Shipbuilding Subsidy May be Revived

Wednesday, October 08, 2008

The ministry of shipping is considering reviving subsidy on shipbuilding to enable the industry to be globally competitive.
Currently, India’s share of global shipbuilding orders stands a minuscule 1percent.
The subsidy scheme had expired on August 14, 2007.
T R Baalu, Union minister of shipping, road transport and highways, said the ministry is thinking of circulating a cabinet note on subsidy this week.
The previous subsidy scheme provided a 30% incentive on the contract value of ocean-going merchant vessels more than 80 metres in length sold to Indian companies, and on all ships sold to foreign firms.
A report by audit and consultancy KPMG on shipbuilding subsidies across the globe last year showed that Indian yards suffer a minimum cost disadvantage of 32-37% on the price of a typical ship.
That’s because countries such as Japan, South Korea, China and Vietnam give many direct or indirect incentives and subsidies to their own shipyards.
The firm was hired by the Shipyards Association of India (SAI) after finance minister P Chidambaram asked for a study on shipbuilding subsidies given by other countries and the quantum of such subsidies.
The ministry is also planning to streamline taxes and fiscal structure to offset the disadvantages faced.
However, a modified scheme may see the subsidy cut from the earlier 30%. Industry sources suggest that based on the studies conducted by the ministry, talks are on to reduce it to 20% for the next 10 years.
However, one point has been made clear that the new scheme would be an extension and take into account all the orders booked after the old subsidy expired.
Datar also said that thrice earlier draft notes have been circulated but with no outcomes.
India currently has orders worth Rs 22,000 crore to be executed in its 23 shipyards, which are mostly in the private sector, barring nine run by the government.
All the private yards including ABG Shipyard, Pipavav Shipyard, Bharati Shipyard Ltd, Larsen and Toubro Ltd etc and newer ones that are planned have outlined capacity expansions worth Rs 20,000 crore in the next 3-5 years.
Source: DNA