 148 Not Known
No of Employees 2, 87,702 12,000
Order book 40 m DWT 1.3m DWT
Global share 19 ' 20% 1%
China has been gaining almost 2% of the world's share every year. India has a lot of catching up to do.
The growth of Chinese shipbuilding industry is now becoming a threat to almost all major shipbuilding nations as China is planning to become the leading shipbuilding nation with an aim to corner more than 30% global share by 2015. India is probably the only country that will be able to match the Chinese prices with its relatively low labour costs and industrial base for manufacture of equipment.
The fact however remains that India's contribution is tending towards being a significant component in the global shipbuilding industry and that we need to get our act together to use this very promising window of opportunity. With the exponential growth in the number of ships calling on Indian ports, providing ship-repair facilities is becoming an increasingly attractive opportunity. Not only does ship-repair and building activity help generate substantial local jobs, it also builds the capacity of local industry.
Table 11.Future projection of Indian shipbuilding industry

8.2) COMPARISON OF SHIPYARDS IN INDIA & SOUTH KOREA

At present situation ship yards in South Korea are highly sophisticated compared to India. The Comparison between Hyundai Heavy Industries (HHI), Ulsan and Hindustan Shipyard Limited, Visakhapatnam reveals drawbacks in Indian Shipbuilding Industry.
Hyundai Heavy Industries:-
Hyundai Heavy Industries is currently largest Shipbuilding Company in terms of productivity with a global share of 15%. Currently, HHI has full of orders till 2012 and working at its maximum capacity to meet the demand. HSL achieved a productivity of 73,743 Dwt with 98% capacity utilization for the year 2007-08. Recently, it delivered a vessel of size 53,000 Dwt (which is largest in the History of HSL since 1941, even though it has capacity to built up to 80,000 Dwt) to Good Earth Maritime Ltd. It was taken over by Ministry of Defence, very recently.
Hyundai Heavy Industries, Ulsan, South Korea HHI started building two 260,000 Dwt VLCCs in conjunction with its dry dock construction and, two years later, had a christening ceremony for the two VLCCs with the simultaneous dedication of its shipyard. In 1984, just 10 years after HHI delivered its first VLCC; HHI surpassed 10 m Dwt in ship production. In 2008, HHI has set a new world record in shipbuilding history by exceeding an aggregate total of 120 m Dwt in Ship production.
Since the establishment in 1973, HHI is not only been successful in shipbuilding, but has also expanded its business activities in various heavy industry fields such as Offshore Engineering, Electro Electric Systems, Engine & Machinery, Industrial Plant & Engineering and Construction Equipment.
HHI operates two Research Institutes, HMRI (Hyundai Maritime Research Institute) and HIRI (Hyundai Industrial Research Institute), both of which are playing important roles in company's R & D activities. With high level of automation and new technologies ranging from off-line welding robots indoor production of 40m long blocks, to environmentally controlled painting shop, HHI offers a number of advantages: greater productivity gains, reduced building timings and, above all, superb quality.

Hindustan Shipyard Limited, Visakhapatnam, India
SCI India Steam Navigation (former name of HSL) established in 1941, under private management. Government of India took over it completely, by the year 1961. The yard is laid out in an area of 46.2 hectares (300,000 sq meters). It has plasma cutting machines, steel processing facilities, material handling & transportation equipment, cranes of various types and sizes, logistic and storage facilities. The test and measuring facilities verify conformance of vessels with class rules and quality standards. The yard has separate and dedicated infrastructure and facilities for ship building and ship repairs.

8.3 MAIN CRISIS RESPONSE BY COUNTRY:-

Country
Description of government intervention
South Korea ' Announcement of a 32 trillion Won (approx. 18 billion Euro) support package to shipyards and ship owners as part of an emergency economic policy, comprising 12 billion Euros in loans and guarantees to shipyards and suppliers (supply of working capital) and 6.7 billion Euros in direct loans and debt to ship-owners (domestic and foreign).
' Creation of a fund of some $3 billion (30% funded by government) to buy over 100 ships from Korean shipping firms.
' The Korean Export-Import Bank has put aside 8.5 trillion won for loans to small domestic shipbuilders. The government will encourage state-run banks to provide guarantees for overseas contracts of troubled companies.
China ' State owned COSCO, China Shipping Group and Sinotrans are supported to pick up cancelled shipbuilding orders from state owned shipyards (CSSC and CSIC.
' State owned shipyards CSSC and CSIC support to carry out mergers and acquisitions through capital injections and the creation of an industrial fund
' Continuation of the stimulus package to expand annual shipbuilding capacity to 50 mln DWT annually.
' Specific measures, including competitive loans to ship owners to encourage fleet renewal; increased and preferential credit facilities for foreign ship buyers; (17%) subsidy on ship prices for domestic ocean going ships till 2012; access to working capital for shipbuilders at preferential interest rates + mortgage financing for ships under construction.
India ' Build in India policy ' proposal for a $2 billion loan packages to the shipping industry connected to the idea of buying at domestic yards.
' 2007 subsidy scheme (30% subsidy) for orders secured till August 2007. Newly proposed 20% subsidy from 2007 onwards.

9. KEY FACTORS & CHALLENGES TO ENHANCE FOR SHIPBUILDING OPERATION IN INDIA

1) FINANCIAL IMPLICATIONS
The financial implications of the subsidy are shown in tabulated form below. This table has been prepared on the basis of the projections shown above. In order to estimate the total benefit a computation of the total Net Present Value of the net Government benefits {Taxes (Shipbuilding + Ancillary) ' Subsidy} has been computed from 2006 onwards. The tax rates taken are 18% in the 11th Plan; 15% in the 12th Plan, 12% in the 13th Plan and 9% in the 14th Plan. The discount rate is taken as 11% for NPV. The subsidy has been taken as 30% in the 11th Plan, 20% in the 12th Plan and 10% in the 13th Plan.
The NPV of Net Government benefit is Rs 21,671 crs if subsidy is given to the shipbuilding industry. Apart from this there will be a tremendous value addition in terms of jobs, expansion of manufacturing and ancillary industry as well as other down stream effects. A similar expansion will also take place in the Ship Repairs industry and therefore the total benefit will be much more.
In the event subsidy is not given there is unlikely to be any new investment in setting up of new shipyards or expansion of existing facilities. The existing industry, being old and obsolete will not be able to compete globally and may have to close down.

Table 12.Projections of the net Government benefits
YEAR Shipbuilding Revenue Subsidy Total Govt. Income Profit=
Tax-NPV
2007 2925 878 684
2008 3803 1141 890 -251
2009 4943 1483 1157 -326
2010 6426 1928 1504 -424
2011 8354 2506 1955 -552
2012 10860 3258 2541 -717
2013 14118 2824 2753 -71
2014 18354 3671 3579 -92
2015 23860 4772 4653 -119
2016 31018 6204 6049 -155
2017 40324 8065 7863 -202
2018 34947 3495 5452 1957
2019 454311 4543 7087 2544
2020 59061 5906 9213 3307
2021 76779 7678 11977 9213
2022 99812 9981 15571 11977
2023 129756 0.00 15181 11678
2024 129750 0.00 15181 11678
2025 129750 0.00 15181 11678

2) FUNDING
The total investment during the XI plan from all the above can be expected to be in the region of Rs.4000 Crores. All these investments are with the help of continuance of the subsidy scheme by the government and setting up of SEZs for new shipyards in consonance with other fiscal incentives.
In case all these things do happen, the existing public sector shipyards, viz. CSL, HSL and HDPE will be seriously affected unless -
(a) Existing shipyards/industry is given SEZ status.
(b) Price disadvantage in pricing between existing and new shipyards due to taxes is removed.
(c) Shift of trained manpower from existing shipyards is arrested.
Hence, it stands to reason that existing PSU shipyards must also be given SEZ status along with new shipyards in order to remain competitive and avoid different interpretation of the same fiscal rule for the same business.

