Centre plans capital support for building inland waterways ships

Annual cargo movement on waterways has risen (Photo: Bloomberg)
Annual cargo movement on waterways has risen (Photo: Bloomberg)

Summary

VGF is a partial government capital grant for large and long-gestation public-private partnership (PPP) infrastructure projects

The Union shipping ministry is working on a 5,000 crore package to encourage the construction of inland vessels and ships to develop a blue economy and achieve self-reliance, two people aware of the development said. As part of the plans, the government will provide viability-gap funding (VGF) for companies ready to build these vessels.

The plan, currently under discussion and formulation, would first focus on developing an ecosystem to build inland vessels to support cargo movement on national waterways, the people cited above said on condition of anonymity. VGF may also be considered later for entities manufacturing sea-bound vessels, including cruise ships.

“The concept of VGF for inland vessels to support the Make in India initiative is under formulation and consideration. It will be rolled out soon so shipbuilding picks up momentum in the country," one of the two people cited earlier said.

Questions mailed to the spokespeople for the ministry of ports, shipping and waterways, and the finance ministry, which would have to approve the budget for VGF, remained unanswered till press time.

VGF is a partial government capital grant for large and long-gestation public-private partnership (PPP) infrastructure projects. These grants make projects commercially viable, encouraging private investments. Normally, VGF support is given to the lowest bidder for a capital grant, subject to a maximum of 20% of the total project cost. An equal amount of VGF (20%) can also be extended by the central sponsoring ministry from its budget if it so decides.

“Capital grant by the Centre would certainly bring interest from the private sector in building large manufacturing capability required for building ships and vessels required to support growing river and sea-based cargo transportation in the country," a top executive with a large shipbuilding company said. “Already, a few government entities such as Cochin Shipyard Ltd are making big strides in shipbuilding and getting orders even from European countries. But domestic manufacturing has to be scaled even more to meet the rising local demand while keeping the costs low to support the larger initiative of lowering the country’s logistics costs," the executive said on condition of anonymity.

The scheme will aim to support the manufacturing of inland vessels for both passengers and cargo across India’s expanding inland waterways, which has grown to 22 in FY23 from a mere three in FY15. The initiative will also promote the growth of coastal shipping.

Annual cargo movement on waterways has increased from 30 million tonnes in FY15 to over 116 mt in FY23, with expectations that it would rise further to over 200 mt by 2030. The modal share of inland cargo movement is also set to grow over 5% by 2030, which would require more vessels. In an interview, Union minister for ports, shipping and waterways Sarbananda Sonowal indicated expanding financial support to encourage vessel manufacturing. He had said that under the Ship Building Financial Assistance (SBFA) policy, financial support is given to Indian shipyards to make India an attractive destination for technologically advanced green ships, and more support would be extended to manufacture all kinds of vessels.

“Let us understand that our policy is not only to develop the port but also how we can develop shipbuilding across the country. This should include shipbuilding facilities, ship repair facilities, and facilities for all other accessories," Sonowal had said.

The government is also working to enhance existing vessel manufacturing capabilities through state-owned entities. The Hooghly unit of Cochin Shipyard Ltd began operations recently. It is dedicated to inland cargo vessels, and every year, 8-10 vessels will be manufactured at this facility.

Technology support has also been taken from DST in Germany for low-draft vessels. A ship-repairing facility is also being developed near Guwahati. A memorandum of understanding has been signed with IHC Netherlands that will allow Cochin Shipyard to manufacture large 12,000 cubic metre dredger.

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