Let go all lines for shipbuilders

IIPM’s 36th Glorious Year of Academic Excellence

Their is an urgent need for the government to support the industry to let it achieve its potential

How prudent is it to talk about the product (the ship), which spearheaded the first phase of globalisation & industrialisation, when the world is already at the cusp of a finding new technologies & avenues to move into a totally new mode of transporting & conducting trade? A valid question indeed. But, despite stupendous strides in the realm of communication technology, we still need to ply through the high-seas to transport our goods, because unfortunately, we are yet to device methods to miniaturise goods & send them through the cyberspace. And it is this reality, which justifies continued investments in the shipbuilding industry. But the question is does the Indian establishment have the vision to see the co-relation between the growing trade & the need to build robust shipbuilding infrastructure in the country? This becomes pertinent especially in context of our economy, which is constantly endeavouring to enhance its manufacturing outputs & compete globally.

The Indian shipbuilding industry is now asking the government to renew and enhance the subsidies offered to the industry, as the growth of the shipbuilding capabilities have the potential to have a cascading affect on the overall economy. According to a KPMG study, by 2012, the shipbuilding industry would add value to the tune of Rs.64,000 crores to the overall economy; besides providing additional income to the tune of Rs.4,500 crores to the government exchequer.

The subsidy demand by the industry is certainly not out of proportion. In comparison to Korea & China, the cost of shipbuilding in India is almost 50% higher. The higher taxes in India compel the local customers of new ships to look outside (in China 84% of the demand is met by the indigenous shipyards). This is because China took a leap into the shipbuilding arena altealst 10-12 years ahead of India. Furthermore, compared to 492 shipyards in China, India has 26, of which at least four cater to defence needs only; China has an order book of 96,100m DWT & India 3m DWT.

Now, if India has to acquire the global shipbuilding share of 7% by 2016, the government will surely have to provide much more boost to the sector and make all efforts to bring it on an even keel with the other industries in the manufacturing sector. “It goes to the credit of Indian shipbuilding that despite all odds, the Indian yards have been able to achieve more than 30% y-o-y growth since last four years, notching up an order book of Rs.20,000 crores from mere Rs.1,500 crores in 2002. And achieving these figures through 68% exports.” Rear Admiral (Retd) Ajit Tiwari CMD, Hindustan Shipyard Ltd (HSL), told B&E.

The future of maritime industry in India will continue to look bleak, unless the government takes some bold measures to increase maritime awareness in the country & the land-lubbers begin to appreciate the importance of building up maritime infrastructure. We are still miles away from sending products through the satellites, ships will continue to be the mainstay of trade.

B&E edit bureau: Atul Bharadwaj

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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