3) FISCAL REFORMS-CUSTOMS
3.1) Duty on sale of ship
Though items imported for building Ships indigenously are exempted from payment of Customs duty, the ships built and delivered to Indian owners are treated as ships imported and Customs duty @ 5% is levied by treatment of indigenously built ships under the above category will defeat the very purpose of granting the facility of duty free imports of raw materials and parts for shipbuilding extended for indigenous shipbuilding industry.
This discourages building of ships for Indian owners and encourages building for overseas owners. This will seriously affect growth of Inland Water Transport and Coastal transport in India.
Duty on capital goods imported for shipbuilding
Capital goods imported for shipbuilding including renewals and replacements of yard facilities are presently dutiable under Customs Act. This must be reversed if climate for Shipbuilding in India is to be encouraged.
Ships are constructed under bond and remain to be bonded till they are broken up even in the case of ships delivered to indigenous owners.
Hence it is not construed as a sale for home consumption. However Customs Department interpret and assess the above sale of ship to Indian owners as home consumption Sale and value the scrap on the basis of value of the mother material. This leads to continuous litigation and wastage of time and money. This amounts discrimination and is detrimentally affecting the industry. To avoid the same amendment is required.
The imported items kept under customs Bond, if not utilized, within 1 year in the case of shipbuilding and 90 days in the case of ship repair, for the purpose for which imported, are required to be de-bonded paying customs duty and interest which ends up in huge loss to the yards. When such stocks of imported materials have become obsolete and unusable, it has to be disposed off. The actual realizable value will be much less than the Customs Duty and interest payable for de-bonding the items. Hence this has to be exempted from levy of interest and customs duty may be charged on realizable value only.
Presently goods imported for ship building and ship repair are kept under bond and drawn for shipbuilding/ship repair operations by taking permission from the Customs Authorities and fitment certificates are furnished. The yards are maintaining all records of import/storage/ consumption of goods. Hence the Customs Authorities can inspect and verify the records at any point of time.
It is suggested to consider 'Self Removal System' whereby the yards will maintain Customs Bond and the designated Officers of the yard will control and supervise the bond operations instead of the present customs establishment in the yards as yard is submitting all required documents including fitment certificates.
This will help the yard to release the warehoused items required for shipbuilding/ship repair activities in time thereby achieve delivery targets/schedule and reduce huge establishment expenses incurred for maintaining the Customs Establishment in the yards.
3.2) Excise Duty
Capital goods required for construction of ships are not exempted from levy of Excise Duty. Capital goods for shipbuilding also be exempted from the key of excise duty as in case of Ship repair as the concessions given to shiprepair activity alone may not yield the required purpose.
Benefits of this exemption may be extended to all manufactured items anywhere in the country (without confining to items manufactured in shipyards alone) intended for use in construction and repair of ocean going vessels and exemption from following Central Excise Rules, 2001 may be allowed due to practical infeasibility in complying with the rules. No financial implications are involved. End exemption is available in respect of items manufactured in a shipyard intended for use in manufacture or repair of goods falling under certain headings. Benefits are for procedural relaxations.
For effective utilization of yard facilities, shipyards will have to undertake other works, which are dutiable. In such cases even scrap generated from exempted products, which is otherwise exempted, will also become dutiable. Since separate accounts and records are kept for exempted works and excisable works, scrap arising from exempted works may be exempted from Excise Duty, even if excisable goods other than exempted goods are also manufactured in the shipyard.

4) R&D IN SHIPBUILDING
4.1) IT in Shipbuilding/ Repair Industry
Integration of design, detailed engineering, information exchange, production monitoring and project management are the key elements in shipbuilding/ Repairs. There is a need to train in the areas of key packages like CAD/ CAM packages such as Tribon, Foran, Auto Ship etc to facilitate drafting, design development, Dimensional management, Procurement planning, yard practices, document management, and support systems to management etc. The integration of production processes, internal and external exchange of data would be need of the future. In order to keep pace with the latest developments in ship building internationally, a technical library is required to be established which is accessed online by every shipyard and other associated organizations for their online logistic management support system.
NSDRC, having a specialized R & D Centre for networking, computerization, online connectivity and a computerized library information system, may be entrusted with the responsibility of establishing these new initiatives in various shipyards.

4.2) Training and HRD in Shipbuilding & Shiprepair industry
There is a requirement of Institutional support for Impart Training Technical and Managerial Courses in the SBR Sector. This is needed in the following key areas:-
(a) Naval Architecture and Ship Designing (Basic and Detailed Production Drawing/ Packages)
(b) Ship Building Technology (Block Production Techniques, Construction Super vision/
Surveying),
(c) Equipment Design and Production Techniques (Ancillary Development).
To promote R&D in Shipbuilding an outlay of Rs.201.80 crores is proposed. In addition, an outlay of Rs.19 crores is proposed for Conducting Studies in Shipbuilding.

5) EXECUTION DELAY -
Delays in order fulfillment could impact earnings for the company. While accepting a contract to build a ship, shipyards agree to a particular delivery schedule and satisfactory performance of the vessel and issue performance guarantee of 5% of the value of contract money. ABG has a huge order book increases the possibility of the performance guarantee being invoked leading to reduced earnings. Further, any delays on the new capacities coming up may increase the execution risk, leading to delay in completion of orders on time.

6) FOREX RISKS
Forex risks emanate from the fact that 90% exports form a major composition of sales and also global new building prices are quoted mostly in dollar terms.

7) GROWTH TRAP
Biggest risk for ABG lies in the fact that the current sales constitute a small percentage of future sales charted. We are certainly relying more on future growth to reap benefits from this investment.
8) INDUSTRY WIDE RISK
ABG will be exposed to the general industry wide risks like rise in raw material costs & steep rise in global ship building capacity.
9) EQUIPMENT SEGMENT
As shipbuilding in India is in its nascent stage, most of the critical equipment and machinery used in ships are imported. The indigenous items are used in coastal barges, fishing vessels and Inland vessels. These segments contribute less than 5% of commercial shipbuilding in India. In the absence of local manufactures Indian shipbuilding industry opens large opportunities for international equipment suppliers.
Market share in high-end equipment segment such as Marine Engines, Propulsion Systems, Automation systems, Communication systems which are currently shared with Japanese, German, Singapore and Korean Companies.
Shipyards in India procure all the low value items either from China or have developed local vendors to manufacture them. These items include Anchors, Anchor Chains, Cables, Switches, Intercommunication systems, valves, etc.
There are more than 500 companies from various countries registered in India to supply critical equipments and machinery. Price of equipment plays an important role in the decision making process for selection of equipments and machinery. If the maker of equipments and machinery is not specified by the owner, price becomes a key parameters in deciding the make, though without compromising on the quality of equipments and machinery.

Table13. Equipment imported by Indian shipyard and country of manufacturer.
Equipment Countries of Import
Main Engine Belgium,Finland,Japan,Singapore,SKorea,U.K.
Propulsion Germany,Norway,Singapore
Gensates France,Germany,Japan,Singapore,U.k.
Steering gear Canada,Denmark,Germany,Japan,Netherland,Singapore
Deck engine Germany,Italy,Norway,U.K.
Navigation German,Japan,Norway,U.K.
HVAC Korea,Australia,Singapore,Netherlands,Denmark
Boiler plant Belgium,Sweden,Denmark,norway
Anchor chain China,Hongkong,Singapore,Korea,Japan
Valves Netherlands, Singapore, Scotland, Germany, Korea
Marine Duty Pumps Spain, Italy, Denmark, Germany, Singapore, Netherlands
Lashing Range Singapore, Denmark, Hong Kong
Fire Fighting System Greece, Germany, Holland, U.K., Japan, Singapore
Inter Communication Singapore, Denmark
Air Compressor Germany, Singapore, U.K. Holland, Germany
Winch Australia, Singapore, Belgium, Denmark, Holland, Japan
Towing Winch Belgium, Netherlands, Holland, Denmark, Japan, Spain

AS Bharti shipyard concern etc------
Scattered facilities '
Bharati's existing facilities scattered over smaller yards across geographical locations might be leading to some extra time & cost for the company. However, a few days spent in towing of vessels does not make any significant impact over the total 18-20 months of construction period. Also, with the newer larger yards coming up, the contribution of these smaller older yards is bound to fall dramatically.

10. OPPORTUNITY IN WORLD FOR INDIAN SHIPBUILDING INDUSTRY

1) REPLACEMENT DEMAND
1.1) Age Profile of World Fleet '
Various international organizations like International Maritime Organization (IMO) have proposed to scrape & phase out vessels of more than 25 years of age. The Director General of Shipping (DGS), India has also announced a mandate CAP 2 (Condition Assessment Programme) rating for all vessels that are 20 years old & a complete ban on oil tankers aged above 25 years from entering into Indian waters effective 1st April 2004.
More than 65% of the world fleet is above the age of 15 years. With these due for replacement, new buildings would primarily be used to replace the aging fleet.
1.2) Scrapping of Single Hull vessels -
IMO regulation mandates the conversion of all oil tankers to double hull by 2010 & scrapping of single hull tankers. Tankers constitute more than 45% of the total vessels, of which about 33% are single hull. This is expected to drive an increase in demand for new vessels.

