Though a site near Vizag is preferable, options to be explored anywhere in AP or Orissa. A Cabinet decision likely by the end of the current fiscal, said an official.

With the stage set for transfer of Hindustan Shipyard Limited (HSL) to the Ministry of Defence, the Ministry of Shipping has decided to use the amount it would get as compensation from the new owner for establishing a large shipyard on the East Coast in the Public Private Partnership (PPP) model.

Axis Bank is engaged to conduct the valuation, and once it is complete the MoD has to come to an understanding with the MoS for payment of compensation.

Sources told The Hindu that with an estimated Rs.1,000 crores to Rs.1,500 crores likely to be paid by MoD, the MoS would look for 1,000 to 1,500 acres adjoining an ideal waterfront area with a draft of 10 to 15 metres to construct a Greenfield shipyard.

Sources said that the MoS would seek a suitable site, preferably near Visakhapatnam, though the options would be explored anywhere in Andhra Pradesh or Orissa.

First phase

In the first phase, the new shipyard would take up ship repairs. In the next phase, it would undertake construction of Very Large Crude Carriers (VLCC) with a DWT of 2,00,000 and more.

Sources disclosed that the MoS was in an advanced stage of finalising the nitty-gritty of establishing the new shipyard. A Cabinet decision was likely by the end of the current fiscal, an official said.

The decision was necessitated due to the requirement for ship/dredger repairs and construction of new vessels once HSL was brought under the control of MoD.

The MoD, after the recommendation of Group of Ministers headed by Union Finance Minister Pranab Mukherjee, was very keen on taking over HSL due to its strategic importance. It is pretty close to the Eastern Naval Command and the Naval Dockyard and a futuristic naval base is coming up at a distance of about 40 km from the existing one.

The value of HSL’s assets would have been much more but for the fact that the yard was located on land belonging to Visakhapatnam Port Trust. The new shipyard’s two-phase construction would involve an investment of Rs.3,000 crores to Rs.4,000 crores.

PPP model

The PPP model was chosen due to heavy investment required for a Greenfield shipyard. Once HSL’s ownership changes, it would become the fourth shipyard under MoD. HSL was set up in the private sector in 1941 by Scindia Navigation Company and the Government of India took it over in 1961.