As an endeavor to assist MSMEs, the government of India has established a variety of policies and programs. With the intention of resolving the primary challenges encountered by micro, small, and medium enterprises (MSMEs), these initiatives simplify the regulatory landscape, facilitate access to financing, and reduce the cost of capital [2][3][4]. Nonetheless, certain governmental entities are engaged in policies and practices that run counter to the objectives of the government. Let me offer you illustrations.
One preliminary concern pertains to the method of awarding contracts to government shipyards, which circumvents the need for a competitive procurement process involving MSME boat yards. Numerous governmental entities, including the Inland Waterways of India (IWAI), are notorious for this conduct, which they partake in to avoid the time commitment and accountability associated with a procurement process. Through the nomination of a government shipbuilder, this obligation is transferred to the receiving company. A separate arrangement dubbed as an MOU is also practiced. That sounds more respectable to steer clear of MSME boatyard ire as opposed to nomination. Recent examples include the following:
1. MOU for six electric ferries in Uttar Pradesh between IWAI and CSL. Each cost on average 14.1 Cr [1][5] [12]
2. MOU for a single electric ferry in Assam between IWAI and CSL. Each cost on average 14.1 Cr [1]
3. MOU for a single hydrogen fuel cell ferry in Varanasi, Uttar Pradesh, between IWAI and CSL. A price of 17.5 Cr [1]
4. MOU for one electric ferry in West Bengal between the West Bengal government and GRSE [7]
5. Kerala Fisheries’ nomination to CSL for three Marine Ambulance. Each one cost 6.08 crore [8]
6. Ministry of Fisheries’ nomination to CSL for 16 fishing vessels for Tamil Nadu. Each costs 80 lakhs [9]
7. IWAI had nominated CSL for eight RoRo throughout India [10]
8. IWAI had nominated CSL for two Ro-Pax throughout India [10]
9. Kochi Corporation had nominated CSL for two RoRo. Each cost 7.5 Cr [11]
The second issue is that big shipyards take part in boatbuilding projects and compete with MSME boatyards. Although it is obvious that these enormous shipyards, with their expensive infrastructure costs and overheads, would not be able to compete with MSME if there were a level playing field. However, the two problems MSMEs face, a lack of funding and a high cost of capital, lead to their downfall. MSMEs cannot take on projects larger than their annual revenue due to a lack of capital, whereas their high capital costs keep them from becoming competitive. In this situation, when large shipyards starts making boats, it end up pushing MSMEs to their death spiral.
The unfair coordination with the organisation that award the project is another aspect. Only large shipyards are able to compete because of the conditions imposed. The Kochi Metro project serves as a magnificent example. CSL was pre-qualified as a builder based on the annual steel consumed and financial turnover even though it had never previously constructed a single electric boat. Even GRSE, when they signed an MOU for the construction of an electric ferry, had no prior construction expertise. Only MSME boatyards have to encounter such experience criteria.
If the Indian government will only aggregate the information that has been made publically available regarding the amount of foreign currency lost by these large shipyards, the picture would be clear and go beyond rescuing MSMEs. According to CSL’s annual reports for the previous five years, the company has lost 4133 Cr, or more than $500 million USD, in FOREX.
| 2022-23 | 2021-22 | 2020-21 | 2019-20 | 2018-19 | |
| FOREX IN (Cr. ₹) | 280 | 23 | 71 | 3 | 0 |
| FOREX OUT (Cr. ₹) | 869 | 539 | 671 | 1135 | 951 |
| NET FOREX IN (Cr. ₹) | -589 | -516 | -600 | -1132 | -951 |
MSMEs frequently work to localise the creation of technology, and MSME boatyards won’t just assemble imported boat parts unlike large shipyards. Despite all of these tactics, these massive shipyards present themselves as the nation’s MSMEs’ saviours through a robust public relations effort. In reality, they are just destroying the MSME boatyards.
References
- https://shipmin.gov.in/sites/default/files/MAJOR%20ACHIEVEMENTS%20FOR%20THE%20MONTH%20OF%20NOVEMBER%2C%202022.pdf
- https://sandith.in/2020/02/11/how-govt-policies-inadvertently-discriminates-msmes/
- https://sandith.in/2020/07/12/aatmanirbhar-in-theory-and-practice-1/ there are 4 parts
- https://www.thehindubusinessline.com/opinion/not-easy-for-msmes-to-be-aatmanirbhar/article32405631.ece published in Business Line
- https://economictimes.indiatimes.com/epaper/delhicapital/2022/may/01/sunet-bottomline/india-to-build-hydrogen-fuelled-vessels-at-cochin-shipyard/articleshow/91222278.cms
- https://currentaffairs.bankexamstoday.com/2022/11/iwai-signs-mou-with-csl.html
- https://www.theweek.in/news/biz-tech/2022/07/05/grse-inks-pact-with-west-bengal-govt-for-construction-of-next-ge.html
- https://www.business-standard.com/article/pti-stories/cochin-shipyard-to-build-three-marine-ambulances-for-ker-govt-118053101383_1.html
- https://www.newindianexpress.com/business/2018/jan/31/csl-forays-into-fishing-vessels-construction-1766011.html
- https://www.business-standard.com/article/companies/cochin-shipyard-delivers-ro-ro-vessels-to-inland-waterways-authority-120092901333_1.html
- https://www.thehindu.com/news/cities/Kochi/kochi-corporation-trying-to-form-spv-to-run-ro-ro-vessels/article38206214.ece
- https://www.irclass.org/media-and-publications/news/indian-register-of-shipping-to-provide-classification-services-to-six-hybrid-electric-catamarans-for-inland-waterways-authority-of-india/
Sandith Thandasherry 
Very incisive article Sandith. It showed the inner workings of the Indian shipbuilding industry. I hope this is a wake-up call for the industry regulators and facilitators.
There’s a big market outside of India too for small boats. I wish the country had an aggressive plan to go after that market currently dominated by east and south east Asian yards.
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