2) NEW-BUILDING PRICES
Prices are a clear indicator of the demand ' supply mismatch within any industry. Vessels prices, in the recent past have increased rapidly, indicating that the demand for new builds has far exceeded supply.

3) OFFSHORE SEGMENT
New Demand Driver
According to the International Energy Agency (IEA), world energy consumption is expected to double by 2040, needing US$ 20 trillion of investment. The Energy Information Administration (EIA) estimates non- OECD Asia (in particular China & India) to take 43% of the total increase in global oil use over the next 20 years. Oil & gas equipment & services companies are enjoying a strong operating environment. With the rise in oil prices, recovery of oil reserves & production from ultra deepwater fields, marginal fields & other previously unviable fields has now become economically viable, resulting in increased demand for

offshore oil equipment & services, leading to a significant increase in capital spending.
The Indian offshore market is also witnessing a rapid expansion. Big players like Reliance & ONGC are committing large capital expenditures for their E&P activities ' both from new & existing fields. The offshore industry is further expected to benefit from the GOI's NELP VII which has a total of 57 blocks on offer. With increased E&P activities, the charter rates for offshore supply vessels have increased rapidly, leading to an increase in demand for OSVs. Also considering that ~ 75% of the world OSV fleet is above 20 years of age, a huge replacement demand is expected for these vessels.

4) SUPPLY SIDE SCENARIO
Due to the current boom in demand for new builds, or additional tonnage, the order book of existing global shipyards is full for delivery till 2012. Global giants like South Korea & Japan are currently unable to take new orders for delivery before 2011-12, resulting in a wait time for new building orders increasing to more than 4 years. With such a global scenario, new shipbuilding orders are moving towards countries like India & China for fulfillment of their new vessel requirements.



Fig1.New Orders, completion &Orderbook

11. KEY POSITIVES FOR THE INDIAN SHIPBUILDING INDUSTRY

1) GEOGRAPHIC LOCATION
India's strategic geographical location acts as a harbour for the rising global seaborne trade between Europe, USA & Australia. Besides it has 12 major ports & 185 intermediate ports which make it more favorable. India's long coastline measuring 7,617 Km. in length makes it easier for shipyards to build & repair ships of all types & sizes.

2) RELATIVELY LOW COST OF HIGHLY SKILLED & TECHNICAL LABOUR
As per a research done by consulting firm AT Kearney, India ranks second only to the USA in terms of trained manpower availability. India possesses a large pool of well educated English speaking technical workers at low cost compared to most t of other shipbuilding countries.
The labour cost per worker in India is estimated at US$ 1,192 per year, compared to US$ 10,743 per worker in South Korea and US$ 21,317 in Singapore. Because shipbuilding is a labour intensive industry, India's low cost of labour should provide Indian shipyards with the opportunity to increase their market share in the global shipbuilding industry.
Table14.Labour rate in different countries
Country Labour rate
India 1
China 0.5-1.5
Singapore 3
Korea 6
U.K. 10
USA 10
Japan 12
France 13
Norway 14
Germany 15
3) NEW GLOBAL INVESTMENT DESTINATION
Growing at about 9% GDP, India has emerged as a preferred investment destination the world over. Incidentally, the shipbuilding sector is also witnessing global investments coming up within the country. Global makers of ship parts and materials plan to set up factories in India to tap rising demand for their products. Japan's Mitsui & Co. Ltd and Chugoku Marine Paints Ltd, South Korea's STACO Co. Ltd, Norway's Jotun Group and Finland-based engine maker Wartsila Corp. are keen on setting up units in India. Also, HSH Nordbank AG, world's largest ship-financier & Norway's biggest bank DnB NOR Bank ASAare planning to start their India operations.

4) FAVORABLE GOVERNMENT OF INDIA (GOI) POLICY
The Government of India has taken some major initiatives in developing & promoting the shipbuilding industry within the country.
Shipbuilding Subsidy '
The GOI had announced a 30% subsidy assistance for public sector yards in 1997. With the intent to encourage private sector investments, the Ministry of Shipping, in 2002, initiated a move to grant subsidies to private sector yards for a period of 5 years.
This subsidy assistance is in line with the direct or indirect assistance given to the shipbuilding industry by governments of other countries. This 30% subsidy was provided to private sector shipyards on vessels prices for orders taken before 14 August, 2007. It was restricted to ocean going merchant vessels over 80 meters in length - manufactured for domestic market & ships of all types - manufactured for export, on fulfillment of certain conditions.
The subsidy scheme has ended on 14 August, 2007.
However, the Ministry of Shipping has proposed a subsidy of 20% for a period of 10 years beginning 15 August, 2007. This comes on the back of the report submitted by consulting firm KPMG India Pvt. Ltd., that recommended an extension of the 30% shipbuilding subsidy scheme for a 10 year period till 2017 and also suggested that the business be treated as an infrastructure activity, making it eligible for incentives such as tax holidays.

5) SAGARMALA PROJECT
The GOI has announced a major project known as the 'Sagar Mala' / National Maritime Development Programme (NMDP) to develop India's maritime sector, involving a massive investment of Rs. 1,000 billion. The project is primarily aimed at capacity expansion, modernization & creating two major world-class international shipyards, one each on the East & West coast of India. This project is expected to result in additional demand for 2,400 new ships.

6) TONNAGE TAX REGIME
The GOI has introduced tonnage tax for shipping companies which has shown a positive impact on their net profits, thereby free up additional funds for expansion.

7) FDI POLICY
GOI also allows 100% FDI for the shipbuilding sector.

8) MARINE SHIPBUILDING PARK'
The Gujarat Maritime Board (GMB) plans to develop a Marine Shipbuilding Park along its 1,600 km. long coastline & aims to become the hub of Indian shipbuilding industry.

9) NELP BLOCKS
The GOI has already awarded 162 blocks in the previous 6 rounds with expected investments to the tune of US$ 8 billion. The Government now plans to offer 57 blocks in the upcoming NELP VII, including 28 blocks for offshore ' 19 in deep water & 9 in shallow water.

12. SWOT ANALYSIS OF INDIAN SHIPBUILDING
INDUSTRY

STRENGTH OF INDIAN SHIPBUILDING:-
India has a flourishing shipping activity which requires new ships in large numbers. A large coast line remains untapped with regard to coastal ships.
India has a low labour rate which has been acknowledged by the international community, which is engaged in outsourcing skilled and knowledge based jobs to India. In shipbuilding sector, large skilled labour is employed and this sector also requires large number of trained engineers and technicians for design, production and management and it is quite well known that in India trained man power at various levels is available sufficiently, i.e., ITI, diploma and degree level engineering programs. Both the areas of ancillary and service industries including IT sector are in a state of high growth with the potential of outsourcing to India being on the rise. This is a particular strength area for shipbuilding.
Raw material for shipbuilding is steel and, to a lesser extent, aluminium for war ships and high performance craft. With steel production on the high growth path, availability of raw material for shipbuilding should be easy.
India has a long coast line and expansion in shipbuilding is no problem with many suitable sites available for putting up shipyards and ship repair facilities.

WEAKNESS OF INDIAN SHIPBUILDING INDUSTRY:-
Governmental support and initiative for shipbuilding is almost negligible in India. Though the Government has announced 30% cash subsidy for ships built in Indian shipyards, the procedural delay is enormous and many times, subsidy is not realized. Other than this, there is neither any a tax concession or favorable financing facility nor there do any export promotional avenue. Consider this against the South Korean story of setting up an apex advisory body on shipbuilding reporting directly to head of the state. The state governments with long coast lines do not consider shipbuilding to be attractive. Except Gujarat no other state government has taken any steps to encourage shipbuilding.
Existing shipyards have obsolete equipment and layout. More importantly, the production process is obsolete with very poor management. Ship marketing is almost nonexistent and ship production is unplanned. Labour productivity is also low compared to other countries with labour intensive industries. This could be due to lack of orders, bad planning and lack of leadership. There is also lack of quality awareness at all levels from worker to top level management which frequently leads to rework causing delay and cost overruns. This also affects shipyard's credibility.
Due to lack of marketing efforts and lack of support from R and D activities, Indian shipbuilders tend to concentrate on low value products and are unable to identify new and emerging markets. One of the major weaknesses of Indian shipbuilding industry is poor interaction between R and D institutions and industry which is unacceptable for a growing industry.

