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‘We’ve Gone Below Sea Level in Shipbuilding’
- Cmde M Jitendran, Chief Consultant, Indian Register of Shipping
While interacting with SMP World, Cmde M Jitendran, Chief Consultant, Indian Register of Shipping, says that shipbuilding requires a 50 to 100 year perceptive plan, which must be sustained without change as it directly contributes to economic development. Market volatility and fluctuations should not be allowed to seriously affect this vital industry. Excerpts:

With a long helm of more than two decades in the Indian Marine industry, what is the drastic evolution you have witnessed in this period?
In my view, we have come full circle and now gone below “sea level” in shipbuilding. During the last decade, in 2003 the Indian shipbuilding share in global market was a meager 0.2 per cent. In 2008, we were able to grab 1.3 per cent. But now we are much below the mark we crossed in 2008 due to delays in many projects and many shipyards facing financial crisis. The fact that ship repairing business provides a buffer solution to overcome slowdown period has not been taken seriously. World economy is showing recessionary trends and shipping industry is sailing through troubled waters. Despite having opportunities in investments in port infrastructure, the progress is not even on the horizon. On the other side, Gujarat ports under GMB have made progress very well and Indian ship recycling industry has gained topmost position in the global markets.

What is your perception about of the growth of shipbuilding in the current market scenario? Please detail the opportunities and challenges faced by the sector in the country?
Being capital intensive cyclical industry, shipbuilding sector requires long–term perceptive plan of 50-100 years, which can be sustainable for longer period thus contributing to economic growth of the country. Market volatility and fluctuations should not be allowed to seriously affect this vital industry. In India, shipbuilding sector can’t make progress on five-year plan basis. However, there are huge opportunities in coastal shipping. Being energy efficient, coastal shipping can be developed for smooth movement of cargo along the huge coastline of India. It will also ease traffic congestion at our ports. Building of such coastal vessels in our shipyards under Indian flag, providing worldclass ship repair services, development of dredging industry will augment economic growth, which will ultimately boost Indian economy. All these require long-term plans. Each of these opportunities can be executed into a reality with the support of proper policy and regulatory framework in place. Development of this sector will create immense opportunities in education, employment and services related to this field.

Despite having 10 Govt-owned and more than 50 private-owned shipyards in the country, India represents a mere 1.3 per cent of the global shipbuilding share. Can you please apprise us the factors, which have led to such a meager share in global market?
As I mentioned earlier, we had climbed to about 1.3 per cent, five years ago but are nowhere representing that volume today. Importantly, even five years ago, it was mainly foreign ship owners who placed orders in Indian shipyards. There were hardly any domestic orders. The Government also opened the shipbuilding subsidy scheme to private shipyards with effect from 2002, which gave the industry a huge boost and created massive employment opportunities. This scheme was discontinued for all shipyards, public and private in 2007 and we quickly became uncompetitive. When shipping took a downturn and foreign ship owners stopped placing orders in Indian shipyards, we started lagging behind and have now reached a stage where it would be very difficult to secure export orders due to flight of skilled personnel to greener pastures. If the industry is dependent on export orders only, then it cannot be immune to market downturns. There must a thriving domestic demand for sustainability.

In the last decade, India has come up with only two new shipyards - one at Pipavav in Gujarat and the second at Kattupalli in Tamil Nadu, and other potential investors have either deferred the Govt’s proposed plans or abandoned them altogether due to the weak outlook/ market. What are the factors, which have led to this situation?
To promote shipbuilding, there is a need to develops domestic shipping market, which should be able to utilise 50 per cent of domestic shipyard potential. Absence of domestic players to tap local shipyards capacity may lead to involvement of international players in capacity utilisation. In such a situation, we cannot be immune to market forces and sustainability will depend on a viable book order position. Hence, steady long-term policies such as building of coastal ships in India under Indian flag, building 100 per cent of cargo ships required by India to execute at least 40 per cent of our EXIM trade as compared to less than 10 per cent now, designing and building our own dredgers, promotion of island tourism and cruise shipping etc. are some of the factors that will ensure domestic shipping growth and we won’t become a victim of weak global outlook/market. This is sustainable as 97 per cent of our EXIM trade is executed through sea and the volume is growing every year. I think this is not going to change for next 50 years or perhaps forever.

As per the Maritime Agenda 2010-2020, the government proposes giving a boost to Indian ship building in order to achieve a global market share of 5 per cent by 2020. As per you, what will be the future roadmap to achieve it?
Indian shipbuilding sector can’t propel unless and until there is an integrated approach towards the development of ports, roads, railways, electric power and water supply along with shipyards. Shipbulding can’t grow in isolation to 5 per cent by 2020 if it is only fully export oriented and caters only to foreign market with domestic subsidy support. Long-term investment plan coupled with investor-friendly policy and regulatory framework in place will help to achieve sustainability in shipbuilding sector.

Shipbuilding is a globalised, technology and capital intensive industry, with high volatility. In your view, how will the public-private partnerships (PPP) model continue to explore the development of shipyards in India?
India being a vast country, only one type of PPP model or government-funded shipyards won’t be sustainable for a long period. Shipyards in different states have to develop competitively depending upon local conditions and prevalent culture in that area. Shipyard performance will have to be tailored to deliver high quality ships at international prices within internationally acceptable timeframes even for domestic requirements. Hence, we need globally competitive shipyards. Those built only for domestic consumption will be a drag.

What would be your wish-list in terms of Govt. policy which could make the shipbuilding industry more viable in India?
Shipbuilding needs enormous amount of coordination, guidance and leadership at different levels to escalate performance. I feel leadership crisis is one of the reasons for the current scenario of shipbuilding sector. There is need to spread awareness about importance of maritime industry contributing towards economic growth of the country. It will not be possible to become a super power by avoiding shipbuilding. I think that govt should take initiatives to frame policies which will be favorable for coastal shipping, ship repair, conversions, dredging etc.

What is the way forward?
With bankers tightening liquidity and oversupply of vessels in the market, all rating agencies have predicted a gloomy picture for the global shipping industry. So, the market is going to be volatile for the next two years at least. While US is climbing to recovery, there is still recession in Europe and growth in Asian countries is going to be low. So, demand is not going to pick up soon. So, this is the best time to put our house in order and build a bright future for India in maritime industry. Good leadership should forge new alliances and plan expansion of existing ones tailored for domestic growth in shipping, port infrastructure and shipbuilding in a well diversified manner. There must a focus to cut greenhouse gases from the maritime industry of the future. Thousands of beautiful, eco-friendly, indigenously built ships must dot the long coastline of a vibrant and booming India performing a variety of functions.