Bangalore: The government on Thursday agreed to pay shipbuilders a subsidy on confirmed orders signed just before 14 August, when a five-year scheme providing financial support ended.
State support: An ABG shipyard in Surat, Gujarat.The govt move will help shipbuilders claim subsidy on orders worth Rs5,306 crore. Ashesh Shah / Mint
The cabinet committee on economic affairs, or CCEA, approved the shipping ministry’s proposal to that effect.
“The government of India has decided to liquidate the committed liability for payment of subsidy for ongoing shipbuilding contracts entered up to 14th August 2007, the date of expiry of the subsidy scheme,” a government statement said after CCEA cleared the proposal. “Thus, subsidy shall be released for all the cases for which contracts had been signed by 14th August 2007, as it is the committed liability of the government of India.”
The move will help shipbuilders such as ABG Shipyard Ltd, Bharati Shipyard Ltd, and Larsen and Toubro Ltd, among others, to claim subsidy on orders estimated to be worth Rs5,306 crore. They had until now been considered ineligible by the ministry because shipbuilders did not follow certain procedures to avail of the financial support on those orders. Mint had reported on the demand for payment Wednesday.
“This is a very good move as non-availability of subsidy on confirmed orders would have impacted the financials of shipbuilders,” said Dhananjay Datar, chief financial officer of ABG Shipyard.
The scheme, introduced in the mid-1990s and since given five-year extensions, should be extended further, he said.
The shipbuilding subsidy scheme offered state-owned and private shipbuilders 30% extra on building ocean-going merchant vessels that were more than 80m long, if they were built for the domestic market.
For export orders, however, ships of all types and capacities were eligible for the subsidy.
This support is given to public sector yards in instalments, while private companies get it after the ship is built and delivered to the buyer.