OPPORTUNITIES FOR INDIAN SHIPBUILDING INDUSTRY:-
One of the big opportunities that Indian shipbuilding industry has encountered is the present shipbuilding market which has come to Indian door steps almost unsolicited. Since the pressure of finding a market is reasonably eased, India shipbuilding community should take this opportunity to formulate strategies for long term growth and survival of this industry.
India is also witnessing a boom in offshore oil exploration and production in Indian shores and abroad through collaborations. There is a high demand inside the country for production of offshore platforms and their repair facilities.
Large skill base is available for providing suitable manpower for conventional shipbuilding. There are plenty of ITI level institutions in the country providing basic skills required for shipbuilding such as welding, fitting, carpentry, foundry etc. The existing shipbuilding industries also have their own in-house skill training programs. There are large number of technician training institutions in the country providing technician level training and skill. Presently there are large numbers of government and private institutions providing degree programs in various engineering disciplines.
With the economic boom in the country the large capital base in private hands is finding its way to various industries. This is evident from the over subscription of IPOs in the shipbuilding sector.

THREATS TO INDIAN SHIPBUILDING INDUSTRY:-
In spite of the strengths and opportunities for growth of shipbuilding, there are a number of threats which, if not encountered and eliminated, could spell doom for the industry.
The first threat is lack of government recognition which prevents shipbuilding and repair industry from achieving infrastructure status and benefiting subsequently from tax concessions and tax holidays. If this industry is not recognized by government as an important strategic industry, it is difficult for it to grow and compete with shipbuilding giants like China, South Korea and the new entrant Vietnam.
The shipbuilding industry does not seem to have a country wide presence. It seems as if this industry can only be profitable in a state like Gujarat with a large coast line. It can be seen that coastal states of Kerala, Karnataka and Andhra Pradesh can boast of only one shipyard each. In West Bengal there are two shipyards doing well. Coastal states of Orissa and Tamil Nadu do not have any shipyard as yet. If the industry does not spread to other coastal states, it is unlikely that the country as a whole will appreciate or benefit from this industry.
Another major threat to the growth of shipbuilding industry is lack of proper professional education and R and D facilities in the country. The growth of Indian Register of Shipping has not been as it should have been and it is yet to receive the status of a full member of IACS.
NSDRC, as the sole design and R and D organization of Ministry of Shipping, Government of India is not functioning properly. The other R and D laboratories, such as, NIO, NIOT, NSTL, NPOL, which are not under Ministry of Shipping are doing all right.
Regarding education, there are four institutions providing naval architecture degree to about 120 graduates per year, whereas, the country needs about ten times more naval architecture and shipbuilding engineers per year. If the country is unable to provide JIT training to convert other engineers of mechanical sciences to shipbuilding engineers, the immediate need of the industry cannot be fulfilled and it may suffer. Further, unless there is a plan to increase the strength of graduates in this specialized field in the next four to five years there may be a shortage of man power which will have a very adverse effect on the industry.

13. INITIATIVES REQUIRED & RECOMMENDATIONS FOR GROWTH OF SHIPBUILDING

The following course of action, which is an integrated approach, is suggested for ensuring development of shipbuilding sector in India. It is believed that this will remove the structural weakness of the industry as well as address other concerns.
1) DEDICATED SEZ
All ships including dredgers imported by Indian owners from abroad are fully exempted from customs duty. Hence the existing shipbuilding industry is totally unprotected. In fact customs duty of the order of about 35% is imposed on all capital equipment required for shipbuilding even though this measure does not protect any industry in India. There is therefore a need to accord export status for building ships which are built in India for Indian owners. Both existing and future shipyards should be considered as SEZ.
Such a status should be accorded to any other ancillary industry that may come up to enable the industry to grow in clusters. Investment will then be structured and will flow in the right direction without affecting the existing units.

2) SINGLE WINDOW CLEARANCE
The industry is presently subjected to multiple checks and clearance from both Central and State Governments. From being an extremely dynamic as well as cyclical industry, return on investment/capital needs to be ensured by avoiding procedural delays and allowing smooth expansion of capacity. The main deterrent of multiple clearances which delay a project must be removed. Hence environmental clearance, clearance for allocation of land and its development, clearance for power and water requirements and security clearance of the location apart from the long term fiscal climate must be established through a single window.
Professional Monitoring Authority
To ensure targeted development of this sector, there is need for good professional advice at the higher level. If you have to achieve reasonable slice of the world market share in the next 10 years and ensure that investments take place, professional monitoring authority fully empowered must be appointed. This authority will facilitate clearance through a single window and ensure that bottlenecks for investment in the sector are removed.

3) DESIGN & INVESTMENT IN R&D
India lags behind in ship design capability, whereby it can develop new designs for the market. Presently most of the designs or parts thereof are imported from abroad and virtually there is no innovation indigenously. Availability of design and a strong capability in the Shipyard will enable keeping delivery schedules and cut cost dramatically. The credibility of the shipyard also goes up. There is a need to encourage design and provide fiscal benefits as given to R&D investments in the pharma sector.

4) ANCILLARY INDUSTRY DEVELOPMENT
Indian shipyards lack volume to make commercial ancillary development viable. Annual deliveries of ocean going ships from Indian shipyards vary between 35 to 40. These 40 ships built at Indian shipyard cater to a wide range of market segment, wider specification and distributed owners. The ships machinery used for these ships could have varied capacities, dimensions, and ownerships. This makes development of ancillary industry difficult.
Norwegian equipment suppliers dominate supplies to Indian shipyards in building offshore supply vessels. However, in large bulk carrier segment a large portion of equipments are imported from S. Korea, China and other countries.
Local supplier
Several firms have entered in Indian market with a view to gradually expand their presence into full fledged manufacturing unit. Garden Reach Shipbuilders has setup MTU engine manufacturing unit at Ranchi. Wartsila has setup plant in Khopoli, Maharashtra for manufacturing and assembly of genests. Goa Shipyard jointly with Wartsila has supplied several heavy forged components to naval ships MAN and Caterpillar have setup their assembly and testing units in Maharashtra and Tamil Nadu. These units also cater to land based requirements in addition to marine segment. Due to lack of volume, standalone units for marine segment would not be viable. In addition to these, Steel Authority of India and Essar Steel have begun catering to shipyards for steel plates.
India has Heavy Forging Units at Heavy Engineering Corporation, Ranchi. Though the company is in financial trouble, it caters to mostly naval and coast guard ships. In addition, Bharat Heavy Electricals also supplies to shipyards, but does not have dedicated unit for shipbuilding industry due to lack of volume. Bharat Forge, one of the leading forging companies globally is setting up heavy forging unit at an investment of more than Rs.30 billion.
However, India has full-fledged ancillary units which support building small barges, river crafts, etc. Companies such as Geeta Engineering, Shree Gajanan Prasad, etc have well equipped plants to manufacture propellers, shafts for barges, fishing trawlers, etc.
ABG Shipyard and Pipavav Shipyard have proposed setting up engine manufacturing units with foreign collaboration. Atlas Coppco and Kirloskar make compressors, Jindal makes pipes, Voltas and Bluestar make air conditioning equipments are some of the other ancillaries.
Local manufacturers have an edge in supplying these low value items as cost is sole criteria in selecting these vendors. Some of the foreign based firms such as Siemens manufacture switches locally for shipyards. Local manufacturers in India roughly control close to 60% of the supply of cables, switches, valves, intercommunication systems, etc, rest is procured from China, Singapore. These items do not fall under critical list of items and their make is not specified by ship owners who place their orders to Indian Shipyards. Shipyards select the suppliers and price is the determining factor in choice of suppliers.

5) SUBSIDY
Shipbuilding skills take a long time to nurture and build up and industries take time to be set up. Hence the present subsidy scheme needs to be extended for at least the next 10 years so that Indian shipbuilding fully establishes itself in the global arena.

6) TAXES & DUTIES
There is a need to bring the taxes and duty structure on par with the competitors in Dubai, Singapore and Colombo. Service Tax on shipbuilding and shiprepair is totally unwarranted and promotes only foreign shipyard to be more competitive. Indian Shipyards are therefore to be exempted from service tax as shipbuilding and shiprepair are both manufacturing activities.

