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Tuesday, September 29, 2020

Maritime Logistics Professional

No subsidy for ship building in coming budget

Posted to No subsidy for ship building in coming budget (by on January 14, 2013

Shipping Minister informs that the ship building subsidy will not be revived in the next Union budget

It is going to be a long wait for ship building industry which has been crying itself hoarse for the Indian government to revive plans to reintroduce the subsidy scheme for local shipbuilders that was discontinued five years ago.  In fact the Union Shipping Minister G. K. Vasan while interacting with the press recently stated in Mumbai that no subsidy would be announced in the next budget though the stakeholders have a strong case and are in discussion to finalize various conditions. 

In order to reduce the cost of constructing vessels in India and make the industry globally competitive the Ministry of Shipping (MoS) is extending its entire support to the sector. Concerns have been spurred with India’s declining market share in global manufacturing, which is recorded at a paltry 0.01%.

Prashant R. Govil, Advisor to the Shipyards Association of India informed that the ship builders have been in discussion with the shipping ministry and broadly there has been an agreement on being granted 15 per cent subsidy provided the imports for ship building are restricted to 50 per cent. Though the shipping ministry is in agreement the finance ministry has yet to given its concurrence.

“Subsidy is an important issue especially because there is a need for a level playing field to compete internationally,” says Vijay Kumar, Managing Director of Bharati Shipyard Ltd. “Taxes, duties and interest rates in India are very high putting ship builders at a disadvantage. Governments of all maritime countries be it China, Japan, Vietnam, or Korea – all support their ship building industry both directly as well as indirectly. Since shipping is an international business, there is zero custom duty for importing ships by Indian ship owners. So basically Indian shipyards are competing with China, Korea, etc., who have low cost and governmental support compared with Indian ship builders who have to spend more while contending with receiving next to no support.”

According to a stakeholders KPMG, an internationally reputed consultant, had carried out a study which concluded that in 2006-2007 an investment of about $ 3.64 billion was planned for either expansion of existing shipbuilding facilities or for new green field shipbuilding facilities. According to this study this investment of $ 3.64 billion would create a further investment of $ 44.400 billion investment in the downstream industries by 2020. It would lead to an increase in the employment of about 2.5 million persons.

“This is the type of impact that this industry can have,” he points out. “For this it is necessary for the Government to support this industry in its growth phase. Just as the Government invests in roads etc. and has a certain rate of return, the shipbuilding industry can provide a much larger return. The KMPG study further states that  if the support structure which was in place between 2002-2007, is carried out till 2017 then all the support the Government would have given would have been paid back in the form of taxes, duties and other benefits. And by 2020 the government would be a net earner of $ 520 million year on year, every year thereafter.”

Since the Indian maitime industry is comparatively small in India it is felt that the government has possibly at the working level never understood the impact of this industry. Hence it may continue to get sidelined until such time there is a new awakening.