Global recession in the shipbuilding industry has affected the financial position of a number of yards especially in the private sector.
Due to market downturn post 2008 and the lack of government policy support, all shipyards other than the defense shipyards are facing challenging times with very few global shipbuilding orders coming in.
The Indian shipbuilding industry has continued to concentrate on defense and offshore sector vessels. The fleet expansion plans of Indian Navy and the vessels for the Indian Coast Guard
are the two prime segments which were targeted by the Indian shipyards.
Lack of orders from the Indian commercial ship owners and the lack of government policy support adversely affected the Indian shipbuilding outlook. In the year 2016, Government has taken following initiatives to strengthen shipbuilding industry.
Government of India has, on April 13, 2016, notified inclusion of stand-alone shipyards undertaking activities such as shipbuilding and ship-repair under the Harmonized List of Infrastructure sectors.
With this inclusion, shipyards will be able to avail flexible structuring of long term project loans, long term funding from Infrastructure Funds at lower rates of interest and for a longer tenure equivalent to the economic life of their assets, relaxed ECB norms, issuance of infrastructure bonds for meeting working capital requirements.
The Government of India has introduced a Rs. 4000 crore Shipbuilding Financial Assistance Policy for a period of 10 years viz 2016-2016 to encourage domestic shipbuilding.
Financial assistance will be granted to Indian Shipyards equal to 20% of the lower of “Contract Price” or the “Fair Price” (as assessed by three international valuers) of each vessel built by them for a period of at least 10 years commencing 2015-16.
Revision of domestic eligibility criteria has been approved to ensure that all the government departments or governmental agencies such as CPSUs procuring vessels for governmental purposes or for own purposes shall undertake bulk tendering for their vessel related requirements with deliveries starting from 2016-17 with a Right of First Refusal (RoFR) for Indian shipyards and shall ensure that from 2025 onwards, only Indian-built vessels are procured for governmental purpose or for own purpose.
Similar relaxation will be applicable for repair of their vessels. Necessary guidelines have since been formulated and uploaded on the website of the Ministry on May 31, 2016 for wide circulation and operationalization.
To promote ease of doing business in the sector, in the Union Budget 2016-2017, Government of India has issued simplified procedure for tax compliance for the shipyards while procuring duty free goods for shipbuilding and ship repair.