7) CUSTOM AND EXCISE DUTY ON CAPITAL INVESTMENT ON SHIPBUILDING
Presently about 35% duty is to be paid on all capital equipment such as cranes, plasma cutting machines and other material handling equipment purchased for running a Shipyard. This is totally unwarranted as it does not protect any indigenous industry. This inflates the cost of establishment/expansion of shipyard as compared to International Yards and permanently disables the shipyards in terms of higher capital cost, interest cost and depreciation charges. This also results in reduced return on capital employed and inherently increases the risk profile of investment.
Therefore, it is recommended that these investments be exempt from customs/excise duty till such time as the SEZ status is not accorded to the shipyards. Custom bonded warehouse Rules should be amended to suit Shipbuilding industry including the period for which materials can be stored. Presently, Sec 65 of the Customs Act and its varied interpretations results in a huge increase in cost of production. The whole issue of storage and issue of material for shipbuilding is totally oriented to meet customs procedures and NOT commensurate with industry practice abroad.
There is a need to promote single point taxation or rationalize tax structure (State and Central) in line with competitive yards in South East Asia, viz. Colombo, Dubai, etc. since it is a global market we are targeting.
Simplification of customs procedures, including:
(a) Priority clearance for import
(b) Duty exemption for scrap generated in shipbuilding and ship repair.
The tedious and laborious procedure involved for customs clearance and issue of materials to demoralize motivated personnel. Eventually there is a lot of wastage of time and manpower mainly to reconcile materials which goes on for years after a project is over.

8) FISCAL & ADMINISTRATIVE REFORMS
The reforms required can be broadly grouped into Fiscal and Administrative. Shipbuilding and Ship repair cannot be seen in isolation as far as taxes and levied are concerned. For example, service tax of 12.24% in particular, is affecting the ship repair business of Cochin Shipyard, which constitutes about 60% of the ship repair income generated in India.
Though issues relating to shipbuilding only are addressed in this topic, the taxes and levies, both central and state affecting ship building present position so its required modification required, detailed justification for amendment and revenue implication of proposed change.

In Korea in all major shipyards, the blocks are fabricated by different contractors at different places, but they manage to match perfectly. The reason is the quality of the drawings and the quality control and dimensional check by the fabricators and inspectors.
In India to produce the same quality of production documentation is possible, but not at the cost which shipyards are willing to pay. Most Indian yards have noticed may pay large sums for the concept design, but will pay peanuts for detailed design done in India. Most yards do not realize the importance of good, error free production documentation.
He was speaking from his personal experience .In HSL also, the yard would like to do the production drawings themselves, with limited inexperienced staff and land up in huge delays and reworks.
A little extra money spends on quality documentation will save a lot of time, money and rework.

14. SHIP BUILDING IN THE NEWS (2012-2014)

1) Date 16-4-2012: Indian ship building industry to reach Rs 9,200 crore by 2015
The Indian shipbuilding and ship repair industry is likely to reach Rs 9,200 crore from the
current level of just over Rs 7,310 crore, according to a study done by the industry body ASSOCHAM.
The study 'Shipbuilding Industry in India: An overview', by The Associated Chambers of Commerce and Industry of India (ASSOCHAM), said that India accounts for just about one per cent of the global shipbuilding industry worth about Rs 7.3 lakh crore but is growing at a compounded annual growth rate (CAGR) of about 8 per cent.
Globally, this industry is growing at a CAGR of about 24 per cent and is likely to reach Rs 14 lakh crore by 2015 owing to rising global sea borne trade, according to the study.
"Lower costs of labour, availability of skilled workforce together with robust demand in the domestic market and a growing steel industry are certain factors that build up a strong case for shipbuilding sector in India," said Mr D.S. Rawat, secretary general of ASSOCHAM.
"For a well balanced and comprehensively developed domestic shipbuilding and ship repair industry, the government should provide fiscal incentives to develop strong research and development facilities, designing capabilities and set up an auxiliary base to encourage the growth of the sector," said Mr Rawat.
The overall cargo traffic at major ports in India is about 600 million tonnes and is likely to reach 1,230 million tonnes by 2015 and 3,000 million tones by 2020 growing at a compounded annual growth rate (CAGR) of about 20 per cent, said ASSOCHAM study.
"For this India needs to furbish up its ports and the whole shipping infrastructure to enhance the handling capacity and facilitate operation of larger shipments to increase its share in the global maritime business," said Mr Rawat.
"The government should rope in maritime states to identify and make land available, thereby seeking their contribution for setting up a new port or a shipyard in each of these states." "This also denotes huge scope for private sector and foreign direct investment (FDI) in the shipping industry and the maritime states can develop a composite project on the public-private partnership model," he said.
China, South Korea and Japan are leading shipbuilding nations and cater to over 80 per cent of the global shipbuilding industry. China alone accounts for over 35 per cent of this global industry. India and Vietnam are upcoming centres for global shipbuilding.
High input costs and rising costs of raw material, freight together with miscellaneous duties and taxes being imposed amounts to a huge price differential of about 50 per cent in building a ship in India and other countries, said ASSOCHAM. Besides, though the costs of labour in India is low compared to that in other nations but shipbuilding being a labour intensive industry, fulfilling the requirement of skilled workforce is another significant problem being faced by the shipbuilding companies.
The government has a key role to improve the efficiency and productivity of domestic shipbuilding companies to enable them compete with their overseas counterparts. ASSOCHAM recommends revival of subsidy scheme, easing tax related regulations and declaring the shipbuilding a status of strategic industry.
With about 8,000 kilometre long coastline there are about 27 shipyards, 12 major ports and 200 ports under states' jurisdiction in India, there is huge scope for development of shipping sector considering that country's opportunities in the maritime business have not been utilized fully.

2) Date 21-5-2012:Government undertakes large scale modernization of defense shipyards
The government today said it has undertaken a large scale modernization of defense shipyards along with steps to encourage private sector participation in these projects to reduce the time needed for constructing warships.
In a written reply to Lok Sabha, Defence Minister A K Antony gave details of the warships being built at the four defence shipyards -- Mazagon Dock Limited-Mumbai (MDL), Garden Reach Shipbuilders and Engineers Ltd-Kolkata (GRSE), Goa Shipyard Ltd (GSL) and Hindustan Shipyard Ltd-Andhra Pradesh (HSL).

"All the four defence shipyards have initiated major modernisation program by pooling up resources from the project based funding as well as their internal accruals," he said. He said the government has taken steps to encourage private sector participation "in construction of warships by amending the Defence Procurement Procedure".
The Defence Ministry has also promulgated joint venture guidelines, in addition to the existing ones, to ensure that requirement of the forces can be met indigenously, with requisite quality and within the stipulated timelines, he said. On the reasons for delays in various projects, Antony said, "Warships building is a very complex activity with a long gestation period. Latest technologies and systems that evolve during construction period have to be incorporated after making necessary changes in the existing design."
Considering the effect of global technological denial regime on the industry, he said, "It takes time for all the stakeholders to evolve indigenous solutions." Antony also noted that "ancillary shipbuilding industry" in the country is also in a "development phase and timely availability of various equipment that go into shipbuilding is affected."

3) Date 8-6-2012:L&T Shipbuilding wins orders worth Rs 483 crores from Qatar
L & T Shipbuilding, a subsidiary of Larsen & Toubro, bagged orders valued at Rs 483 crores for four specialized commercial vessels in the first quarter of 2012-2013. The orders from Halul offshore services company WLL, Qatar are for designs construction, trials and commissioning of the two platform supply vessels (PSVs) and two anchors handling, towing, supply and support Vessels (AHTSSVs), secured against stiff international competition, the orders affirm L&T capabilities in building such vessels.
The PSVs will be equipped for firefighting, rescue and standb, offshore supply, oil recovery and related duties. The vessels will have diesel - electric propulsion and DP2 dynamic position capability. AHTSSVs with a bollard pull of 90 tons will be equipped for emergency response and rescue, offshore supply, oil recovery, standby and other related duties. These vessels will be provided with advanced diesel- Hybrid propulsion and DP2 dynamic positioning capability.

