Mumbai: Kolkata-based defence PSU Garden Reach Shipbuilders & Engineers Ltd (GRSE) is in a combative mode as it braces for a stock exchange listing through an initial public offering. In an interview to BusinessLine, CMD Rear Admiral (Retd) VK Saxena spoke at length on a range of issues, including private competitors’ criticism of defence PSUs getting orders from the government on nomination basis. Excerpts:

Defence PSUs are often criticised for getting orders on nomination basis. What is your take on it?

The era of awarding contracts on nomination/cost plus basis is over. The earlier orders we got were on nomination basis, but looking at our present performance, we have participated in competitive bidding for two major projects - four large survey vessels and anti-submarine warfare (ASW) shallow water corvettes. We have not only become the successful bidder but our competitors, particularly the private yards, are nowhere in the picture. It shows the kind of costing we are capable of doing.

The costing largely gets influenced along with the design efforts, the concept design, the plan which you work out, what kind of designs would be there, what kind of material and equipment will come and that comes with the huge design experience which my team enjoys. Therefore, we were able to actually work out the best of the possible proposals and bid for it. And nobody, I would say especially the private players, could match it. Our recent successes in competitive bidding gives us huge confidence. We are now well-placed to get into any kind of competitive bidding process, whether in India or elsewhere.

What is unique about your design team?

We have a very competent and capable design team of 74 engineers. It is very important for controlling the cost which, in turn, can influence the complete product cost. They are using the latest software such as Aveva Marine and NAPA and does R&D to create new hull forms. Using the design team’s expertise, we can control the costs and get into the market to bid for products. This is one key area of our capability.

The 16-ship ASW shallow water corvettes’ tender was to be split equally between the L1 and L2 bidders with the L2 required to match the L1 price. GRSE was the L2 in the tender. What was the price differential?

The price difference between L1 (Cochin Shipyard) and L2 for the ASW corvettes was not very big. We have now matched the cost of L1.

Are your margins coming under pressure due to competitive bidding?

Certainly. In competitive bidding, the margins will come down. Therefore, we have to ensure that our internal efficiencies go up tremendously. All our operations have to be re-looked. That’s what we are focussing on. All areas of operations are to reviewed, especially the material procurement part because material costs as much as 75 per cent of the project cost.

Would you still like some orders to come on nomination basis?

There are certain projects that are very complicated. The government knows it and the navy knows it. Nobody else can make it. Warship building is a different process altogether and it can’t be learnt not in just 2-3 years’ time. There are two key factors. One is the capability and capacity and second is the expertise and knowledge in warship building. So, while one can create the physical capacity, the expertise required to undertake this complex process is something which cannot be acquired in 2-3 years’ time.

The government and the navy decide whether the yards are competent enough to be given the request for proposals, say for a destroyer. As of now, some of the private yards have got the orders, but they’ve not been able to deliver even the simple ships. GRSE has over five decades of experience, knowledge and the competence whether in designing, planning, production, project management, or people.

What is your order book position?

Our current order book is in the range of ₹20,000-crore plus, which comprises four projects, three for the navy and one for the Coast Guard, totalling 13 ships. Out of this, three ships are the P-17 Alpha project for advanced missile stealth frigates on which the construction has just started. These three ships are valued at a combined ₹19,000 crore.

The balance order book is for the remaining 10 ships that are in advanced stages of construction.

Two more major projects should get awarded any time. These are for four survey vessels and eight ASW shallow water corvettes which would be worth about ₹10,000 crore in total.

Has the collapse of the Goliath crane impacted your operations?

We have to procure a new Goliath crane, it is not possible to recover the one that collapsed, the same thing cannot be used. But, as such, we have not got any impact because of the collapse of the Goliath crane.

The crane was fully insured, so we will be getting the cost of the crane itself. With regard to operations, strategies are in place to continue construction in the form of blocks of the ships. Basically, the Goliath crane was used for lifting mega blocks. So, I have to reach that stage where the mega blocks are required to be lifted. Right now, the entire thing is planned for the P-17 Alpha project, where the ships would be constructed using the modular integration method.

What is the strategy to deal with this?

We’ll be doing something in a strategic manner where we’ll have the blocks of some size, some range which can be easily lifted out and brought back to the building berth and then continue to start joining them. So, instead of lifting the mega block, I’ve the block getting in there and still I’ll continue with the concept of block fabrication which is an integrated construction concept.

As of now, there is no impact on the production line and we’ve got all the strategies in place and still be meeting the delivery timelines on all the ships which we have in hand.

Have you started the process of erecting a new Goliath crane?

We are already in discussions on the design. We’ll be looking at — not the same design — what improvement should I make so that such things should not happen in future. That is the first step which is right now under discussions with specialist agencies and shortly we would be framing our specifications, tender document and bid it out.

How much would the replacement cost?

The old crane cost around ₹110 crore. The cost will depend on what kind of a Goliath crane we would need. Cost would be higher than the one that collapsed because it will have more advanced features or additional safety features, different technology that would make it stronger, safer and secure.

How long would it take to erect the new crane?

Such kind of cranes would normally take around 18-24 months for erection. It should not make any difference to us based on our build period and construction programme of the ships.

There were no casualties?

It was one of those things that happened, but there were no casualties; that was the best thing. It happened at such point of time when nobody was there. And none of my assets, my warships which were there got affected.