Indian industries involved in exporting and importing cargo should change their “approach” and reach a “consensus” on building strong local shipping and shipbuilding industries in their long-term interest, said Takeshi Hashimoto, chief executive officer of Japan’s Mitsui O.S.K. Lines, Ltd. (MOL), the world’s second-largest fleet owner.
Hashimoto’s comments assume significance in the wake of a raft of announcements by finance minister Nirmala Sitharaman in the budget to rejuvenate the two underperforming industries despite a long coastline and huge market.
Will the announcements spur the shipbuilding industry, for instance, to up its game? “India has the potential, and it is logical,” Hashimoto said in an interview during a visit to Mumbai. “Therefore, I think it can be possible. However, India needs to operate the policy mix wisely . Today, the shipbuilding industry is dominated by China, South Korea and Japan. They are very competitive and so it is difficult for Indian shipbuilding industry to start export (of new ships) from day one because there is a huge difference in price competitiveness between China, South Korea, Japan and India,” he pointed out.
So, for at least 5-10 years, the local shipbuilders need “protection from the government or support from other industries”, he said.
“The most important factor is the approach adopted by each industry, such as the big import and export industries like oil and gas, automobile, steel and iron ore. They need to reach a consensus on building a strong Indian shipping and shipbuilding industries for their long-term interest,” Hashimoto stated.
“In the short term, it is better to use the cheapest ship from the market but as long as they continue this approach, the shipbuilding industry will never fly,” he explained.
“Therefore, government support together with strong intention of the Indian industries or industrial leaders is vital if India really wants to reach a leading position in global exports (of ships) and have a strong shipping and shipbuilding industries,” he noted.
Hashimoto said that the time has come for India to nurture local industries to support exports and imports. “In this regard, an integrated industrial policy will be critical and crucial,” he said.
“Similar to how automakers such as Suzuki and Hyundai scaled their domestic and export presence, India’s shipbuilding industry needs structured policy and industrial collaboration to achieve global competitiveness,” he said, adding “I am optimistic because of the huge upside potential and the actual necessity for India to develop the shipping and shipbuilding industries. However, to do so, the people or the industries should sacrifice today’s profit to some extent, otherwise it will not happen,” he said.
Hashimoto recalled Japan’s experience when that country started LNG imports in the 1980’s to drive home his point. “Construction of ships is expensive. It means that the freight rate for customers is expensive, and it is inevitable. We were supported by the government to some extent but at the same time our customers accepted to pay that relatively high freight rate to Japanese shipping companies because they considered that as a necessary process to develop the industry,” he emphasised.