The Mukesh Ambani-owned Reliance Group is set to make a splash in shipbuilding and dredging with two separate companies. Sources said the petroleum-to-retail giant is expected to invest around $ 1 billion each in two companies and has begun talks with international majors for a strategic tie-up for the dredging business, reports the Economic Times. This $ 2-billion investment is over and above the $ 1.3-billion investment committed for the Rewas Port, off Navi Mumbai.

The shipyard will come up at Rewas, where Reliance is setting up a mega port and a special economic zone (SEZ). The company is also looking at a ship repair yard at Kakinada for servicing offshore/platform vessels and rigs. This facility is expected to be the hub for all its offshore activities in the KG basin, where Reliance Industries (RIL) has struck oil and gas in abundance.

The group will spend around billion to build dredgers at its own shipyard and other yards. Plans are also afoot to set up a mega dredging company, which will compete with international giants such as Van Oord and Dredging International. Sources said Reliance wants to cash in on the two booming sectors of shipbuilding and dredging.

As a majority of existing foreign shipyards are full with orders, shipbuilding prices are expected to remain firm for another couple of years. On the dredging side, almost all Indian ports are trying to deepen their berths and approach channels in order to accommodate larger ships. This has increased the demand for dredgers, pushing up charter rates to new highs, while the supply remains sluggish.

Sources said around 80% of the world’s dredging market is serviced by a handful of European majors — mostly from Holland and Belgium — such as Royal Boskalis, Dredging International, Van Oord and the Jan de Nul Group. Sources said Reliance wanted to start building dredgers at the yard initially, and later expand the capacity to build other ocean-going vessels.

“Talks are currently on, and it is likely to take a final shape in a month or two,” said a senior RIL official. He said the Kakinada facility will be owned by Reliance Logistics while the shipyard project will be owned by Reliance Logistics Investment and Jai Corp, a company belonging to Anand Jain. An RIL spokesperson refused to talk about the proposed plans. An e-mail questionnaire sent to RIL went unanswered.

Amma Lines, the initial promoters of Rewas Port, is expected to join hands with the Reliance Group for the two projects. Sources said Amma Lines, promoted by a first-generation entrepreneur Meka Vijay Papa Rao, has already signed an agreement with the Dutch dredging major IHC Holland to bring their ship designs to India. While the dredging company will help Rewas Port deepen the channel and berths, it is also hoping to bid for other dredging contracts coming up in India and abroad.

According to Rewas Ports president KV Natarajan, the dredging project at Rewas Port will make it the largest in India, even bigger than the controversial Sethusamudram Ship Canal Project (SSCP) in terms of volume. “Over 120 million cubic metres will be dredged in the Amba river at Rewas at an estimated cost of Rs 1,800 crore for the first phase alone,” he said. This is much bigger than Sethusamudram Canal which involves dredging of 80-90 million cubic metres, at a revised cost of around Rs 2,600 crore, which has now on the slow track due to political opposition and a few legal cases.

Rewas Port’s current draught — depth at the berth — during the tidal window is about 4-5 metres. “We want to make it 14.5 metres in the first phase and 20 metres in the second,” said Mr Natarajan. The Reliance Group will invite other dredging companies to start the first phase of dredging, and is ready with a global tender, which is scheduled to be floated next month. Reliance is in touch with all global dredging majors to ensure that they are ready with equipment to participate in the tender when floated. The successful bidder will have to start dredging by January 2008 and complete it within 30 months.

The dredging firm, proposed to be set up by the Reliance Group, is expected to take up the second phase of dredging at Rewas, which is scheduled to begin after two years. Rewas Port, with 10 berths for containers, general cargo and car carriers, is expected to be commissioned in October 2008. While Reliance Group companies own 65%, Maharashtra Maritime Board (MMB) owns 11%, and the initial promoters, Amma Lines, the remaining 24%.