Larsen & Toubro

L&T plans to build ship engines, looking for mega shipyard site

It has started scouting for land on the west coast; to buy 500 acres more near proposed hub at Kattupalli yard.

India’s biggest engineering and construction firm, Larsen and Toubro Ltd (L&T), which has already announced an entry into the shipbuilding business, is now looking to start making engines for ships and other components that go into ships.

Much like in the shipbuilding business, there is currently a boom in the global ship-components business with demand far exceeding supply. Apart from entering this business, L&T, which ventured into shipbuilding in 2006, has started scouting for a suitable site for a mega shipyard on the country’s west coast, said a person familiar with the development who did not wish to be named before an announcement on the same.

An L&T spokesperson declined to comment. In early January, the Tamil Nadu government cleared a proposal from L&T to build the country’s largest shipyard at Kattupalli in Thiruvallur district near Chennai at a cost of around Rs3,000 crore. The Kattupalli yard, spread over 1,200 acres, will also have a commercial port adjacent to it.

The firm now plans to acquire an additional 500 acres near the Kattupalli project from the state-owned Tamil Nadu Industrial Development Corp. Ltd, or Tidco, to facilitate setting up of ancillary industries that make and supply components used in ships. “L&T wants to convert Kattupalli into a shipbuilding hub,” the person familiar with the development said. It is here that the company plans to make diesel engines for ships that it will build and also for other customers. However, L&T is yet to finalize the strategy for the diesel engine venture. “The company is yet to decide whether to opt for the licensing route or float a joint venture with an established player to set up the engine factory,” the person said.

L&T has held initial discussions regarding the diesel engine venture with Germany’s MAN Diesel SE, one of the world’s top makers of large diesel ship engines, Finnish equipment maker Wartsila Corp. and STX Engine Co. Ltd, a unit of South Korean shipbuilder STX Shipbuilding Co. Ltd, the person said. MAN Diesel has adopted the licensing route to manufacture its engines in several parts of the globe. Under this plan, the company making engines using MAN Diesel’s technology will have to share a certain proportion of its revenues with MAN Diesel. Wartsila already has a factory at Khopoli in Maharashtra that manufactures and exports components that go into ships, but not engines.

L&T is currently building mid-sized ships at its heavy engineering complex located at Hazira near Surat in Gujarat. However, the potential to build large ships at this facility is limited. Shipbuilders across the globe are facing a shortage of ship engines at a time when they are fully booked for the next few years. If an engine is ordered today, it will not be delivered until 2010. With local shipyards adding capacities and new players entering the shipbuilding business, demand for ship engines within the country is set to rise. In the absence of locally available engines and other gear, Indian shipbuilders import them from factories located in Finland, Norway, Germany, Italy, the UK and South Korea. Amid a global boom in shipbuilding, dependence on overseas factories creates additional bottlenecks for Indian shipbuilders.

Major marine equipment makers such as MAN Diesel, Wartsila, Rolls Royce and STX Engine are looking to set up ship engine factories to cash in on India’s rapidly growing shipbuilding industry, riding on increased demand for ships globally. Traditional shipbuilding nations such as South Korea, Japan and Norway have turned down orders for relatively smaller ships for lack of capacities in their facilities. Mint had reported on 27 January that India’s largest shipping firm, the state-owned Shipping Corp. of India Ltd, was looking to partner with a few government-run units to enter the business of making ship engines.

India’s biggest private sector shipbuilders, ABG Shipyard Ltd, Bharati Shipyard Ltd, Pipavav Shipyard Ltd, Cochin Shipyard Ltd, Hindustan Shipyard Ltd, Mazagon Dock Ltd and a few others are currently building ships worth more than Rs20,000 crore. “There are enough volumes in India to justify setting up of engine factories,” Rishi Agarwal, managing director, ABG, had said in an earlier interview.

----- With due apologies and full credits to LiveMint