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HomeNewsBusinessCochin Shipyard aims to tap into European coastal shipping industry in the coming years, says CMD Madhu S Nair

Cochin Shipyard aims to tap into European coastal shipping industry in the coming years, says CMD Madhu S Nair

The shipbuilder is also keen on green shipping as it plans to turn green vessel construction into a key earning source in the next couple of years.

August 21, 2024 / 08:01 IST
Madhu S Nair, Chairman & Managing Director of Cochin Shipyard.

Madhu S Nair, Chairman & Managing Director of Cochin Shipyard.

 
 
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Cochin Shipyard (CSL), India’s leading shipbuilder, aims to tap into the European coastal shipping or short-sea shipping industry in the next few years after winning contracts to manufacture 14 ships for two European clients in the last year, the company's Chairman and Managing Director Madhu S Nair said.

"A number of coastal ships or coastal short sea vessels of 100-130 metre length are being built in India for various European players. Going forward we are definitely keeping our eyes and ears open in that space," Nair told Moneycontrol in an exclusive interview.

While India commands less than one percent of the $140 billion global shipbuilding market, the government is actively working to boost demand for the local shipbuilding industry, both domestically and internationally.

"The challenge is to try and trigger more shipbuilding within the country. And shipbuilding is not just one monolith, it is in different segments," Nair said.
The shipping ministry is expected to soon come up with a new shipbuilding and repair policy as part of the Maritime India Vision 2030 that aims to move India's shipbuilding and ship repair ranking into the top 10 globally.

CSL is also keen on green shipping as it plans to turn green vessel construction into a key earning source in the next couple of years. Edited excerpts:

India's shipbuilding sector holds a mere 0.5 percent share of the global market, what major steps can the government take to increase the share?

The government is working toward granting infrastructure status to the shipping industry. It has launched a shipbuilding financial assistance scheme, which is getting strengthened. There is a strong impetus from the government side to promote green shipbuilding in the country.

Further, the government is also thinking about how to make sure that Indian demand is aggregated. The government is looking at ways the Indian requirement be aggregated or collated significantly towards shipping companies operating out of India, and in turn, such shipping companies would be in a position to have more ships being built within the country.

The government is also considering various financial instruments, risk coverage instruments, and potentially even a Maritime Development Fund.

Going by the order intake over the past 2-3 years at CSL and other yards in the country, India can be looking at much better market share numbers in the coming years.

Do you see a need for a production linked incentives (PLI) scheme for shipbuilding in India to attract private investments and do you think there is scope for an employment incentive scheme in the shipbuilding sector in the country?

While the government has discussed launching a PLI scheme for the shipbuilding sector, a PLI scheme probably may not be the best solution for an industry like shipbuilding. A PLI scheme works on creating manufacturing capacity when the demand is already present. In India the government needs to come up with methods to trigger the demand for shipbuilding in the country.

The challenge is to try and trigger more shipbuilding within the country. And shipbuilding is not just one monolith, it is in different segments. There is already an automatic route of foreign direct investment (FDI) partnerships in the shipbuilding sector.

Especially on the merchant shipping side, if foreign companies are looking to set up shipbuilding or ship repair facilities in India they will look to not just produce for India but also for the global market. The government should look at ways to facilitate making Indian shipbuilding companies globally competitive from a technology and financial point of view.

If the government can trigger demand for shipbuilding first in India and for Indian ships globally that will help new ventures wanting to set up shipyards or existing players expand capacity for future growth. There are certain segments, for example, a number of coastal ships or coastal short sea vessels of 100-130 metre length are being built in India for various European players.

Shipbuilding can play a significant role in the employment linked schemes announced by the government as the industry generates a number of employment opportunities. The industry has got cascading employment generation potential.

What are the company’s expansion and capital expenditure plans for the next few years?

We have two subsidiary companies, one based out of Kolkata, and another based out of Udupi in Karnataka. We also have three ship repair units outside Kochi — in Mumbai, Kolkata and Port Blair.
We have completed two major expansion projects at our facility in Kochi. One was a large new 310-metre-long dry dock, and the other one was the International Ship Repair Facility. Together we invested about Rs 2,800 crore in these two facilities in Kochi. It has the potential to provide direct employment to 4,000 people.

With the new project, CSL will be able to repair 150-160 ships per year. Currently, we repair 80-90 ships. We are also looking at developing another facility on the western coast of the country to carry out repairs of passing vessels.

What is CSL's revenue mix and the split between the government and defence business versus commercial shipping, what is your growth trajectory for the next couple of years?

Shipbuilding contributes around 70 percent to our topline and the remaining 30 percent is from ship repair. In the shipbuilding space around 70 percent of our contracts are orders from defence while the remaining are merchant orders.

Even in the ship repair about 65 to 70 percent would be defence and the balance would be non-defence. We expect a 20 percent topline growth in 2024-25 when compared to last year.

Is CSL ready to build another aircraft carrier?

The new dry dock can accommodate an aircraft carrier of 70,000-tonne displacement. For perspective, INS Vikrant has a displacement of 45,000 tonne. The new dry dock can take 600 tonne of load per square metre.

The dry dock is designed for a minimum life of 100 years. So, if India decides to build a bigger aircraft carrier, we are strategically well-positioned.

In June CSL got an order from Wilson ASA, Norway, for design and construction of four 6300 TDW dry cargo vessels. Can you share more details on the timeline for the completion of the order?

We had an initial contract to build six vessels for the Wilson brothers and those vessels would start being delivered by the end of this year, early next year.

Those will be the first set of vessels. We are looking to supply a further eight vessels to the Wilson brothers, and the contract for 4 has already been signed and another 4 will be concluded very shortly.

CSL has signed a contract with the government to build six Next Generation Missile Vessels (NGMV) for the Indian Navy for Rs 9,805 crore with the delivery of ships set to begin in 2027, can you share more details of the project and timeline for execution?

We will be supplying six NGMVs for the Indian Navy as part of that contract. Currently, the project is in engineering design and equipment procurement stage. We expect to start construction on the first vessel this quarter.

The government has come out with guidelines for pilot projects on green hydrogen use in the shipping sector this year. As part of the programme the government is looking at retrofitting existing ships to enable them to run on green hydrogen. Is that a market space that CSL expects to grow significantly in the next few years?

We have already developed India's first fully indigenous hydrogen fuel cell vessel. It will get operationalised in Varanasi very shortly, but that vessel is more to demonstrate our technological capabilities.

As we move forward, and with the government initiative in developing the green hydrogen-based economy, I am sure that there will be many more opportunities to come.

Yaruqhullah Khan
first published: Aug 21, 2024 08:00 am

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