Cochin Shipyard ‘ready’ to put equity in India’s first locally build dredger for DCI

P Manoj Mumbai | Updated on March 15, 2021

DCI’s financial crunch nudge ministry to explore different funding options

With Dredging Corporation of India Ltd (DCI) facing fund crunch, the government is looking at multiple options for financing India’s first locally built high end and larger dredger with Dutch know how, including asking state-run Cochin Shipyard Ltd to extend equity support to the vessel it will construct for the Visakhapatnam-based dredging firm.

Mumbai-listed Cochin Shipyard and DCI signed a memorandum of understanding (MoU) recently for constructing either a 8,000 or a 12,000 cubic metre hopper capacity trailing suction hopper dredger (TSHD) estimated to cost as much as ₹800 crore. TSHDs are used to maintain the channel of ports.

Cochin Shipyard and IHC Holland B V have signed a separate MoU for collaborating on technology and design for high capacity, complex dredgers.

The ministry of ports, shipping and waterways which brokered the deal to build dredgers locally as part of the Make in India and ‘Atmanirbhar Bharat’ initiatives, has suggested pooling of resources by different entities to finance the construction.

These include Cochin Shipyard chipping in with 20 per cent of the equity component of the dredger cost with the balance equity funded by the four major ports – Visakhapatnam Port Trust, Paradip Port Trust, Deendayal Port Trust and Jawaharlal Nehru Port Trust – which are shareholders of DCI.

Equity component

The equity component contributed by the four major port trusts would carry interest rate that is 1-2 per cent more than the rate on bank fixed deposit where they have parked some of their money. Such an arrangement would still be cheaper for DCI than borrowing directly from the market at higher interest rates.

DCI could also explore overseas soft loan particularly from institutions based in the Netherlands as major equipment/parts for constructing the dredger will be supplied by IHC Holland, the world’s largest dredger builder.

It is uncommon in the global shipping industry for shipyards to put equity or extend other funding support to vessels they build for fleet owners.

“Cochin Shipyard has said it is willing to look at picking equity stake in the dredger construction project to facilitate the Make in India policy,” said a government official briefed on the plan.

The yard is also agreeable to receiving the construction cost of the dredger staggered over a longer time span along with some interest to help the cause of Make in India, he added.

DCI and Cochin Shipyard are discussing the specification of the dredger. After the finalisation of the dredger specification, the yard plans to submit the construction cost basis which the funding arrangement will be tied up.

Financial crunch

The financial crunch has forced DCI to delay the payment of about ₹160 crore it owes Van Oord India Pvt Ltd for the subcontracting work it did at Jawaharlal Nehru Port Trust in 2019.

The dredging work was originally given to DCI by JNPT on nomination basis (without tender) which was in turn sub-contracted by DCI to Van Oord India, the Indian unit of Dutch dredging firm Van Oord Dredging and Marine Contracting Co.

“Unless someone gives money, DCI will find it difficult to fund the dredger building cost on its own,” the official added.

Published on March 15, 2021

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