Mazagon-Pipavav tie-up: Losers have plenty to complain about

For the domestic ship-building industry, which is just about sighting the recovery path after the global recession, the intent of Mazagon Dock to open its doors for private participation to execute its Rs 1 lakh crore order book was a god-sent opportunity.

Larsen & Toubro, ABG Shipyard, Bharati Shipyard as also Pipavav Shipyard, which were shortlisted, had been negotiating hard with the public sector undertaking, fully in the know that defence orders in the Mazagon kitty could keep them going for over 10-15 years.

Mr Nikhil Gandhi, Chairman, Pipavav, who said his yard was equipped to build five warships or 10 smaller ones a year, agreed that that the Mazagon order book, with part execution alone, could keep his company busy for over 15 years.

In fact, he said it would require five yards of Pipavav's size to complete the Dock's pending orders.

Of course, the tie-up with Mazagon Dock would pave the way for the joint venture to get to build ships for friendly neighbouring countries, which do not have resources and ability to do so on their turf.

Given the backlog and size of defence orders, it might not be curtains for other shipyards. Other public sector yards such as Hindustan Shipyard and Garden Reach Shipbuilders and Engineers are also looking for private sector collaboration.

The losers' main grouse is that there was neither a format, similar to a tender, nor contour lines for them to base their detailed plan on, in addition to not knowing what the evaluation criteria was.

On August 25, after the bidders had made their presentations to the Mazagon Board, they were asked to elaborate on their presentations in terms of the terms and conditions.

Even after that, the communications lines were open. There was no deadline for submission mentioned. None of the bidders were given an indication that the Mazagon Dock Board would meet and decide on the issue in a fortnight.

Going by the way the deal was finalised, what appears to have tilted the scales in favour of Pipavav, in the words of one of bidders, was that it had a former Chairman and Managing Director of Mazagon Dock in its ranks as a director, who was able to fine-tune the detailed plan to the undisclosed norms of the Mazagon Dock.

While, those who lost out to Pipavav have every reason to cite their capabilities and strengths over that of Pipavav, Mr Gandhi, was candid in stating that Pipavav infrastructure was the main reason for the company to be chosen as the ‘partner of choice.'

L&T has ample cause to complain as it has had an association with the Mazagon Dock in some projects. Moreover, L&T's shareholding pattern does give it an edge over others, as 32 per cent are vested with government agencies.

Besides penning their displeasure to the Mazagon Dock, both L&T and ABG Shipyard have also communicated to the Defence Ministry and the Chief of Naval Chief on the issue.

Considering the priority the government associates with defence and the formal government nod still awaited for the Pipavav- Mazagon deal it could be said that Pipavav despite getting the letter of intent from Mazagon Docks is still not in clear waters.

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