New warship plans stalled by Ministry's JV freeze

Discussion in 'Indian Navy' started by Galaxy, Oct 19, 2011.

  1. Galaxy

    Galaxy Elite Member Elite Member

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    New warship plans stalled by Ministry's JV freeze
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    Ajai Shukla / New Delhi October 18, 2011

    Planning has stalled for building new indigenous warships for the Indian Navy. This after Defence Minister A K Antony, rattled by protests from private shipbuilders, scuttled a proposed joint venture (JV) on September 26 between public sector shipbuilder, Mazagon Dock Ltd, Mumbai (MDL) and the private Dahej-based Pipavav Shipyard; and announced a freeze on warship building JVs until a formal policy was formulated.

    That effectively places all new warship projects on hold. Senior MoD (ministry of defence) officials point out that, with defence shipyard capacities already filled by ongoing warship projects, JVs were intended to create fresh capacities by coupling the public defence shipyards’ expertise and experience, with the large unutilised capacities of India’s new private sector warship builders. But with these JVs now on hold, at least until a new policy is finalised, no Indian shipyard has both the capacity and expertise to build a new line of warships.

    “We cannot just hand over a contract to build major capital warships to a private shipbuilder with no track record; there are tens of thousands of crore rupees at stake in such projects, and potentially years of delay. Nor can we give any more contracts to public sector shipyards; their order books are full for years to come. Until we finalise the new JV policy, any new warship project will go by default to a foreign builder,” a top MoD official told Business Standard.

    Stuck in the pipeline are at least two major warship projects: Project 15B, which involves building four 6,800 tonne destroyers for Rs 29,325 crore; and Project 75I for building six conventional attack submarines for an estimated Rs 20,000 crore. Also potentially threatened is Project 17A for building seven stealth frigates.

    Nor is the government clear about who will formulate the new policy on warship-building JVs. While the public sector defence shipyards are owned by the MoD, the Ministry of Shipping and the Ministry of Heavy Industry also have jurisdiction over the private shipyards.

    At the heart of this logjam is the government’s decision last year to speed up warship construction through public-private partnership. When the MoD was processing the financial sanction last year for MDL to build four destroyers under Project 15B, the ministry of finance (MoF) objected. Commenting on the draft note being prepared for the Cabinet Committee on Security (CCS), the MoF noted MDL’s time and cost overruns on all its recent projects and pointed out that the same was likely to happen in Project 15B.

    A Comptroller and Auditor General (CAG) audit report in March pointed to MDL’s delays of 4-5 years in constructing the first ship of various projects. The CAG report also highlighted a cost overrun of 226 per cent on Project 15A, the predecessor to Project 15B, for which sanction was being processed.

    The MoF, therefore, suggested that an overloaded MDL adopts the public-private partnership (PPP) model for building Project 15B. The risk of delay, the MoF opined, could be minimised by co-opting a suitable private sector shipyard with idle warship building capacity. MDL, it was suggested, should select a private shipyard and form a JV that could build Project 15B.

    This was an unpalatable suggestion for the Department of Defence Production (DDP), which oversees the MoD’s four public sector shipyards — besides MDL, there is Garden Reach Shipbuilders and Engineers, Kolkata (GRSE); Goa Shipyard Ltd (GSL); and the recently acquired Hindustan Shipyard Ltd (HSL). The PPP model meant sharing profits with a private sector shipyard. But rather than turn down the MoF’s recommendations and risk having it oppose the sanction of Project 15B in the CCS, it was decided to cater for the MoF’s concerns. In late 2010, the MoD’s acquisitions head instructed MDL to select a suitable private sector shipyard as a JV partner.

    Accordingly, MDL approached a range of private shipyards for expressions of interest (EoIs) “for synergising efforts of MDL in shipbuilding”. It asked shipyards for “a business plan and a joint collaborative strategy to meet challenging timelines in order to liquidate the order book of MDL”. This was published in major national dailies in March. In a follow-up letter (PRO/3001/2011-12/26 dated May 11, 2011), MDL asked for EoIs to be submitted by May 31, 2011. Candidates were invited to visit MDL “to gain first hand appraisal of the infrastructure, processes and procedures of the Yard”.

    Eventually, after an MDL team visited private sector candidate shipyards to evaluate their strengths and capabilities, a short list was drawn up of four shipyards: Larsen & Toubro, ABG Shipyard, Pipavav Shipyard and Bharati Shipyard. Final presentations were made to MDL’s board on August 23, with shipyards presenting their joint collaborative strategy. Two days later, MDL asked for more details but, on September 9, before those could be presented, MDL selected Pipavav Shipyard as its JV partner.

    The resulting flurry of protests from the other three private shipyards triggered the defence minister’s personal decision to set aside this selection until a policy on JVs was formulated.

    MoD and MDL sources strongly defend Pipavav’s selection, arguing that its location and facilities make it a shoo-in as MDL’s partner.

