The Hindu Business Line : Ministry raises pitch for 20% shipbuilding subsidy

Seeking sops
The Ministry proposes continuation of the subsidy for 10 years with review after five years.
Indian ship makers have sought extension of the subsidy pointing out that shipbuilders in Europe, China and Korea receive several fiscal benefits.

Mamuni Das

New Delhi, Dec 18 The Shipping Ministry is pitching for about 20 per cent subsidy levels for the ship building sector and has floated a Cabinet note with the proposal. Till mid-August this year, the ship manufacturing sector used to receive 30 per cent subsidy under the shipbuilding subsidy scheme.

The Ministry has proposed continuation of the subsidy for 10 years with review after five years, according to sources . It has called for maintaining subsidy levels “in the range of 20 per cent”.

Additionally, the shipbuilders may also get subsidies for large vessels only with the Ministry batting for a “level playing field between domestic and export orders”.

In the earlier subsidy regime, if ships were manufactured for exports, all types of ships were eligible for the subsidy provided the Indian firms won orders by meeting certain norms like global competitive bidding process.

However, if they were manufactured for the domestic market, the subsidy was restricted to ocean-going merchant vessels that were over 80 metres in length. Thus even if ships are manufactured for the export market, a subsidy would be extended only if the ships are larger than 80 metres.

Private shipyards like ABG, Bharati and Pipavav are witnessing the growth significantly from exports. According to consulting firm i-maritime early this year, out of the private shipyards’ total orders of $2,686 million, exports account for almost $2,284 million.

Despite the current boom in the ship-building sector, Indian ship makers have sought extension of the subsidy pointing out that shipbuilders in Europe, China and Korea receive several fiscal benefits that makes the Indian shipyards sector uncompetitive.

According to a KPMG study, Indian shipyards face a price disadvantage of about 51 per cent and 41 per cent compared with those in China and Korea. The disadvantage is on account of lower taxes and customs duties; lower interest rates on working capital and capital expenditure; apart from bulk purchase discounts on purchase of inputs.

For instance, the Chinese yards get export buyers’ credit at 2.7 per cent, subsidy on inland sailing ships, customs duty rebate on imported inputs and exemption from enterprise income-tax equivalent to corporate tax.