L & T has established shipbuilding capabilities at Hazira on the west coast & at a new state of the art shipyard cum port at Kattupalli near Chennai on the east coast. The Kattupalli facility is the largest integrated marine complex of its kind in India geared for building specialized commercial ships and customized vessels as well as warships and submarines. A Unique feature of the ship yard is an in house designed ship - lift with lifting capacity of 21000 tons and a transfer mechanism which enables ship building and ship repairs of several vessels simultaneously. In addition a larger modular fabrication facility enables manufacture of large offshore modules, platforms and rigs.

4) Date 15-6-2012:Mitsubishi may establish joint venture with L&T Shipbuilding
Heavy Engineering (MHI) will look at establishing a joint venture with Larsen and Toubro Shipbuilding Ltd to set up its first overseas base outside Japan. In an email response to ET, Mitsubishi said that the company does not have a concrete plan on a joint venture establishment yet, but will look carefully at the improvement of L&T's capability and delivery time in addition to a favourable governmental policy to support Indian shipyards.
" As of now, there is no concrete plan on a joint-venture establishment. We had signed a technical collaboration agreement with L&T Shipbuilding Limited to provide various technological support for LTSB's construction of commercial vessels at the end of last year, with a future idea which we might establish a joint-venture", Mitusbishi said.
L&T Shipbuilding, a subsidiary of domestic infrastructure major, Larsen and Toubro had in December last year signed an agreement with Mitsubishi for technological assistance, ranging from design drawings to quality control.
On Wednesday, MV Kotwal, President, Heavy engineering at L&T told ET that the company has not had any discussions with Mitsubishi on a possible stake sale to Mitsubishi, but said that the company will take an appropriate call on the matter if it comes up for discussion.
"We have not had any discussions on the same. If and when it come up, We will look into the matter. But so far, we have not had any discussions", Kotwal told ET. Mitsubishi's plans to acquire stake in the company comes at a time when Indian shipyards including Pipavav Defence, Bharati Shipyard and ABG shipyard have been struggling to receive orders for shipbuilding contracts from domestic and international shipping companies.
In February this year, the shipping ministry had said that the ministry will ask for a revival of the shipbuilding subsidy for the industry. The subsidy scheme was introduced in mid-1990s to help the shipbuilding industry and since then been given five-year extensions until it expired on August 14, 2007. The scheme offered the shipbuilders a 30% subsidy on the cost of building ocean-going merchant vessels that were more than 80m long, if they were built for the domestic market.
While Indian shipyards only contribute 0.1% of the global shipbuilding industry, shipyards in China, Japan and South Korea produce more than 75 % of the vessels manufactured globally forcing Indian shipyards to look for orders from the domestic defence sector. In 2011, the government had agreed to allow public private partnerships in the Defence sector and Mazagon
Dock was the first to get off the block while the other three--Cochin Shipyard, Hindustan Shipyard and Garden Reach Shipbuilders-were expected to follow suit. At stake are Defence contracts worth crores of rupees to build the Indian Navy's requirement of warships in the coming years.

5) Date 9-7-2012:Asian shipbuilding industry woes fuel hopes of shipping recovery
Shipping industry players in India, like their counterparts in other maritime nations across the world, seem to heave a sigh of relief at the news of distress conditions prevailing among many of the leading shipbuilding industries in South East Asian countries.
According to local reports, about 50% of shipbuilding companies in China may go bankrupt in the next two to three years. Global new orders in the first five months of the year was 6.7 million compensated gross tonnage, down 50% year-on-year , they pointed out. Meanwhile, South Korea shipbuilders are expected to post their first annual drop in overseas shipments in 19 years after a slump in orders during the global financial crisis.
Hyundai Heavy Industries Co, the world's largest shipyard , and other Korean shipbuilders are handing over fewer vessels this year after the credit crunch and falling freight rates caused orders to collapse from late 2008 into 2009. Full-year exports of ships and offshore products may fall to $43 billion from a record $54.5 billion in 2011, ministry of knowledge economy was quoted in another report. The value of first-half deliveries declined 20% to $25.5 billion, based on preliminary data, it said.
At a time when global shipping community is troubled due to problems caused by orderbook overhang from the boom period, a world economic slowdown and a softening in commodity demand,' there is a substantial number of people who believe that such 'a correction' could help to bring in the much needed balance in the industry , helping it to recoup its energies after the slowdown of the recent years. "It is the only hope," asserted a leading shipping player in the course of discussion .
"Until some of the Chinese shipyards start going bankrupt , there would not be any improvement in the market conditions," opined a ship-owner from Mumbai. "If not, the Chinese government will continue to give subsidies and the yards will continue building ships which will keep flooding the market, depressing it further ." According to him, China has more yards than the rest of the world and "they can put up a shipyard faster than they can build a ship."
Even though he knows that it is the right time to buy shipping assets, he is 'sitting on the fence' , for want of financing options. "For want of private equity funds or high net worth individuals (HNIs) who want to invest in shipping as a standalone business the shipping industry in India could said to be dying to a certain extent. Most of the big owners are suffering and the way the market looks it is not likely that it will recover within the next six months to one year," he added.
"It is the right time to buy ships but very few people who understand the business has the money," said the ship-owner, adding, "Whereas banks cannot fund any more, ship owners are near bankrupt condition. The main problem in India is that there are very few alternative sources of funding. In US and Europe lot of funds are now looking at re-entering shipping. For example, Citibank is looking back to re-enter shipping portfolio.
There are also entities that are looking to buy distress shares. "It is the right time for the government to come to the help of the industry to add national tonnage ," said a member of the Indian National Shipowners' Association (Insa).

6) Date 20-10-2012:L&T shipbuilding arm to raise 2,500 crore to replace loans raised for Tamil Nadu unit: Sources
Larsen & Toubro's shipbuilding arm plans to raise 2,500 crore through bonds to replace existing loans raised for its unit at Kattupalli in Tamil Nadu, sources in the know of the matter told ET.
L&T, which has an established shipbuilding facility at Hazira in Gujarat, has set up an ambitious shipyard-cum-port at Kattupalli at a total cost of 4,700 crore, which has been financed through 80% debt and 20% equity.
The refinance may help the company reduce the interest rate by 150-200 basis points, analysts said. L&T Shipbuilding will raise the funds in two tranches of 1,200 crore and 1,300 crore, respectively. It will raise 1,200 crore through 5-year bonds, which would have a call option after the third and fourth years at 8.95%.

