(Photo: A Scorpene submarine being assembled at the East Yard in Mazagon Docks Ltd, Mumbai. DCNS, the French company that made the Scorpene, is in talks with Garden Reach Shipbuilders and Engineers (GRSE) Kolkata for setting up a joint venture design consultancy)
by Ajai Shukla
Business Standard: 15th April 2008
For decades, India’s three defence shipyards combined the inefficiency of the public sector with the indecisiveness of the Ministry of Defence (MoD). In Marxist Kolkata, Garden Reach Shipbuilders and Engineers (GRSE) also blended in militant trade unionism to ensure that the warships it was asked to build were invariably delayed.
That’s history. Today, with the MoD loosening its hold over its shipyards, GRSE buzzes with a capitalist energy never seen before in the 124-year history of that shipyard. Business Standard has learned that GRSE is at an advanced stage of negotiations with French shipbuilding giant, DCNS (Direction des Constructions Navales Services), for jointly setting up a cutting edge design centre for warships and merchant ships. This will target both the Indian and the global markets.
GRSE’s Chairman and Managing Director, Rear Admiral TS Ganeshan, emphasises that negotiations are still underway, and that the GRSE board must clear the JV before any announcements can be made. But he is upbeat about the potential for the JV to handle design work outsourced from Europe and the US.
Admiral Ganeshan says, “The design centre is being set up with versatile, broad spectrum capabilities so that it can design warships as well as merchant ships. We also expect work from foreign shipyards, which find that the cost of their design manpower is too high. They may get the designs done from Kolkata… and then build the ships in their countries. Our foreign partner will, I hope, bring his work here, get it done and take it back.”
Interestingly, GRSE confirms that a third partner is in discussions for this JV: Indian IT engineering company, Infotech Enterprises, an international name in Geospatial Information Systems (GIS), or tools that allow users to extract information from digitised maps. Infotech Enterprises already designs systems for the US military, through a JV in Puerto Rico. Its 6500 software engineers generated Rs 750 crores in revenue last year.
Refusing to comment on the JV, Infotech Enterprises CEO, BVR Mohan Reddy says, “68% of our revenue comes from engineering. Admittedly 62% of that is in the aerospace sector, but Infotech Enterprises identified marine and shipbuilding as thrust areas a full two years back. We already have 150 engineers who are hardcore specialists in the domain of ship design. And we are looking to expand our footprint in this sector.”
Admiral Ganeshan says he would have liked the Design Centre to be up and running three months ago, but he expects the JV to be formed by August 2008, subject to clearance from the GRSE board. In racing ahead with its own partnerships, GRSE is proving far more ambitious than the Ministry of Defence --- which believes that the volume of work justifies no more than one Design Centre JV, which would handle design for all three defence shipyards: GRSE, Mazagon Docks Ltd (MDL), and Goa Shipyard Ltd (GSL)
But with GRSE setting the pace, the giant MDL is also going ahead with its own JV, albeit more conservatively. MDL’s Chairman and Managing Director, Vice Admiral SKK Krishnan told Business Standard that four foreign shipyards have been short-listed and MDL has hired ICRA as consultants to recommend a suitable JV partner and to help with the legalities of the JV. MDL does not plan to bring in a third IT partner, as GRSE is doing.
MDL is in no hurry, because it does not have orders yet that would provide work for a design bureau. Admiral Krishnan says, “The government hasn’t officially sanctioned the next-generation frigate and destroyer projects (codenamed Projects 17-A, and Project 15-B respectively). We know these orders are definitely going to come, but there’s no rush; I don’t see these warship projects coming through for the next six months.”
The MoD’s discomfort with multiple design bureaus is tempered somewhat by the advantage of having more design options. Admiral Ganeshan points out, “If, for some technical or commercial reasons, the new JV fails, it should not become a breakdown point for all the shipyards. If my JV fails for some reason, I should be able to get my job done from the MDL JV… and vice versa. It’s a matter of strategy to have at least two design JVs.”