Domestic shipyards to get preference in orders from public sector

In order to promote the domestic ship building industry, the Directorate General of Shipping has decided that public sector ship owners will have to give preference to Indian-made ships.

But, this is subject to domestic ship builders matching best price discovered through international competitive bidding.

The benefit for the shipyards would be through a first right of refusal given to them.

“Recently, we decided to give preference to Indian ship builders. The notification has already been issued,” said Dr S.B. Agnihotri, DG Shipping.

Special treatment

Simply put, when a company such as Shipping Corporation of India (SCI) goes to acquire a vessel, it will have to give preference to an Indian ship builder, provided he offers the specified vessel in the best price discovered through the tender process.

“Preferences will be given to Indian built vessels when it comes to acquisitions. They will get special treatment in the existing Indian flagged vessels as well as future ships which will be acquired in India,” Mr K Mohandas, Secretary, Ministry of Shipping, told reporters at the sidelines of the SMM India 2011.

However, the Secretary and the DG Shipping stressed on the need for Indian shipyards to improve their performance in certain areas. Dr Agnihotri wanted Indian shipyards to ensure timely delivery of ships. He also asked them to work towards bringing in more energy efficiency in ships.

Cost-competitiveness

Mr Mohandas said that the domestic shipyards need to ensure cost-competitiveness. “SCI is also substantially privately held. Indian shipyards must match global costs,” he said.

Meanwhile, Mr S. Hajara, Chairman and Managing Director of SCI, said, “So, as of now, we acquire ships in a competitive basis through global tendering. Small ships and vessels from Indian shipyards are of satisfactory quality. But, in the case of big ships, global shipyards are much better.”

On the long pending issue of extension of ship building subsidy policy to Indian shipyards beyond August 2007, Mr Mohandas said, “The proposal was sent sometime in August last year. But the Finance Ministry still has it under consideration.”

Ship prices down

Commenting on the prices of ships, Mr Hajara said, “The prices have come down significantly. The very large crude carriers, which were costing around $170 million, are now costing $100 million. I don't think the prices would come down further because the input prices are not going down.”

He added that the shipyards are delivering ships at very low margins or even below costs, in the light of input prices going up and historical low orders placed by ship owners in 2009.

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