Bangalore: Uncertainty over the fate of subsidy payments for shipbuilders such as Pipavav Defence and Offshore Engineering Co. Ltd, ABG Shipyard Ltd and Bharati Shipyard Ltd could lift soon, with the government looking to extend the payment timeline for a scheme which ended seven years ago.
Under the scheme which ended on 14 August 2007, ships of certain specifications would be eligible for a 30% subsidy. In 2009, the government agreed to extend the timeline for paying subsidies till March 2014. An extension now will benefit shipyards which are still building ships under contracts signed when the scheme was on, and even for some which have already delivered the ships but are waiting for the subsidy.
If the order comes, this would be the second such extension.
“A budgetary provision up to 31 March 2014 only was approved by the government (in March 2009). The process of holding inter-ministerial consultations regarding extension of timelines beyond 2013-14 for payment of subsidy to Indian shipyards in respect of shipbuilding contracts signed up to 14th August 2007 has been initiated," a spokesman for the shipping ministry said.
The scheme offered Indian firms 30% subsidy on ocean-going merchant vessels over 80m made for the domestic market; export-order ships of all types and capacities were eligible.
Public sector yards get the subsidy in instalments; private firms after the ship is built and delivered to the buyer.
“Non-availability of subsidy on confirmed orders signed before 14 August 2014 would have impacted the financials of shipbuilders," said a spokesman for the Shipyards Association of India, an industry lobby.
Bharati Shipyard, for instance, is yet to get ₹ 660.6 crore in subsidy. “The receivables have been budgeted as per the subsidy scheme of the government. We have been complying with the terms of the scheme," Prakash Kapoor, MD, Bharati Shipyard said on 8 September.
Under the scheme, the CCEA had asked the defence ministry to make budgetary provisions for defence shipyards under the administrative control of ministry, process their cases of subsidy and release funds to them.
The cash-strapped centre has resisted demands from shipbuilders for re-introducing the subsidy scheme.
Instead, the shipping ministry is working on a comprehensive policy to promote the local shipbuilding industry as announced by finance minister Arun Jaitley in his budget speech on 10 July, including setting up a ₹ 15,000 crore corpus for extending cheaper funds to shipbuilders.
“Shipbuilding is a big opportunity today," Prime Minister Narendra Modi said on 16 August during the foundation stone ceremony for a special economic zone (SEZ) and road connectivity project at Jawaharlal Nehru Port Trust located near Mumbai.
“India’s contribution to global shipbuilding has been very low. South Korea, a very small country, smaller than the state of Maharashtra today alone has a 40% share of global shipbuilding. We want to encourage shipbuilding," Modi said.
Elaborating on his theme of “Come, make in India", which he mentioned during his Independence Day address, Modi said his government will encourage foreign investment in shipbuilding.