Firstly, L&T Shipbuilding only undertakes defence projects. Although we are one of the major private sector shipyards (at the moment we are number one by demonstrated performance), we are still a minority in Government ship building programmes because the Government has its own public sector shipyards to which the Government gives high value contracts on a nomination basis but when it comes to us, we need to compete through tenders in which the public sector shipyards are competing as well, and we get the contract only after winning the tender. Now since the public sector shipyards are already flushed with orders and have a comfortable cash flow, their approach towards the tender is entirely different from the private sector shipyard which does not have a comfortable cash flow situation as it has invested heavily on infrastructure and is looking for the order, to achieve a break-even or some profits. So our first major challenge is the disparity between nomination and competition.
Another challenge that we initially faced was that the Government gives contracts to shipyards to build ships that match their individual capability, and capability cannot be demonstrated unless a contract is given in the first place. So the solution to this problem is that the Government gives simple/ small orders first and then based on the performance, will differentially increase the complexity/ magnitude of the orders. L&T has so far come out with flying colours in our performance on differential building. The graph or trajectory over the last six years has been truly good and has outstandingly met all the timelines along the path, which stands out from competing shipyards. So we are a minority not only with respect to being a private sector shipyard, but also when it comes to demonstrating performance. This attracts a lot of attention and also bring along with it, some complexities.
Third point is that for public sector shipyards, the entire infrastructure belongs to the Government and is free of cost, whereas for private sector shipyards, it is hard earned money which is invested, for which some interest has to be paid or kept aside. So in a nut shell, it is not a level playing field because even the cost approach is different as the public sector does not have to factor the infrastructure costs while the private sector has to. This is a complex issue that has to be untangled and the disproportion between the public sector and private sector competing for the same tender should be bridged.
Although we are far less experienced than the public sector shipyards, that has never been a challenge for us as we have bridged the difference in experience through earnest efforts, skill sets, and our leadership.
Another challenge is that L&T has a huge brand image, and the recognition that they can do nothing wrong or shoddy. It is nice to have an image like this but it is also a huge challenge because you cannot afford to complete projects behind time or of poor quality. The public also expects the same. So its very important for us to make sure that we don't falter, and are conscious at all times, of ensuring that this image is not dented. Another related factor is that L&T has a spectrum of diverse actions like construction of airports, bridges, large buildings, etc. In this wide canvas, shipbuilding is perhaps the baby, i.e., the youngest wing. So for us, it is a challenge to ensure that we keep up the brand image at all times.
Now to answer the next part of your question, is vendor development one of the challenges; vendor development has always been a challenge because vendors find it difficult to survive in the defence environment. So to develop a vendor, we have to make them a business partner first, to ensure that there is a partnership with the vendor and that he benefits by being with us. Benefits have to be mutual, so we ensure that we provide managerial attention to his requirements, such as making sure there are no delays in payments from our side, giving adequate technological training if he requires it, ensure that he adheres to safety norms and his employees are adequately safeguarded, etc.