Friday, March 21, 2008

L&T to start work on its integrated shipyard soon

Larsen & Toubro hopes to shortly begin work on the integrated shipbuilding yard and port at Ennore, north of Chennai, according to company officials.

Its proposal for this project got the Tamil Nadu Government’s approval in January 2008, and the company is now discussing the agreement it will sign with the Government for the project.

The project’s cost has been estimated at Rs 3,060 crore with the equity component being put at Rs 1,100 crore. The Tamil Nadu Industrial Development Corporation, a State Government industrial promotion agency, will hold a 3 per cent equity stake in the venture.

The process of earmarking the 1,200 acres of land for the project is on and once that is finished construction work will start, according to the sources. The project is expected to take 24 months for completion.

L&T plans to build large-sized ships, including very large crude carriers (250,000 tonnes and more) at the shipbuilding yard. It is expected that the company will also make vessels for defence purposes.

With the Tamil Nadu Government deciding to allot the land for the project at market rate, the cost of the land alone will be about Rs 250 crore, according to reliable sources. L&T also plans to develop a high-class component base near the shipbuilding yard, as the ship building activity picks up.

L&T had initially proposed only a shipyard but decided to go in for an integrated port because of the cost and the breakwater construction work involved. The cost could then be shared between the port and the shipyard.

The company has a ship building facility at Hazira in Gujarat and was looking to construct a greenfield facility since it could not expand at Hazira and also because the ship building business was booming.

The Tamil Nadu Government announced in August 2007 a minor ports policy, which was meant to facilitate the integrated ship building yard-cum-port project. Under the policy, the Government said captive ports could handle commercial cargo, thereby improving the economic viability of such a project.

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