The Hindu Business Line : Encourage shipbuilding, and ancillaries will follow: Industry

Expansion of ancillary units in the country would depend on the Indian shipbuilding industry reaching a “critical mass” and fiscal sops, say industry experts.

Mamuni Das

As Indian shipyards’ order-book cross Rs 30,176 crore, companies that supply various components and services have slowly started setting up their base in the country. Earlier this year, Rolls-Royce inaugurated its marine service facility in Navi Mumbai to support the growing shipping industry in India.

The new facility, which employs 60 people, will offer support services and undertake repair and upgradation of Rolls-Royce products in the region. The company plans to expand its base and start manufacturing activities in about a year, say industry sources in the know.

Wartsila has an export-oriented unit situated at Khopoli in Maharashtra. All orders placed by Indian customers are on the group companies such as Wartsila Finland and Wartsila Netherlands.

Talking about expansion of the facility, Mr Sharad Sinha, Associated Vice President-Sales, Wartsila India, said, “The production of gearboxes, controllable pitch propellers and shafting at Khopoli could be as high as one fourth of the global requirement of Wartsila for these products.”

MacGregor, the Euro 748-million firm which provides engineering solution for maritime transportation and offshore industries, plans to establish a local presence in India. It has nominated its branch office in Dubai to act as the back-up office until the service branch in Mumbai builds up its own resources to handle the service business independently.

EMPLOYMENT POTENTIAL

With shipbuilding firms still sourcing below ten per cent of their input components from India, the Government is open to considering various options to encourage setting up of ancillary and ship-repair units in the country as these units have a significant employment generation potential.

Mr Rajiv Gupta, Joint Secretary, Shipping Ministry, stressed on the need to increase the “level of ancillarisation” in the country.

“For every one person employed in a shipyard, employment is generated for about seven persons in ancillary and support industry,” pointed out Mr V. Kumar, Managing Director, Bharati Shipyard.

When shipbuilders sought deemed export status for components manufactured in India at a recent conference, Commerce Ministry Secretary, Mr Ajay Shankar, assured that the Ministry would “consider” their demands.

Expansion of ancillary units in the country would depend on the Indian shipbuilding industry reaching a “critical mass” and fiscal sops, say industry experts. Component manufacturers have to be assured of continuous demand before they start setting up their base here. “The mother industry has to reach a critical mass before the ancillary units establish their base here,” said Bharati Shipyards’ Mr Kumar.

According to a KPMG study commission by Shipyards Association of India, most globally reputed companies started establishing in China after it crossed a shipbuilding capacity of about five million dead weight tonnage (DWT).

Mr Kumar cited examples of countries with largest shipbuilding order book shares — China (35 per share of world shipbuilding order-book in July 2008), South Korea (37 per cent) and Japan (19 per cent).

It took over 15 years for the Chinese shipbuilding industry to increase the use of domestic components in its shipyards, Mr Kumar pointed out. From sourcing 25 per cent of components domestically during early-1990s, Chinese shipyards have now increased the level of ancillarisation to 60-65 per cent. Similarly, the level of domestic component usage for Japanese shipyards was about 30-40 per cent in mid-1950s, while it has touched almost 100 per cent now, he said. Korean shipbuilders, who sourced 20-25 per cent domestic components in 1970s, now source about 88-90 per cent components from within Korea.

COMPONENT MAKERS

“Usually, the buyers specify the make of components to be used in the ships depending on the service support that they would get (from a particular component manufacturer) in the areas where the ship will operate,” Commodore M. Jitendran, Chairman and Managing Director, Cochin Shipyard, said.

For instance, if the vessels are to ply in Africa and Europe, the shipowners would opt for a component manufacturer who has a dealer network for supply of spares in those areas as well.

The component manufacturers also need a supportive fiscal regime. “In the present taxation regime, Indian shipyards usually find it cheaper to use imported components than their domestic counterparts. While there is a Customs duty exemption for imported components, domestic components attract various taxes including value added tax,” Commodore Jitendran said. Even the freight component on imported equipment — which ranges from two per cent to seven per cent depending on the equipment size — does not add much to the cost.

The Shipping Secretary, Mr A. P. V. N. Sarma, called for increased focus on ship-repair facilities in the country. On fears of whether the Indian shipyards will continue to enjoy a robust order-book over long term given that shipbuilding is a cyclical industry, Hindustan Shipyard Limited (HSL) Chairman and Managing Director Rear Admiral Ajit Tewari echoed on the need to encourage ship-repair facilities along with shipbuilding industry in the country.

“Ship repair industry is an evergreen industry as ships are mandated to have special surveys (called class renewals) every fifth year of a vessel’s operation and intermediate surveys every 2-2.5 years,” Rear Admiral Tewari said. Nowadays, it is difficult to get a slot in repair yards and often ships are blocked for many days before they can be serviced,” he explained.

Indian shipbuilders have approached the Government for extension of a shipbuilding subsidy programme of the Government that existed till mid-August 2007.

More Stories on : Shipping/Ports | Engineering

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Airlines want Govt push for funding

Jet makers eye piece of action in India

Kandla on growth path

Encourage shipbuilding, and ancillaries will follow: Industry

'Container shipping in reverse gear'

Ship recycling rule roll-out

‘Investment plans may have to be recast based on economic situation’