Make in India: Shipping Ministry urges Defence Ministry to order vessels from domestic firms

NEW DELHI: The shipbuilding industry is riding the ‘ Make in India’ plank to urge the defence sector to order vessels from the domestic companies instead of turning to firms abroad.

The ministry of shipping has written to the defence ministry to encourage Indian shipbuilding sector by allowing domestic firms to build some of its vessels from a total order book that runs into over $92 billion (about Rs 5.7 lakh crore). The shipping ministry is batting for not just public sector entities like the Cochin Shipyard but also private companies including Bharti Shipyard and ABG Shipyard, among others, to promote the entire industry.

The industry has been in the doldrums for the past four years due to a fall in orders from shipping companies. Several companies are undergoing corporate debt restructuring (CDR) or running into severe losses. The majority of the orders with the Cochin Shipyard are from the Navy and Air Force, helping keep the company afloat.

The shipping ministry has sought easing of the CDR process to help these companies. “The stressed books of the shipbuilding companies are a big deterrent to getting new orders. We will address that problem,” a senior official said. The ministry has also proposed a number of measures to the Reserve Bank of India to enable better access to financing for shipbuilding yards. One of the suggestions is to allow the shipbuilding companies buyer’s credit and pre-shipment credit in foreign currency (PCFC). This will help them import raw materials, especially ones not available in India for vessel construction, even without a domestic or export order.

The shipbuilding industry is also hoping to get infrastructure status, which will automatically increase its ability to use extra commercial borrowings.

The order book of the Indian Navy includes submarines, frigates, destroyers, aircraft carriers, offshore patrol vessels, corvettes, oceanographic and research vessels, etc.

While orders for commercial ships have dried up, the defence sector’s order book has thrived. Indian shipbuilding companies may be given advantages such as first right of refusal or price preference to get ahead of others in getting these orders. But procuring adequate technical expertise in a closely guarded sector like defence could stillput them on a weak footing.