India considering extending shipbuilding subsidies

India?s shipping ministry plans to extend the shipbuilding subsidy scheme by another five years to 2012. The ministry is preparing a cabinet note for this purpose saying that it is examining whether the same magnitude of subsidy should be given or not.

Under the current policy, 30% subsidy on the bid price is available to the shipyards on domestic orders obtained through a global tender process for the construction of sea-going vessels as defined under the Merchant Shipping Act, 1958. However, the vessel must be a merchant vessel of at least 80 metres length.

For the export orders obtained through a global tender process or otherwise for the construction of any type of vessel, 30% subsidy on the bid price, or negotiated price as the case may be, is payable to the yard.

The 35% shipbuilding subsidy scheme was introduced in 1997 for a period of five years for public sector shipyards only. It was extended for another five years until 2007 and the government this time also allowed the private sector yards to claim the subsidy. The magnitude of subsidy was also reduced to 30% during this period. Officials said the ministry was pushing for another extension as it thought that the industry still needed government support for it to compete with foreign ship building companies.

Ship building companies in Japan and China managed to undercut India in global bidding due to government concessions.