LOGISTICALLY SPEAKING. Will Indian shipyards miss the LNG bus?

Indian shipyards are finding it hard to meet GAIL’s eligibility criteria for building LNG ships. It has been two months, but none of the yards that expressed interest in the public sector gas importer’s call to hire three Indian-built ships, have put in the bids as yet. The deadline is two days away.

Besides pricing, getting a technology partner seems to be a hurdle. India has never built an LNG vessel and therefore a technology tie-up has been specified by GAIL as a pre-condition to bid. Yards in South Korea and Japan, which have the requisite experience, are reluctant about sharing their technology with India.

Whatever may be the reason, it would be suicidal for a country, that recently celebrated its successful mission to Mars, to give up its plans to enter building LNG ships due to technological shortcomings. It was the Prime Minister’s Make in India strategy that forced GAIL to go for three indigenously built vessels out of the nine which it proposes to hire for importing liquefied natural gas from the US.

Cochin Shipyard, L&T, Pipavav Defence and Engineering Company have the physical infrastructure to take up the job. However, it appears that they would miss the bus unless the deadline and eligibility norms are relaxed to find a technology partner.

For several reasons, it is important to ensure that domestic yards do not miss this opportunity. Given that India will be depending on large volume of imported LNG in the coming years, control over building and operating gas carriers is strategically important. (Currently India is the world’s fifth largest importer of LNG and its rank is poised to improve in future).

It is pertinent to note that GAIL has already tied-up with Shipping Corporation of India to operate LNG vessels with an option for the latter to partly own them. SCI is the only Indian shipping line operating LNG vessels. For shipyards with huge idle capacity an LNG order will be a great boon. The slow-down in global shipping in the last six years left shipyards with few orders. It would be crucial for them to tap new avenues like building high-value specialised vessels.

An LNG vessel today costs more than $200 million to build. It would be a great loss for domestic yards, if they let go the GAIL offer. It is understandable that foreign yards will not easily part with their technology and create competition for themselves. As pointed out by an official from a shipyard, why should foreign yards share their technology unless they benefit in some way? There are two ways out to ensure domestic yards’ participation. As suggested by an official, GAIL should relax its norms without compromising on the security of the vessel. This would enable local yards to tie-up with smaller foreign yards which have the technology but may not have the experience like Korea or Japan.

Two, New Delhi could tap Government channels to get technology tie-up with yards in South Korea, which has a lot of business interest in India and it would benefit both to have a long-term tie-up in shipbuilding. Why not explore an equal-partnership option?

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