Thursday, 24 January 2013

Shipping Ministry wants to resurrect subsidies for shipbuilders

Concerned with the Indian shipbuilding industry’s drop in market share in the last five years, the shipping ministry wants to resurrect the subsidy regime for shipbuilders that was scrapped in 2007, reports say.  It is believe that a recommendation has been made to the cabinet committee of secretaries that proposes a subsidy for domestic shipbuilders, who have seen their global market share fall from 1.2 per cent to a puny 0.1 per cent since 2007.

Union Shipping Secretary PK Sinha told the Economic Times, "We are taking a slew of measures to help the domestic shipbuilding sector. We have asked for 15 per cent subsidy for the domestic shipbuilding sector, and in addition, we have also asked the committee of secretaries to exempt the sector from customs duties on capital items imported for shipbuilding."

Although the earlier scheme gave domestic shipbuilders a 30 per cent subsidy on the cost of ocean-going vessels, the imperative to reduce the country’s growing fiscal deficit has prompted the lower 15 per cent number, analysts say. The exemption, if approved, from a 26.85 per cent customs duty on capital items imported for shipbuilding, will also help, they add.

"There is a price difference of 30-35 per cent in the cost of vessels produced in India as compared to China and that has affected us. And in the past few years, there have hardly been any orders coming for Indian shipyards," an official of the Shipyards Association of India rues.

The government’s target- that Indian shipyards reach a 5 per cent global market share- seems very ambitious in present circumstances, given that Indian shipyards face a massive cost disadvantage- of 32 to 37 per cent when compared with yards in Asia, the Far East, Japan and Europe- a 2008 KPMG report said.

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