    Says a top official intimately involved in the decision-making, “Pipavav Shipyard met MDL’s strategic requirements: it is located on the west coast, close to MDL; it possesses a dry dock for constructing large warships, which matches MDL’s method of building in a dry dock. In any re-evaluation, Pipavav will emerge the natural choice.”

    Business Standard has learned that Pipavav’s bid was also the most aggressive. Contemplating a JV with a paid up capital of Rs 50 crore, Pipavav volunteered to contribute Rs 49 crore, with MDL contributing Rs 1 crore. On the board, however, there would be equal representation and MDL would have the effective right to nominate the chairman.

    New warship plans stalled by Ministry's JV freeze
     
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  3. ace009

    ace009 Freakin' Fighter fan Elite Member

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    That does not make sense from a business perspective - WTF is wrong with Indian businesses?

    No wonder GoI smelled something fishy ...
     
  4. plugwater

    plugwater Elite Member Elite Member

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    Also a former chairman of MDL is now a managing director in Pipavav board.
     
  5. Ray

    Ray The Chairman Defence Professionals Moderator

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    Board of Directors Pipavav Shipyard

    Board of Directors

    NAMES OF THE DIRECTORS

    DESIGNATION
    Mr. Nikhil Prataprai Gandhi

    Non - Executive Director and Chairman
    Mr. Bhavesh Prataprai Gandhi

    Executive Vice Chairman
    Mr. David Rasquinha

    Nominee Director nominated by EXIM Bank - Independent Director
    Mr. Ramunni Menon Premkumar

    Independent Director
    Mr. Venkiteswaran Subramaniam

    Independent Director
    Mr. Ajai Vikram Singh

    Independent Director
    Mr. Samar Ballav Mohapatra Independent Director

    Pipavav Shipyard :: Board of Directors

    Management Team

    Key Managerial Personnel

    Cmde. M. Jitendran, born in July 1951 has joined Pipavav Shipyard Limited, as the Chief Executive Officer on 1st July, 2010. Prior to this appointment, he was Chairman and Managing Director of Cochin Shipyard Limited for 5 years since May 2005 and Director (Operations) of Cochin Shipyard since May 2002. He had also served in the Indian Navy in various capacities for 30 years.

    Cmde. Jitendran is a Mechanical Engineer who has post graduate specialization in Naval Architecture from IIT, Kharagpur and thereafter in St. Petersburg, Russia. He is a fellow member of Royal Institute of Naval Architecture, London. During his tenure of 8 years in Cochin Shipyard, more than 35 ships of various types were built and exported. Several prestigious repair, upgrade and conversion orders were also undertaken bringing the yard to Miniratna Category I status.

    Mr. Debashis Bir, aged 55, is the Chief Operating Officer - Production of the Company. He joined the Company in August 2007 and is primarily responsible for all manufacturing plants, sites and workshops/facilities, meeting the intermediate and final targets for the product-line and objectives of the Company and achieving timely delivery of product with quality and customer satisfaction within the budgeted costs. He has approximately 32 years of experience in the shipbuilding industry, including shipyard infrastructure, production methodology, ship construction and repair, technical and project management, fund management and financial planning.

    He holds a Bachelor of Science degree and has completed his Bachelor of Technology (Honours) in Naval Architecture from the Indian Institute of Technology, Kharagpur. Prior to joining the Company, Mr. Bir served as the Executive Director of Alcock Ashdown (Gujarat) Limited, Bhavnagar from 2005 until 2007. His prior work experience includes serving with the Chowgule Group of Industries, Goa from 1978 until 1986 as a Naval Architect and a Business Executive for ship building, fishing industry, shipping and waterfront based infrastructure development.

    He has also been independently involved in the business of re-powering Demo Ship's diesel generator sets for land use from 1986 until 1991 in the Chowgule Group. In addition, Mr. Bir promoted a ship building and ship repair company, Alang Marine Limited, Bhavnagar, in partnership with local business groups from 1991 until 2005. In addition to ship building and ship repair, this company was involved in the refit of defence ships and design/installation of dock gates.

    Mr. Jigar Shah,, aged 34, is a qualified chartered accountant and has joined the company as Chief Financial Officer. Prior to this role, Mr. Jigar Shah was the President of Finance of SKIL Infrastructure Ltd. and had overall responsibility for a number of core matters, including fundraising, strategies, planning equity issues, regulatory matters and shareholder relations. He was also involved in various projects of the Group including Pipavav Port, Pipavav Railway, SEZ's and initially in Pipavav Shipyard. He has been with the Group since 1998.

    Mr. Sarasij Majumder, , aged 60, is the Chief Operating Officer (Offshore) of the Company. He joined the Company in Dec.'2010 and is responsible for complete offshore activities. He holds a Bachelor of Engineering degree in Civil and Master of Technology degree in Structure. He has approximately 39 years of rich experience in Infrastructure, Metallurgical Plants (Steel, Copper and Aluminum), Oil and Gas Projects involving upstream, Pipelines and Offshore Projects, Port and Harbor, Marine Terminal etc.

