ABG Shipyard wins Rs1,439 cr order, eligible for 30% subsidy

ABG Shipyard wins Rs1,439 cr order, eligible for 30% subsidy

Mumbai: India’s largest shipbuilder, ABG Shipyard Ltd, will build a dozen bulk carriers—each capable of carrying 35,000 tonnes of dry bulk cargo—for a German shipping firm in a Rs1,439-crore deal, on which it will be eligible for a Central subsidy that expired last month.

As per the shipbuilding subsidy scheme that ended on 14 August after a five-year run, local builders could get an additional 30% of the cost of building a ship of a certain size or for the export market.

“As per the scheme, this order is entitled to get subsidy from the government," said Dhananjay Datar, chief financial officer, ABG Shipyard.

The firm said the order was signed on 3 July before the subsidy scheme ended. It announced the order on Thursday, after securing funds for the contract, Datar added.

This is the second time a shipbuilder has announced an order after the scheme ended, but will still be entitled to the subsidy as the deal was signed before the scheme ended.

On 23 August, India’s top engineering and construction firm, Larsen & Toubro Ltd (L&T), announced an order valued at more than $70 million (Rs286 crore then) for the construction of two ships from RollDock BV of the Netherlands (earlier called Zadeko Shipmanagement CV).

However, L&T officials had said the order was entitled to the subsidy since it was signed well before the scheme ended.

This subsidy is given to public sector shipyards such as Hindustan Shipyard Ltd, Cochin Shipyard Ltd and Mazagon Dock Ltd in instalments during the construction of the ship, while private firms such as ABG Shipyard, Bharati Shipyard Ltd and L&T receive it after the ship is delivered to the buyer.

It is not clear whether the subsidy will be extended in its present form, reintroduced with modifications or even scrapped altogether.

Earlier this week, a report prepared by consultant KPMG India Pvt. Ltd, engaged by an association of shipbuilders, recommended that the scheme be extended by 10 years.

Currently, shipyards executing new shipbuilding orders from 15 August are no longer entitled to any government support unless the scheme is extended with retrospective effect.

ABG Shipyard’s customer is Bereederungsgesellschaft H Vogemann GmbH & Co. KG, whose name was announced on Thursday. With this order, the Indian firm has an order book worth Rs7,121 crore.

In a statement, Udo Wiese, managing director of the H. Vogemann Group, said his company was considering further new shipbuilding projects with ABG. Vogemann owns a modern young fleet of 19 dry bulk carriers.

It is also building new ships at Namura Shipyard in Japan and GSI in China, besides ABG Shipyard.