Shipbuilding- A sector with huge employment potential

Even in 1950s when India established its first IIT at Kharagpur, it happened to have a department of naval architecture, though with an intake of a dozen or two students. I used to wonder where we they be usefully employed. To my query, my seniors told me that best ones go in shipyards abroad.

Nehru had big dreams even about shipbuilding and the shipping as such and rightly so. But over the years, the government couldn’t encourage private sectors to get into the business in big way. A few private sector shipyards were only allowed or on their own, they managed to keep on building ships, but only small vessels. And like many other heavy industries, shipbuilding grew only in public sector. Even some private ones also were nationalized. Today, the major shipyards in India, about seven or so, are all state-owned, inefficient, inambitiously managed, lossmaking, and surviving on budgetary support. While the three neighbouring countries of Asia- Korea, Japan, and China today control roughly 86% of the global market size of $109 billion (2006), Indian shipbuilders have a share of 0.35%. While the trio delivered ships with 60 million tonne-capacity in 2006, India could do a piffling 0.5 million tones. The world capacity of ships in 2005 was 966.5 million tones. One can imagine the addition because of booming shipping industry because of many factors such a replacement of single hull ships by now mandatory double hull ships, race for energy security by creating huge emergency oil reserves, demand of increasing transportation of steel, iron ores and coal.

Shipbuilding is a highly labour-intensive industry and ship repairing is even more so. Major skills required for shipbuilding are conventional welding, fitting, electricals and plumbing, and Indian has plenty of it.

When liberalization abolished industrial licensing in 90s, some such as Bharti Shipyard and ABG Shipyard came up, but couldn’t grow big because of the Asian financial crisis resulting the collapse of demand for ships. However, presently the demand for ships is booming. Indian shipbuilders don’t have capacity to cash on the global demand.

But several companies have come out with plans on construction of big shipyards:

ABG has set up a major shipyard costing Rs 1,600 crore at Dahej, Gujarat, to build up to 25 ships a year.

Sea King is setting up a shipyard at Pipavav, Gujarat, to build ships of up to 300,000 deadweight tonnage (dwt). As claimed, Pipavav Shipyard will be among the ten biggest in the world. The company has already bagged two advance orders worth $720 million to manufacture ships for Z Schifenbau of Germany and B F Shipping of Cyprus.

Bharati Shipyard is investing Rs 450 crore in a Greenfield shipbuilding unit at Mangalore.

PK Ruia group now proposes a mammoth shipyard at Haldia costing over Rs 3,000 crore, that will be among the biggest in the world, building 12 ships a year of Panamax size (the maximum size that can go through the Panama Canal). The project will employ as many as 16,000 workers.

The Adani groups have announced investments in shipbuilding facilities which total over Rs 5,500 crore at Mundra in Kutch, adjacent to its new deep-water port there.

Tata Steel plans a shipyard at its new coast-based plant in Orissa. Tata Steel has just formed a joint shipping line with NYK of Japan, and the shipyard will be a link between its steel and shipping business.

The ministry of defence (navy) has very lately and rightly decided to source the bulk of its requirement from the private sector.

L&T is expanding its shipbuilding business, which includes warships. L&T manufactures already parts of submarines and soon plans to build entire submarines. Other private sector defence suppliers may conceivably get into naval vessels and equipment.

Even the government has woken up and has plans to set up two global size ship building yards one each on the east and west coast in public-private partnership.

But India’s ship components industry is hardly developed necessitating the import of nearly 80% of the ship components from developed countries annually. It may require a special encouragement from the government for the existing ones to expand and new ones to enter, instead of making import duty-free. Many heavy engineering enterprises lying idle can diversify and get into the ship components business. It is essential technically for logistic cost advantages. For example, Japan gets 97.85% of the ship components from domestic plants.

As reported, currently the designs are purchased from overseas. Where have our own naval architects gone? Some entrepreneurs must set up a ship design center of world class that can cater to the ship builders with latest technologies. That must be aimed at as India’s differentiating and winning factor.

With globally reputed marine engineers, naval architects, and managers India can easily have a globally competitive shipbuilding in its private sector with huge employment potential. Many believe that India may target a shipbuilding industry to around $20 billion by 2020.

Shipbuilding dominated by Europe and North America till early 20th centuries lost to Japan by ’60s to become the top ship-builder. And then emerged South Korea, Taiwan and Singapore as major builders. However, as in other manufacturing shipbuilding too is shifting to China. Why can’t it now shift to India?

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