Pipavav: Subsidy scheme to rescue shipbuilding firms

Grappling with cancellation of orders in the wake of a global downturn, domestic shipbuilding firms such as ABG Shipyard and Pipavav Shipyard may look forward to some succour from the government.The unsold vessels of these companies in the past few years could be included in the new subsidy scheme for shipbuilding and ship repair industry with the government reimbursing 20 per cent value of the order size."The shipyard owners have raised the issue of unsold ships with the shipping ministry. Due to lack of interest from original buyers in the last few years, vessels manufactured by various domestic shipyards have remained unsold. The ministry has examined the issue and may include it in the new financial assistance scheme," an industry source said, wishing not to be named.As per an industry estimate, there are about half-a-dozen cases of original buyers not taking delivery of the ships valued at about Rs 1,000 crore. The pile-up of ships with domestic shipyards has led to high carrying cost, extended interest liability on bank borrowings and lock-up of meagre capital resources.To tide over the liquidity crunch of the shipbuilding industry and help them compete with rivals from major maritime countries, the government had announced a Rs 4,000 crore subsidy scheme for the sector in December last year. The financial scheme, applicable from April 1 this year, covers 20 per cent of the cost of ships manufactured for foreign clients.The subsidy scheme is part of the Centre's 'Make in India' initiative and includes a policy for grant of financial assistance to shipyards, after the delivery of ships, to counter cost disadvantages at 20 per cent of the contract price or the fair price, whichever is lower. The assistance is to be reduced by 3 per cent every three years and will be given for all types of ships."Industry condition is very bad but hopefully after the new financial assistance scheme comes into operation it will improve. The order size of the domestic shipyards is also expected to grow in coming years," said PR Govil, advisor to shipyards association of India (SAI).A shipping ministry official said that the new subsidy scheme is being drafted after receiving comments from all concerned economic ministries like commerce & industry, NITI Aayog and heavy industries.Meanwhile, the shipping ministry has also decided to fast-track old cases of shipbuilding subsidy covered by the previous scheme between 2002 and 2007.The renewed government focus on the shipbuilding industry comes in the light of its huge multiplier effect on investment and turnover (11.6 and 4.2) and high employment potential due to a multiplier effect of 6.4. The industry is also very crucial due to its role in energy security, maritime defence and in developing heavy engineering locally.nirbhaykumar@mydigitalfc.com