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Interview-Part IV

Make In India a success in L and T Ship Yard

Ultimately our ship yard has the capability to design and construct ships to meet the defense requirement which is what Make in India is required for and that is being met.

The next aspect is that we have been delivering ships ahead of schedule which means there is no time over runs and therefore there is no cost over runs. It expands and projects the country’s potential to build similar assets for other countries. There is therefore an export market for our products which need to be tapped. We should be able to get some orders from neighboring countries for their navies and coastguards to design and build ships for them.

We have already got a contract from Vietnam Border Guards to build twelve ships  at a cost of Rs 660 crores. It is a high speed vessel bigger than interceptor crafts. The Vietnamese border guards wanted them to be designed with some speed profiles and a certain number of other specifications. They will be completely met and we will hand them over in two to three months Now all these places us that we have the potential and demonstrated capability to serve the Indian navy and the coastguard. Very soon we will demonstrate it to a foreign vendor or a neighboring country.                                                                                                                                                                                                                                                                                                                                                                                                                    

Private ship yards starved of orders; bulk of defense orders go to PSUs

But when it comes to placing orders, the private sector ship yards are not getting their due. If you add up the defense ministry’s orders in the last 10 or 12 years, hardly five per cent of the Orders went to the private sector and the balance to public sector undertakings. We have taken up the issue with the Government of India about the need to increase the percentage of orders to the private sector ship yards.

There are genuine issues that need to be sorted out before private sector ship yards get their due. The government says it is examining the issue. Obviously there are some infirmities when decisions are taken to place orders. Private sector shipyards invest thousands of crores of rupees in building the ship yard. Obviously they need to get some returns on the investment and are answerable to the share holders once a year.  In the case of Public sector undertakings the government’s grants take care of the construction.

The private sector need to be given more defense orders so that the capability of the industry is put to full use in the most economical manner for the security of the country. It can happen only if there are opportunities by which private ship yards which have demonstrated capability are given opportunities, in their specialized area of activity. The orders should not be given to public sector undertakings on a nomination basis.

There may be some genuine reasons for orders to be given to the public sector undertakings but it should not be at the cost of private sector ship yards which are performing better and are more economical to the government both in terms of time and cost. There must be a system by which performance demonstrated should be given due weight in decision making. So there is need for bringing   regulatory changes when defense orders are decided upon by the government.

Before placing orders the issues whether they should be given to public or private sector shipyards need be understood and then only the problems can be overcome. When a government undertaking gets an order the necessary infrastructure for executing the order is funded by the exchequer. Government infuses capital into the undertaking.  In private sector we have to put money from our pocket.

So for the private sector this is a business line where capability and talents are available but financial requirements are challenging. But there has to be a method by which the issues are addressed. I also understand that there cannot be a clear cut formula by which the government can address the issue.

Though Larsen and Toubro ship yard is the only private sector ship yard in the country into defense ship building, we want the issue to be addressed in an institutionalized manner considering that we meet the defense requirements of the country. We also have the capacity to extend similar assistance to neighboring countries which has got its own returns for the country in strategic terms.

Many countries have shown interest in our products  and seen them at the recently concluded Defense Expo at Chennai. They also want to know how our products are performing in the Indian navy and coastguards before deciding on placing orders.  He was confident that the government would give a favorable consideration to the multi-faceted requirement of private ship yards engaged in defense production. Meanwhile in L and T Ship Yard, we look at every order from the defense industry as an opportunity to re-demonstrate our capability.

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