L&T eyeing massive shipbuilding orders

India’s largest engineering and construction firm Larsen & Toubro Ltd (L&T) is negotiating with global shipping fleet owners to build ships worth over $1 billion, but the company cannot finalize these orders because it still hasn’t received the requisite clearances for its shipyard from the local government.

L&T plans to set up the country’s biggest shipbuilding facility at Kattupalli in Tamil Nadu in an effort to tap growing domestic and global demand for ships. The company will invest around $760 million in the shipyard and port project and will build cargo ships, warships and offshore oil rigs. The proposed shipyard will be capable of building 25 ocean going vessels annually and repair another 50-60 ships.

“We want to do what Japan and South Korea are doing, focus on high-end shipbuilding where the money is,” said M.V. Kotwal, a member of L&T?’s board and senior executive vice-president in charge of the heavy engineering business at the company. Kotwal said that L&T would build very large crude carriers, LNG and CNG carriers, car carriers, container ships and warships. ???The new yard will use the latest shipbuilding technology and the most modern processes,” Kotwal said.

L&T has hired the Rostock, Germany-based consultant Ingenieurtechnik und Maschinenbau GmbH (IMG) to develop a master plan and design for the shipyard.

The company also plans to bring in a Japanese or South Korean shipyard as a technology partner at a later date. When fully operational, the shipyard and port will employ close to 10,000 people. L&T plans to begin construction of ships at Kattupalli by the end of 2009 and deliver its first ship a year later.

L&T ventured into the shipbuilding business last year by converting part of its heavy engineering complex at Hazira, near Surat in Gujarat, into a yard that could build three mid-size ships a year with a cargo-carrying capacity of 15,000 to 20,000 tonnes.

Although the company is now expanding the capacity of the Hazira yard to make eight ships a year, it cannot build bigger ships there because of the draught restrictions in the river.

India’s share in the global shipbuilding business is expected to grow to around 15%, or $22 billion, by 2020 from the current level of 0.4%, aided mainly by cost competitiveness and abundant supply of skilled manpower, according to a report by Mumbai-based consulting firm i-maritime Consultancy Pvt. Ltd.