Gujarat - Building the edge
With high growths predicted, shipbuilding is the sunrise industry for Gujarat.
A study of the United Nations Conference on Trade and Development (UNCTAD) estimates that the operation of merchant ships contributes about US$380 billion in freight rates within the global economy, equivalent to about 5% of total world trade.
Research has revealed that throughout the last century the shipping industry has seen a general trend of increases in total trade volume. Increasing industrialization and the liberalization of national economies have fuelled free trade and a growing demand for consumer products. Advances in technology have also made shipping an increasingly efficient and swift method of transportation.
The continued growth is exerting pressure on existing cargo carrying capacity, leading to over capacity utilization. However, new capacity is not forthcoming as shipbuilding yard capacity is limited and gestation periods to build additional tonnage stretches from nine months to two years. This has led shipping lines and ship owners to increase freight and place orders for new ships. As a result, freight rates and vessel prices are ruling at high levels. High freights are making the deployment of even older ships profitable, thus postponing their scrapping. However, such a decision has increased repair visits and downtimes for old ships; with ship repairing facilities facing higher demand, ship repair rates have also crept up.
Global shipbuilding giants
The top three in international shipbuilding - South Korea, China and Japan - have a near hegemonic hold in the industry with a combined tonnage of 77%. Although, South Korea was leading in Shipbuilding industry till about 2009, present developments indicate that by 2015-2020, the Chinese shipbuilding industry share of the international market may be close to or may even surpass Japan and Korea.
Growth drivers in India
India currently accounts for about 1.11% of the global tonnage being built. Although, this seems paltry compared to countries like China, Japan and Korea, the Government of India is bent on increasing this share to 10% in the next 15 to 20 years. The future of the shipbuilding industry in India appears bright for the following reasons:
- 90% of all India-owned ships are foreign-built. This presents a big domestic market to be tapped into.
- Announcement of mega projects by the Government of India to develop the country's maritime sector will result in additional demand for about 2400 new ships
- New structural standards will make scrapping of old ships, specially bulk carriers, mandatory and thus, push demand for new bulk carriers
- The Director General of Shipping's announcement to ban all tankers aged above 25 years will stimulate demand for new tanker vessels
- Quantum jump in the country's overall refining capacity and the consequent increase in shipments of crude oil and petroleum products will spur demand for additional tonnage
Gujarat - Building India's edge
Gujarat has an ancient and stunning legacy of shipbuilding. There are early 14th century records of noted foreign travellers and historians attesting to the remarkable prowess of Gujarat's early shipbuilders in making the finest sea crafts.
History is turning a full circle. Shipbuilding is in the limelight once again.
Presently, there exists 27 operational shipyards in India with total capacity of 2 million DWT of which 9 are in Gujarat with installed capacity of 1.1 million DWT which is more than 50% of country's shipbuilding capacity. During the 11th plan (2007-2012), the national target is to build an annual tonnage of 5 million DWT. Gujarat intends to continue sharing more than 60% of the national target in Shipbuilding/repair market. This would need accelerated growth in Shipbuilding/repair capacity in the state from present 1.11 million DWT to 3 million DWT. The shipbuilding industry in India aspires to be a US$ 20 billion industry by 2020; Gujarat is expected to contribute more than 60% to the business.
- Configuration of the coastline with two gulfs viz. the Gulf of the Cambay and the Gulf of Kutch offering naturally protected locations.
- High tidal range in the Gulf of Cambay offering benefit of tidal window there by reducing dredging needs for Shipyard operation.
- Existence of ancillary industries to supply steel plates, machineries, equipments and other petty items require for shipbuilding.
- Rise in coastal and overseas sea borne trade at its coast.
- Good scope to cope up demand of technically qualified personnel for the ship building sector.
- Lower labour cost.
- Pro-industry policies of the State Government.
GMB has also been actively promoting the strategy of cluster form of Shipyards development and has introduced the concept of "Marine Shipbuilding Parks" (MSPs) at multiple locations with private sector participation. Presently, the focus is on developing 'Dahej Shipbuilding cluster' and 'Bhavnagar Shipbuilding cluster'. Leading companies in the field have already shown interest in setting up medium to large size shipbuilding yards along the state's coasts, estuaries and river mouths, particularly in South Gujarat. Various potential capital intensive projects are being developed by companies of repute such as Bharati Construction and Marine Ltd., ABG Shipyard, Afcons Infrastructure, Modest Infrastructure, Dolphin Offshore etc. at multiple locations in Gujarat.
With the country's longest coastline, strategic position on important domestic and international trade routes, pro-business government, a record of firsts in announcing landmark port policies, sound infrastructure and rich maritime tradition, Gujarat is well-placed to further the country's ambitions. To further accelerate such developments, the Gujarat Government had in 2010 announced a farsighted Shipbuilding Policy. This was bound to happen with a proactive state government like Gujarat, which has a history of firsts in port policy announcements and implementations.