In­dia lacks a level-play­ing field, says L&T Ship­build­ing

Business Standard - - COMPANIES - T E NARASIMHAN

L&T Ship­build­ing, part of en­gi­neer­ing con­glom­er­ate Larsen & Toubro (L&T), has said that its fa­cil­ity at Katup­pali, near Chen­nai, is run­ning at low ca­pac­ity ow­ing to a lack of a level-play­ing field.

The com­pany has in­vested around ~40 bil­lion to set up the fa­cil­ity. It is ca­pa­ble of man­u­fac­tur­ing 10 ships a year, but is mak­ing only two.

“Pri­vate sec­tor util­i­sa­tion (ca­pac­ity) is 20-25 per cent be­cause the pub­lic sec­tor is be­ing over-fed,” B Kan­nan, man­ag­ing di­rec­tor and chief ex­ec­u­tive of­fi­cer, L&T Ship­build­ing, told Busi­nessS­tan­dard. He said his com­pany had no de­fi­ciency in tech­nol­ogy, in­fras­truc­ture ca­pa­bil­ity and ca­pac­ity, or fi­nan­cial strength. The gap is in reg­u­la­tion and pol­icy, which hurts the pri­vate sec­tor, ac­cord­ing to him.

L&T de­signed the Vikram­class offshore pa­trol ves­sels (OPV) in its war­ship de­sign cen­tre at Mana­pakkam, Chen­nai, mak­ing it the first sig­nif­i­cant war ship fully de­signed and built in a pri­vate sec­tor fa­cil­ity.

Com­pany ex­ec­u­tives said the cen­tre could de­sign larger cap­i­tal war­ships like corvettes, fri­gates, and de­stroy­ers.

L&T’s Hazira ship­yard built the hull of the nu­clear sub­ma­rine INS Ari­hant, and is sup­ply­ing hulls for its suc­ces­sor ves­sels too. “We have in­vested a lot, and that should give some re­turns. Get­ting enough or­ders is the main re­quire­ment, which is not hap­pen­ing ow­ing to the ab­sence of a level-play­ing field.

De­mar­ca­tion should emerge on the ba­sis of ca­pa­bil­ity and demon­stra­tion, and the gov­ern­ment is work­ing on it,” said Kan­nan. Over the next 10 years, he said, the Navy and Coast Guard would re­quire around 100 ships, of dif­fer­ent sizes, or 10 ships ev­ery year, but there were five-six ship­yards in In­dia.

“You can­not wait for 10 years. You want the Navy and Coast Guard to be equipped with more ships. Gov­ern­ment poli­cies should be ex­e­cuted fast so that the in­stalled ca­pac­ity can be utilised,” said Kan­nan, a re­tired vice-ad­mi­ral in the In­dian Navy.

The gov­ern­ment should re­di­rect or­ders till pub­lic the sec­tor fin­ishes its jobs, ac­cord­ing to him. Kan­nan said, over the past 10-12 years, around 90 per cent of the or­ders went “on nom­i­na­tion” to the pub­lic sec­tor. Hardly 4-5 per cent came to pri­vate par­ties, he said.

“Pub­lic sec­tor un­der­tak­ings quote lower rates,” said Kan­nan, adding that the NITI Aayog’s rec­om­men­da­tion had been to dis­cour­age nom­i­na­tion as a pro­ce­dure. “While Make in In­dia is a good ini­tia­tive, we need to prac­tise it,” said Kan­nan.

Pub­lic sec­tor Goa Ship­yard took 72 months to build an OPV, sources said. It is now de­liv­er­ing OPVs in 36 months, which L&T took for its first ves­sel, ac­cord­ing to them. L&T won the ~13.04-bil­lion con­tract to build seven OPVs in March 2015. Af­ter the Vikram class, it is sup­posed to de­liver the re­main­ing six OPVs in in­ter­vals of six months.

Com­pany ex­ec­u­tives ear­lier said they could speed up the process if the Coast Guard ac­cepted early de­liv­ery.

Be­cause or­ders from In­dia are few, the com­pany has started look­ing at ex­port mar­kets, which con­trib­ute around ~7 bil­lion.

BS PHOTO

L&T de­signed the Vikram-class offshore pa­trol ves­sels in its war­ship de­sign cen­tre at Mana­pakkam, Chen­nai, mak­ing it the first sig­nif­i­cant war­ship fully de­signed and built in a pri­vate sec­tor fa­cil­ity

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