7) Date 16-1-2013:Shipping Ministry seeks sops, duty waiver for shipbuilders
The union shipping ministry is trying to revive a subsidy scheme for private shipbuilders in the country nearly six years after it was discontinued. In a recommendation made to the cabinet committee of secretaries early this month, the shipping ministry has proposed a 15 per cent subsidy for domestic shipbuilders on the cost of ocean-going vessels, a move aimed at boosting the dilapidated shipbuilding sector.
"We are taking a slew of measures to help the domestic shipbuilding sector. We have asked for 15 per cent subsidy for the domestic shipbuilding sector, and in addition, we have also asked the committee of secretaries to exempt the sector from customs duties on capital items imported for shipbuilding," PK Sinha, union shipping secretary, told ET.
The subsidy scheme that ran till 2007 gave domestic shipbuilders a 30 per cent subsidy on the cost of ocean-going vessels. The ministry, however, is now seeking lower subsidy since the government is trying to reduce the growing fiscal deficit. The shipping ministry's demand which was placed before the cabinet committee of secretaries will be taken up next month.
The ministry has also sought an exemption from the 26.85 per cent customs duty the sector pays on the capital items imported for shipbuilding works. Shipbuilding companies had earlier pointed out that the subsidy was only a means to recover the high taxes that they pay. "The subsidy scheme is more like a means to return the taxes that are levied on the shipbuilding sector. And if the subsidy scheme is revived, we are sure that Indian shipbuilders will see their order books rising," Dhananjay Datar, CFO, ABG Shipyard, country's biggest private shipyard, had earlier told ET.
Indian shipyards have seen its global market share fall from 1.2 per cent in 2007 to 0.1 per cent in the past five years, according to Shipyards Association of India while shipbuilding in countries like China and South Korea continue to account for more than 75 per cent of the global shipbuilding market. Globally, ship orders had dropped more than 50 per cent last year amid oversupply in the market, but South Korean companies won new orders worth $18.9 billion compared with China's $10.2bn and Japan's $2.8 billion, according to a report by London-based Clarkson Research.
The subsidy scheme was introduced in mid-1990s to help the shipbuilding industry and since then been given five-year extensions until it expired on August 14, 2007. The scheme offered shipbuilders a 30 per cent subsidy on the cost of building ocean-going merchant vessels that were more than 80m long if they were built for the domestic market.
However, for export orders, ships of all types and capacities were eligible for the subsidy scheme. While public sector yards were given the subsidy in installments, private shipyards were entitled to receive it after the vessel was delivered to the buyer. "There is a price difference of 30-35 per cent in the cost of vessels produced in India as compared to China and that has affected us.
And in the past few years, there have hardly been any orders coming for Indian shipyards," said an official of Shipyards Association of India, a private body comprising private shipyards in the country. And now, with the global shipping industry going through one of its worst phases, the ministry is of the view that subsidies are inevitable for the growth of ship building sector as the government looks to raise the market share of Indian shipyards to more than 5 per cent of the global shipbuilding industry.
Indian shipbuilding yards carry a minimum cost disadvantage of 32-37 per cent on the price of a typical vessel, when compared with yards in other major shipbuilding countries that include South Korea, Japan, China and Germany, according to a report submitted to the government by audit and consulting firm KPMG India Pvt. Ltd in 2008.
8) Date 22-1-2013:L&T shipbuilding receives freshorders worth Rs 447 crore from the defence ministry
Larsen & Toubro's shipbuilding division on Tuesday said that the company has received an order worth Rs 447 crore from the Ministry of Defence for the construction of 18 High Speed Interceptor Boats for the Indian Coast Guard.
The company had earlier received a similar contract when it was awarded a similar contract worth Rs 977 crore for the construction of 36 vessels. With this order, L&T is positioned as the foremost Indian shipyard in terms of capability to indigenously design and construct the largest number of Interceptor Boats for India's Ministry of Defence", L&T said in a statement.
L&T Shipbuilding, a subsidiary of domestic infrastructure major currently has a facility in Hazira in Gujarat and a shipyard-cum-port at Kattupalli near Chennai on the East Coast. Last year, Japanese shipbuilding major, Mitsubishi had said that the company was interested in acquiring a minority stake in L&T's shipbuilding division.
Indian Shipyards have been dependent on the defence ministry for shipbuilding contracts as the sector has not been able to tap fresh orders since 2007 when a subsidy for the sector was withdrawn. While Indian shipyards only contribute 0.1% of the global shipbuilding industry, shipyards in China, Japan and South Korea produce more than 75 % of the vessels manufactured globally.
In 2011, the government agreed also allowed public private partnerships in the defence sector and Mazagon Dock, country's largest defence shipyard was the first to sign a deal with L&T shipbuilding to jointly manufacture submarines for the Indian Navy.

9) Date 25-3-2013:India planning to tie up Russia in naval ship-building field
India is planning to tie up with Russia for enhancing self-reliance in capabilities for design and development of all types of warships, including submarines, for the Navy and the Coast Guard.
The Defence Ministry is planning to have a tie-up between the Kerala-based National Institute of Research and Development in Defence Shipbuilding (NIRDESH) and Russian Krylov Institute for working in this direction, officials told PTI here.
The Russian institute, set up in 1890s, has been working in this field for a very long time and can help NIRDESH to augment its capabilities, they said. NIRDESH was launched on January 4, 2011 by Defence Minister A K Antony to help in developing a robust defence industrial base by providing technology support and promote ancillary industry participation in the defence shipbuilding sector.
The issue was also discussed at the meeting of the Board of Governors of NIRDESH headed by the Defence Minister, who is also the chairman of the institute. The meeting decided to appoint the head of the Naval Design Directorate as the nodal officer to support NIRDESH as the Navy would be the biggest beneficiary out of the output of the institute, they said.
A sub-committee has also been appointed by the Ministry to prepare a roadmap for growth of NIRDESH while another would examine and select Research and Development projects to be undertaken by it. "One project on indigenisation of rubber items used on Scorpene submarines is already progressing at the Rubber Research Institute of India at Kottayam," they said. NIRDESH will also take up projects related to development of civilian vessels.

10) Date 26-3-2013:Slowdown an opportunity for Indian shipbuilders: DK Joshi, Navy chief
Amidst efforts being made to increase indigenisation of defence equipment, Chief of the Naval Staff Admiral D K Joshi today said the global economic slowdown has opened opportunities for India's defence ship-building yards.
Stating that the recession has lead to shutdown of many companies and the surplus capacities were being shifted to emerging economies like India, he said "We need to exploit this to our advantage. The ultimate test would be the ability to export our product."
He was speaking at the launch of the third Anti Submarine Warfare Corvette, a frontline warship built by Garden Reach Shipbuilders and Engineers for the Indian Navy.
Admiral Joshi said that out of 42 orders given by the navy, 40 were being built indigenously in India by public or private sector enterprises. "The ship being launched today has yet another technological landmark, being the first in the country built with composite infrastructure," he said. GRSE is constructing four ships under project P28. This was the third one, designed indigenously by the directorate of naval design.
"Today Indian Navy and Coast Guard have huge requirement of ships and the same are required to be produced without any time and cost overrun. Timely delivery of quality ships is the need of the hour. Modern shipbuilding technology and tools must be adopted to achieve this objective," Joshi said.
He said the shipyard must also have an effective mechanism for competition from newly developed private shipyards which would try to bag orders and must be accepted as a challenge.
The shipyards have to concentrate on implementation of strong quality assurance practices, development of reliable and proven vendors and most importantly training of its human resources to the lowest rank, Joshi said.

11) Date 12-4-2013:Shipping Ministry seeks sops to boost shipbuilding
The Union shipping ministry has requested the finance ministry to provide an interest subvention scheme for the shipbuilding industry as the sector grapples to attract commercial shipbuilding orders.
In a bid to reduce the cost disadvantage that Indian shipbuilders have in comparison to their global peers, including China, Korea and Japan, the ministry is also seeking tax incentives from the finance ministry, a move if provided, could rejuvenate the sector.
The sector currently contributes 0.l per cent to the global shipbuilding industry and the ministry is looking to increase the share to at least 5 per cent in the next few years. "The ministry wants to improve prospects of the shipbuilding sector. We have lined up measures which include providing cheap loans to the companies," PK Sinha, union shipping secretary told ET.
According to officials in the ministry of shipping, one of the key measures that the ministry is seeking from the finance ministry is interest subvention on loans taken by private shipbuilders. Interest subvention is a scheme where the government pays a certain percentage of the borrowing cost to bring down the net borrowing cost. The government currently extends the scheme to textile manufacturing units.

"The ministry had earlier sought a 15 per cent subsidy scheme for the shipbuilding sector which the finance ministry was not keen on implementing. To create a level playing field for the shipbuilding sector as compared to their global peers we want the ministry to offer certain schemes to improve the situation," a senior official at the ministry of shipping said.
The ministry has also made a recommendation to the cabinet committee of secretaries in their last meeting to introduce the interest subvention scheme, the official added. Indian shipbuilders were earlier provided a subsidy scheme which was withdrawn in 2007 and the domestic shipbuilders have been looking forward to the defence manufacturing sector to receive fresh orders. In addition, domestic shipping companies have also been importing vessels from outside the country due to the low costs.
"This is definitely a small measure in propelling growth in the sector. The industry has been requesting the ministry to provide relief as it is a capital intensive sector and countries across the globe provide support to their shipbuilding industry through various incentives", said MV Kotwal, President, L&T Heavy engineering. However, Kotwal also insisted that the ministry needs to prepare a slew of measures to boost the sector which include incentives to manufacturers of steel for shipbuilding.
India's shipbuilding sector had seen huge activity during the peak period of 2002 to 2008 when several Indian companies including Adani Group, Reliance Group, Essar Group and Shipping Corporation of India announced plans worth 39,000 crore to set up new shipyards in the country. The companies have now put their plans on hold due to the removal of the shipbuilding subsidy and poor orders.

