Customs duty, cargo support to be used to boost local shipbuilding, repairs

P Manoj Mumbai | Updated on October 19, 2020

A detailed study will be conducted on development of non-major ports

The government plans to use a mix of duty restrictions on small vessel imports and the prevailing cargo support policy in a multi-pronged strategy to grow the local shipping, ship building and repairs industry.

The Customs duty paid on the import of vessels will be fully refunded if the vessel is replaced by a new ‘Made in India’ vessel in four years, according to the Maritime India Vision 2030 document prepared by the Shipping Ministry.

State-owned firms will provide long-term charters of over seven years for vessels made in India from 2021 and provide long-term cargo visibility (6-9 months) for all vessels.

Foreign-built and foreign flagged vessels will be suitably disincentivised to provide a level-playing field to India-built and Indian-flagged ships, it said. Ship repair work valued below ₹200 crore will be carried out at local shipyards only under the Atmanirbhar Bharat provisions.

The right of first refusal (ROFR) rules framed in 2016 would be strictly followed in the case of shipbuilding and ship repair works of over ₹200 crore. Entities functioning under the Shipping Ministry will ensure that all vessels owned and operated by them are repaired at Indian shipyards only.

GST for ship repair and its inputs will be at 5 per cent while the free trade warehousing zone (FTWZ) requirements for minimum size and investment outlay would be waived off for ship repair-specific free trade ‘depots/units’.


Right of first refusal

Vessels availing cargo ROFR through PSUs and government entities shall be mandatorily repaired in Indian shipyards. Besides, vessels (including foreign vessels) taken on long term time-charter contracts by PSUs and government entities, should undertake planned repairs only in Indian shipyards.

These measures are expected to help local yards built 5,00,000 gross tonnage (GT) ships by 2030 from the current 27,000 GT ships.

In the case of shipping, the priority for availing the ROFR granted to Indian flagged ships for carrying government-owned or controlled cargo will be amended to boost the capacity of Indian registered ships and make them more competitive. Accordingly, Indian-built, Indian-flagged and Indian-owned ships will get first priority, followed by foreign-built, Indian-flagged and owned vessels and Indian-built, foreign-flagged and owned ships.

Vessels registered in India (but built in foreign yards) up to the issue date of this policy/regulation will fall in the first category of India-built, flagged and owned ships.

Foreign vessels to be chartered by an Indian citizen/company/society will also fall in the first category if 25 per cent of contract money has been paid to the Indian shipyard and 50 per cent of hull fabrication has been completed, as certified by a recognised organisation, according to the Vision document.

About ₹1,400 crore of GST collected from transportation services over the next five years will be channelised towards subsidy support to Indian shipping companies. The shipping industry will be granted infrastructure status to tap low cost, long-term funds.

These steps are aimed at doubling the national cargo (crude oil, LPG, coal and fertilisers) imported on Indian ships in the next five years, thereby driving the Atmanirbhar Bharat initiative, the Vision document added.

Published on October 19, 2020

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