India may revive shipbuilding subsidy

The government in India is planning to revive the subsidy scheme in shipbuilding, discontinued since August 2007. “A cabinet note on the extension of subsidy for the shipbuilding industry will be circulated this week. We will get comments, which will be sent to the highest authority for taking a decision,” the minister of shipping, road transport and highways, T.R. Baalu, said at an industry conference.

Baalu said the ministry was making efforts to streamline the fiscal structure to offset the disadvantages faced by the industry. Until August 2007, ship-builders enjoyed a 30% subsidy. The relief on the bid price was available on domestic and export orders obtained through a global tender. The shipping ministry wanted to extend the scheme by another 10 years, but the finance ministry opposed it.

The shipping ministry is now considering a subsidy of 20-25% on the total value of an order. The incentives will be offered for another three years with effect from August 2007. However, under the new scheme, the incentives will be only for export orders bagged through a global tender, officials said. India has an order backlog of 4.5 million dead weight tonnes to be delivered by 2012-13, of which over 70% is meant for exports.

Consultancy firm KPMG, in a recent report submitted to the government on the extension of subsidy, has suggested that shipbuilding should be treated as an infrastructure activity, making it eligible for incentives such as tax holidays.

According to the report, governments in Japan, Korea, China and Vietnam have supported shipbuilding, directly or indirectly. Indian shipyards carry a minimum cost disadvantage of around 32-37% on the price of a typical ship, the report said.