12) Date 4-7-2013:Shipbuilding industry hurt by unfair taxation: HSL
Unfair taxes are hurting the shipbuilding industry, a top official of Hindustan Shipyard Ltd (HSL) said here today. "There is unfair taxation in the shipbuilding industry. Why service tax imposed on us. There are a lot of complications," HSL Chairman and Managing Director N K Mishra told reporters on the sidelines of a seminar on the defence industry organized by the CII
.
According to Mishra, service tax is also imposed on the manufacturing industry like shipbuilding. There are also "issues" in taxing scraps and raw materials used in manufacturing ships. "At times, there are difficulties in identifying which are imported scraps and which are not during the taxation process," Mishra said. Apart from four public sector companies HSL, Mazagon Dock Ltd, Goa Shipyard Ltd, Garden Reach Shipbuilders & Engineers Ltd, major private players are ABG, Bharati and L&T.
Meanwhile, speakers noted that private sector participation in defence is not up to the mark and while the same it is dismal from eastern region. Aniruddh Kumar, Executive Director (E & SED), Hindustan Aeronautics Ltd (HAL) said they received minimal participation by small and medium enterprises in the eastern region.
"We have less than 100 vendors who develop equipment for us. This is very poor as compared to 1,300 and 427 vendors in the southern region and western region, respectively," Kumar said. "I urge private partners in Kolkata and West Bengal to come forward, HAL has understood your difficulties," Kumar added. According to Lt Gen A K Chaudhury, GoC of Bengal Area, Indian Army, the eastern region should focus more in creating defence industries. "In the East, there has to be a push to improve the defence industrial base, as compared to other regions in the country."

13) Date 12-8-2013:India to emerge as next hub of shipbuilding industry: G K Vasan
Union Minister G K Vasan today claimed India would be the "next hub" of ship-building industry among the emerging economies, though the industry is still reeling under the global economic slowdown.
"A robust ship-building industry is a vital component of any strong economy," Vasan told reporters here. The Union Shipping Minister, while giving examples of USA, western European countries and Japan and South Korean in Asia, stressed that "India would be the next hub of shipbuilding industry."
When asked if his ministry is looking forward to global orders in the wake of the Cochin Shipyard's success in building INS Vikrant, India's first indigenous aircraft carrier, he said the strain on the world economy remains an issue and it is likely to continue for a year.
On a positive note, Vasan said that 87 per cent growth was witnessed in tonnage capacity in shipping industry globally which would be helpful for Indian ship manufacturers as well. "We have long term plan for shipping industry," the minister said, emphasising that Cochin Shipyard Limited has demonstrated its status globally by successfully taking up the challenge of INS Vikrant.
CSL's chairman-cum-managing director Commodore K Subramaniam said his shipyard has redeemed the trust and faith put in it by the government in substantial measure with the launch of INS Vikrant.
The indigenous aircraft carrier has enabled India to join the elite club of nations with the capability of designing and building a warship in the over 35,000-tonne class. The launch of warship, which has a length of 260 metres and is 60 metres wide, is behind schedule by three years. It is set to go for extensive trials in 2016 before being inducted into the Navy by 2018 end.
Fighter aircraft--Mig-29K, Light Combat Aircraft and Kamov-31 helicopters--will be deployed on board the carrier which will also carry an array of other weapons system.

14) Date 10-12-2013:L&T Shipbuilding gets Rs 943 crore order from Qatar firm
L&T Shipbuilding, a subsidiary of engineering major Larsen & Toubro, today said it has received a repeat order for six specialised commercial vessels, valued at $154 million (Rs 943 crore), from a firm based in Qatar.
"The orders from Halul Offshore Services Company, Qatar, are for design, construction, trials and commissioning of four platform supply vessels (PSVs) and two anchor handling towing, supply and standby vessels (AHTSSVs) with 150MT bollard pull," L&T said in a statement.
These orders, received in the third quarter of current fiscal, are in addition to the order received last year from Halul Offshore Services Company for two PSVs and 2 AHTSSVs. L&T said the ships' design would comply with the latest marine environment and crew accommodation regulations. The PSVs are designed for carriage of hazardous cargo like Methanol.
"The ships will be equipped with dynamic positioning capability and will be suitable for fire-fighting, emergency response, rescue and standby, offshore supply, oil recovery and related duties," it said. PSVs are to be delivered in the first quarter of 2015 and AHTSSVs in the last quarter of the same year.

15) Date 16-1-2014:L&T in talks with investors to sell stake in Tamil Nadu terminal, seeks Rs 2,500 crore for its 97% stake
India's biggest construction and engineering group Larsen & Toubro is in talks with potential investors for as take sale in its container terminal in Tamil Nadu, a move prompted by slow off-take of the port business, two people familiar with the matter said.
L&T holds 97% stake in Kattupalli International Container Terminal, a port-cum-shipyard complex developed jointly with state government entity TIDCO, which holds the remaining stake. The Rs 3,989-crore project has been struggling to attract traffic, in part due to excess capacity in south India, since it became operational in February last year. "L&T is in talks with many strategic buyers including some Japanese port operators," one of the persons said, adding that the group is interested in selling only the port business and may want to exit it.
The conglomerate is looking at an enterprise value of Rs 2,300- Rs 2,500 crore. However, with 1,500-crore debt on its books, the equity valuation of the port would be Rs 800-Rs 1,000 crore, the same person, who did not wish to be named, said. A spokesperson for L&T declined comment. L&T, which has interests in roads, power plants, shipbuilding and real estate among others, has been exiting some non-core businesses. The group has said in the past that it will look at value unlocking opportunities in its development projects.
Analysts say L&T's port business looks an attractive proposition for both domestic and international buyers as it has all the required regulatory approvals in place. However, any deal for a stake sale in the port would require government approval because the concession agreement signed between L&T Ports and the state government includes the shipbuilding unit as well.
L&T's shipyard, intended to make warships and submarines, has been running below capacity due to lack of defence orders. L&T had told ET earlier that it is taking orders for offshore platforms and containers to keep the unit running.
It is believed that the company is bullish on the defence shipbuilding business and would not like to sell stake in the division to avoid eligibility related issues while bidding for these projects. Another person familiar with the matter said L&T is yet to decide on whether it will sell stake as a single block or in parts.
The deal is expected to have a high debt component, as 60-65% of the total project cost is debt. This debt might have to be paid by the buyer at the time of purchasing the port due to the complicated deal structure.
Kattupalli is a port owned by the Tamil Nadu government. It was given to L&T for development and operations in 2008. The terminal is operated and maintained by Manila-based port operator International Container Terminal Services Inc. Ports in south India have been recording lower scheduled calls from container shipping lines as the country goes through one of the worst phases of economic slowdown.
Excess port capacity created over the last few years, too, has hampered cargo volume and pricing. Chennai Port, which has added more capacity, is still the preferred port on the country's southeast coast.

15. LIMITATION

This training project is subjected to certain limitations..

' The information presented in the project report consists of secondary data which may be biased from various perspectives.

' The report focuses only on specific category of shipbuilding industry.

' The report can only be used as a reference from corporate perspective.

15. CONCLUSION

THE FUTURE IS NOW

We believe that in the next decade, what we are going to witness in the Indian shipbuilding industry would be no less than a revolution.

For achieving, international competitiveness for Indian shipbuilding industry, the groundwork is being done now. It is expected that India with its unique factor advantages can play a key role in the emerging global shipbuilding sector. What will happen tomorrow is present today in its seed. The events will unfold themselves and we would reach where we belong. However, as the seed needs to be watered, nurtured, and grown with protection to make it eventually a tree ' we all have to work in our respective capacities to make sure that what we do today contributes towards making Indian shipbuilding Industry internationally competitive.

REFERENCES

' www.google.com
' www.shipyard.com
' Report of working group for shipbuilding and ship repair industry for the Eleventh five year plan
' http://planningcommission.gov.in
' http://english.hhi.co.kr
' http://hsl.nic.in
' Yojana, a Development Monthly, November 2013 on 'THE SMESECTOR- FINDING NEW GROWTH MANTRAS'
' Sulabh Agrawal, Ship building Sector report 'Built to last', Angel Broking, August 22, 2012
' Hindustan Shipyard Limited, Visakhapatnam.
' birlaa.com/2008/04/16/lt-tidcoto-build-shipyard-near-chennai
' www.pipavavshipyard.com
' www.mantrana.in
' ICRA Rating Feature October 2013
' Ecorys-Final-Report-on-Shipbuilding-Competitiveness-En
' Indian-Shipbuilding-Industry-Opportunities-for-Global-Equipment-SuppliersForum Paper 2012-2: Jean-Paul Rodrigue ??OECD/ITF 2012
' I-maritime - Research and Information Division
' NMDP REPORT 2012
' http://articles.economictimes.indiatimes.com/keyword/shipbuilding
' http://www.sajn.or.jp/e/statistics/Shipbuilding_Statistics_Mar2013e.pdf

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