Commercial shipbuilding is a potential opportunity we should not close our eyes to, says L&T’s Ramchandani

“When we started shipbuilding and struggled with some of the commercial orders, we decided that commercial shipbuilding is a high-risk game and we for a long time decided to stay away from it. But the scenario today is changing. The demand for tonnage (capacity) is going up, the demand for special vessels like energy carriers etc is going up,” Arun Ramchandani, Senior Vice President, Precision Engineering & Systems, L&T, said in an interview on Tuesday. (27 May) “The South Korean and Japanese yards are full. On the supply side also, there are gaps, and the government is also very clear that at the end of the day, just like defence security, logistics security is also equally important for the country. Shipbuilding being a labour-intensive industry is also a source of a large number of jobs. So, adding all that together, it’s very clear that the government has a thrust to push Indian shipbuilding tonnage up and we move up in the rank of shipbuilding nations, both in the near term and the long term,” Ramchandani said. The government, he said, has announced a revamped shipbuilding financial assistance policy, a ₹25,000 crore Maritime Development Fund and infrastructure status to large ships in the recent Union Budget. “We see this is a potential opportunity that we should not close our eyes to and notwithstanding the foreseen growth in the defence shipbuilding arena, we must evaluate this (commercial shipbuilding), and we are talking to potential partners in South Korea, potential customers in Japan etc and we are looking at how do we gear up for this,” Ramchandani disclosed…Commercial shipbuilding is a different ballgame altogether: cut-throat competition on pricing driven by Chinese yards, tight construction timelines and emphasis on quality. “There are a number of challenges in commercial shipbuilding,” says Ramchandani… In early 2024, L&T began talks with Japan’s Mitsui O. S. K. Lines, Ltd (MOL), the world’s second biggest shipowner by fleet size, to build an oil tanker.“The plan to build a tanker for MOL is not off the table. It is for us to now start looking at what the customer wants and what we can deliver, what are the gaps…All conversations are on the table,” he said.

L&T says that constructing green ships would be the differentiator in the days to come…Ramchandani listed out areas that require focused attention to overcome the challenges faced by local shipbuilders as India eyes a big role in the global shipbuilding market…Based on L&T’s strong naval order book position, does it have the capacity bandwidth to take up commercial ship orders?

“Today, we do have the bandwidth to take up commercial orders. We are looking at what kind of contracts we can get, what are the steps to scale up commercial shipbuilding…We believe we have the capability to scale up both concurrently,” Ramchandani said.

L&T reckons that it can enhance capacity through automation and incremental infrastructure augmentation to take up more orders…In the run-up to re-entering the commercial shipbuilding space, L&T has started taking up commercial ship repair works….Ship repairs are growing, and L&T wants to focus more on it because it’s a quick turnaround business, fetching good revenue for the yard.

“The wonderful thing is that we have a ship lift which gives us a lot of flexibility in repairs because we are not locked into a dry dock or a berth, we can just pull the ship onto a dry berth and do the work there and then put her back into the water. That’s a big advantage that the yard has,” he pointed out…“... Going forward, we are on a big upward trajectory, which would yield good capacity utilisation of the yard and good earnings which will increase significantly as the scale of operations and efficiencies go up on the back of larger demand which exists today and the government’s financial assistance which can be exploited, all of which gives us the confidence that now we are going to see good days of shipbuilding,” Ramchandani added.