Exim Bank to set up ₹1,500-cr fund to assist ship-building industry

To give a boost to ship building in the country, the Export-Import Bank of India (Exim Bank) is planning to set up a dedicated ₹1,500-crore fund with Government support.

This proposal comes in the backdrop of the slump in global demand for ships and boats in 2012 and 2013 and foreign vessels accounting for a lion’s share (almost 90 per cent) in overseas cargo traffic handled at Indian ports.

According to an Exim Bank study, the development of a successful ship building sector has been pivotal to the rapid and robust economic development in most countries in the world with long coastal boundaries. Ship building industry has the potential to significantly contribute to national GDP. The ship building sector has an immense direct and indirect positive impact on most other manufacturing and ancillary industries, besides its huge dependence on infrastructure and services sectors in an economy, the study said.

“This fund (proposed) is for financing the construction, refitting and repair of ships in India,” said Yaduvendra Mathur, Chairman and Managing Director, Exim Bank, on the sidelines of the 20th annual meeting of Asian Exim Banks Forum held recently.

Mathur pointed out that the Shipping Ministry was toying with the idea of setting up a shipping finance company and sought Exim Bank’s feedback in this regard.

“We frankly said one (Shipping Credit and Investment Corporation of India) was set up many years ago but see what happened to that (it was merged with the erstwhile ICICI in 1997).

“We feel an institution is like planting a tree. A tree will not give you fruits in 24 hours. You might have to wait for many years…We told the Shipping Ministry that if you want to strengthen the ship building industry, you can use Exim Bank,” said Mathur.

Lending limit The Exim Bank chief explained that if a financial institution for the ship building sector is set up with ₹1,500 crore equity, then the Reserve Bank of India will permit it to lend only 10 times of the equity. So, the institution can lend ₹15,000 crore.

Mathur said his Bank’s proposal to start a dedicated fund for ship building has reached the Prime Minister’s Office. The National Manufacturing Council is strongly supporting the creation of such a fund within Exim Bank, he added. In a recent research report, industry body Assocham said the Government needs to act as a facilitator to create opportunities for attracting fresh investments in the shipping sector. All the more so as about 41 per cent of India’s fleet of ships belong to the 20-plus age group indicating a slow rate of new fleet addition.

The drastic decline in the share of Indian ships in the carriage of overseas trade over the years is a significant concern, it added.  Use of foreign ships for trade is a drain on precious foreign exchange in terms of payment of freight charges. Instead, the resources could be used for other high priority imports and scaling up infrastructure facilities, said the study.

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