Source: ASSOCHAM
Mr D.S. Rawat, secretary general of ASSOCHAM
With over 41 per cent of India’s fleet of ships in the 20
plus age group, India’s shipbuilding and ship-repair industry holds tremendous
growth potential with opportunities worth over Rs 20,000 crore available in the
sector, an analysis done by apex industry body ASSOCHAM has revealed.
“Ships older than 20 years require more frequent and
extensive repair and maintenance, this augurs well for the Rs 7,300 crore worth
India’s shipbuilding industry, however domestic shipbuilders must invest
extensively in their capacities to take advantage in this regard,” according to
an analysis of ‘Indian Shipping Fleet: Size, capacity and Age Composition,’
conducted by The Associated Chambers of Commerce and Industry of India
(ASSOCHAM) and released on Dec 16.
“Majority of Indian ships are less competitive as mostly
younger vessels that are less than 15 years old are preferred in international
trade,” said Mr D.S. Rawat, secretary general of ASSOCHAM while releasing the
chamber’s analysis.
“The government needs to act as a facilitator and create
opportunities for a healthy business climate to attract fresh investments in
the shipping sector,” Mr Rawat added.
As per the ASSOCHAM analysis, India has a total of 1,122
shipping vessels in its shipping fleet and 41 per cent of these (about 466
vessels) fall in the age group of 20 years and more. Considering that average
life of a shipping vessel is about 26 years, most of the existing Indian
vessels need to be replaced.
Assuming that out of the 41 per cent vessels, about seven
per cent (approximate rate at which India’s vessel strength has grown between
2000 and 2011) of them get replaced then this would translate into 33 ships.
An average cost of constructing a large vessel is roughly
about $100 million, therefore the size of such an opportunity would amount to
$3.3 billion.
“As such the domestic shipbuilders need to pull up their
socks and invest in capacity enhancement in order to take advantage of this
opportunity or else shipbuilders from other countries will cash in on this
opportunity,” said Mr Rawat.
Further, over 23 per cent of India’s total shipping
vessels (about 264 vessels) fall under the age group of five years. Of the
rest, about 141 vessels are in the age group of 16-20 years, 135 vessels are
11-15 years old and about 116 vessels are in the age group of 6-10 years,
highlighted the ASSOCHAM analysis.
Despite total volume of cargo moving in India’s trade
expanding progressively, the share of Indian ships in carriage of country’s
overseas trade declined from about 36 per cent in 1990-91 to just over eight
per cent in 2009-10.
“The continued slippages in share of Indian shipping in
carriage of country’s overseas trade puts us in a precarious situation as bulk
of our essential supplies like oil are carried on foreign flag vessels leaving
our energy supplies at the risk of an abrupt stoppage in case of any
eventuality,” highlighted the ASSOCHAM analysis.
“Besides, it is also causing significant drain on precious
foreign exchange in terms of payment of freight charges, which could otherwise
be used for other high priority imports or for building up indigenous
infrastructure,” the report said.
However, the drop in share also presents an opportunity
for Indian shipbuilders thereby indicating tremendous scope for growth of
Indian shipping.
Though, India has one of the largest merchant shipping
fleet amid developing countries but its share in terms of world total
deadweight tonnage (weight a ship can safely carry) is pretty low evidently as
India contributes just over one per cent to the world deadweight tonnage,
according to the ASSOCHAM analysis.
From about 549 vessels in 2000 India’s shipping fleet
size increased to 1,122 vessels in 2011 indicating a compounded annual growth
rate (CAGR) of about seven per cent. While during this period India’s shipping
capacity increased from over 69,53,000 gross register tonnage (GRT) to
1,10,61,000 GRT.
India accounts for just about one per cent of the global
shipbuilding industry worth about Rs 7.3 lakh crore. China, South Korea and
Japan are leading shipbuilding nations and cater to over 80 per cent of the
global shipbuilding industry with China alone accounting for over 35 per cent
share.
Lower costs of labour, availability of skilled workforce
together with robust demand in the domestic market and a growing steel industry
are certain factors that build up a strong case for shipbuilding sector in
India.
Points to ponder
upon:
For a well balanced and comprehensively developed
domestic shipbuilding and ship repair industry, the government should provide
fiscal incentives to develop strong research and development facilities,
designing capabilities and set up an auxiliary base to encourage the growth of
the sector.
-India needs to furbish up its ports and the whole
shipping infrastructure to enhance the handling capacity and facilitate
operation of larger shipments to increase its share in the global maritime
business.
-The government should rope in maritime states to
identify and make land available, thereby seeking their contribution for
setting up a new port or a shipyard in each of these states.
-This also denotes huge scope for private sector and
foreign direct investment (FDI) in the shipping industry and the maritime
states can develop a composite project on the public-private partnership model.
-High input costs and rising costs of raw material,
freight together with miscellaneous duties and taxes being imposed amounts to a
huge price differential of about 50 per cent in building a ship in India and
other countries.
-Fulfilling the requirement of skilled workforce is
another significant problem being faced by Indian shipbuilders.
-The government has a key role to improve the efficiency
and productivity of domestic shipbuilders to enable them to compete with their
foreign counterparts.
Hence, the ASSOCHAM recommends for providing subsidy
scheme, easing tax related regulations and declaring the shipbuilding a status
of strategic industry.
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