    Prior to joining PSL he served in various organizations of repute including Engineers India Ltd. (EIL), Steel Authority of India Ltd. (SAIL), Architects Collaborated, Indian Housing Corporation (IHC) etc. He has published 13 Technical papers in national, international journals, seminars and symposium. He was, and is external faculty to many Technical Institutes like IIT-Delhi, EIL's Training Institute, ONGC's Training Institute etc.

    Mr J. B. Lee, has joined the PSL efforts at Pipavav yard in the timely delivery of Panamax vessels. He is the Chief Executive Officer of KOSTEC and has a vast experience in shipbuilding and has the required expertise for timely delivery of ships.

    Mr. Lee shall be accompanied by his team leaders from KOREA to develop the methods of incorporating the critical processes of shipbuilding technology to improve the existing process manuals to incorporate effective and efficient use of technology transfer.

    Rear Admiral R M Bhatia is an Executive Director of the Company steering Defense projects. He is Mechanical Engineering Graduate from Indian Institute of Technology, Delhi. During his 31 years with the Indian Navy, he has vast experience in the field of Marine Engineering including Ship-building, Ship-repairs, Major refits and modernization of Submarines, Training and Project Management. He was the Chairman and Managing Director of Hindustan Shipyard Ltd Visakhapatnam, India and Mazagon Dock Ltd., Mumbai, India for over 7 years. He was in the Board of all the Five Major Shipyards under the Ministry of Shipping and The Ministry of Defense. Received the prestigious Distinguished Alumni award from Indian Institute of Technology, Delhi in 2006 for outstanding contribution to National Development

    Mr. Osamu Togo, aged 65, is a Naval Architect from the University of Kyusyu. He has joined the Company in July 2008 as the Head of Shipyard Site Production (SYS). Mr. Togo has approximately 40 years of experience in commercial shipbuilding in Hull construction, Assembly and production control functions. Prior to joining the Company, Mr. Togo worked with Shikavajima Kogyou Co. Ltd. (Japan).

    Mr. Ajit Dabholkar, aged 45, is the Company Secretary and the Compliance Officer of the Company. He is responsible for the corporate secretarial functions of the Company and oversees the corporate counsel department of the Company including managing international arbitrations. He is a fellow member of the Institute of Company Secretaries of India and holds a Bachelor of Commerce degree and an LL.B. degree from the University of Mumbai. He has approximately 22 years of experience in providing business solutions concerning legal and secretarial functions of a company. Prior to joining the Company, he served as the Chief Manager – Secretarial and Legal in Bennett, Coleman and Co. Limited from May 1999 until March 2007. During the period from August 2001 until May 2003, he was also the Company Secretary of Entertainment Network India Limited, a subsidiary of Bennett, Coleman and Co. Limited. His prior work experience includes Wipro Finance Limited from January 1997 until April 1999; Wipro Limited from June 1992 until December 1996 and Galaxy Surfactants Private Limited from August 1987 until May 1992. He was appointed by the Board on March 29, 2007 with effect from March 21, 2007.

    Pipavav Shipyard :: Management Team
     
  6. Yusuf

    Yusuf GUARDIAN Administrator

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    Actually it does. Let's put it this way that pipavav invested 49 CR as advertising budget. The experience it gets from the venture will help it mint $$$$ later. Perfect business sense.
     
  7. ace009

    ace009 Freakin' Fighter fan Elite Member

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    No it does not Yusuf ...

    Any investor putting in 98% of investment and owning 50% of a company AND having less control of the company too is just plain bad business sense.
    It just seems that Pipavav KNOWS that no matter who heads the board and what percentage of the company they legally own, they will get to make the decisions - because the MDL people in the board are their cronies/ puppets.
     
  8. Yusuf

    Yusuf GUARDIAN Administrator

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    Do you think a Gujju will do ghaate ka sauda?
     
  9. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    I told you GoI hates private yards... you can just translate this sentence from babu speak to

    "We cannot just hand over contracts that we cannot graft money from with no track record of corruption, there are tens of thousands of crore rupees in bribes at stake that we can't guarantee will be paid."
     
  10. nrj

    nrj Stars and Ambassadors Stars and Ambassadors

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    This guy Antony will stall anyone or anything if he smells anything fishy. Nothing wrong. We are already late anyways.
     
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  11. Rage

    Rage DFI TEAM Stars and Ambassadors

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    Wait, wait, you guys aren't seeing the big picture. Soon, we'll be sailing a fleet of sampans from Kerala, coupled with the new AK-47 canon, that launches coconuts. This year, I hear, they're even more devastating- filled, as they are with impact-fragmenting coconut-water.
     
    Last edited: Oct 20, 2011
    Armand2REP and LurkerBaba like this.
  12. nrj

    nrj Stars and Ambassadors Stars and Ambassadors

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    P75A should go to MDL with second line of scorpenes. This JV freeze until new policy is formulated won't affect it.
     

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