shipyards riding on freight market boom by Amit Mitra Mumbai , Jan.
SIZE does matter — at least as far as the Indian shipbuilding
industry is concerned. While the big public sector shipyards in
the country are smarting under a frail order book position, their
smaller counterparts in the private sector that are engaged in building
smaller vessels are being bolstered by a surge in demand.
Interestingly, the private shipyards are getting an increasing flow
of orders from foreign companies for smaller vessels, as worldwide
the big shipyards are full with new building orders. "While
the PSU shipyards engaged in building large vessels are non-competitive
in the global market due to their cost over-runs and Government
restrictions, it makes sense for foreign ship owners to place orders
for smaller vessels on Indian yards due to the cheap labour costs
and efficient working," an industry analyst pointed out.
There are about 30 to 35 shipyards in the private sector in the
country, of which ABG, Bharati Shipyard, Western India, Chowgule
and Stebma, are the leading players. Most of them, especially ABG
and Bharati Shipyard are sitting on rich order books.
The healthy trend is prompting many private shipyards to think in
terms of expansion or acquiring other shipyards. ABG, for example,
is investing Rs 375 crore for setting up a new shipyard in Gujarat.
"Work has already started and it is expected to be operational
by 2006. We see interesting possibilities in the shipbuilding and
ship repair market in the coming months," Mr Rishi Agarwal,
Managing Director of the company, told Business Line.
Along with the shipbuilding industry, the ship repair industry is
also riding on an upbeat market. "This is so especially in
the wake of the growing fear of pollution and stricter norms and
regulations on ocean-going vessels. We expect a further spurt in
ship repair orders in the coming years," says Mr S.K. Shahi,
Chairman of SKS (Ship) Ltd. The company is planning to set up a
new ship-repair unit with Danish collaboration.
While it is the boom in the freight market that is the primary driver
of growth in the shipbuilding market, the cheap labour costs in
India are also prompting foreign companies to have their ships built
here. The labour cost per worker in India is at present estimated
at $1,192 per year, while it is $10,743 and $21,317 per day in Korea
and Singapore (both leading shipbuilding nations) respectively.