Govt set to revive subsidy scheme for shipbuilding cos

Govt set to revive subsidy scheme for shipbuilding cos

Nirbhay Kumar & Subhash Narayan
NEW DELHI

THE government is all set to revive the subsidy scheme for
shipbuilding companies such as ABG Shipyard, Bharati Shipyard,
Hindustan Shipyard and Pipavav Shipyard, where a part of the cost of
manufacturing the ship is reimbursed at the point of sale.
The finance ministry has also agreed to release the pending subsidy
amount to shipbuilding companies under the scheme, which lapsed on
August 15, 2007, amounting to nearly Rs 5,000 crore, a government
official said. Shipbuilding companies in the private sector got very
little subsidy under the scheme, added the source.
The finance ministry's in-principle approval has, however, come
with riders. It will now not be an open-ended scheme and the subsidy
component would be worked out on the basis of latest projections of
global orders that the home-grown shipbuilding companies are expected
to generate.
"The finance ministry has given its concurrence on the proposed
subsidy, albeit with some conditions. They have asked us not to keep
the scheme open-ended, which means that there will be no further
extension to the scheme. Following this, we are reviewing the earlier
proposal and are in the process of finalising a fresh scheme," a
government official, who did not wish to be named, told ET.
According to an industry estimate, the domestic shipyards currently
have an order book of Rs 22,000 crore compared with an order of just
Rs 816 crore in 2002. In a bid to promote the domestic shipbuilding
industry, the government has extended the subsidy scheme to private
shipbuilding companies. Earlier, only stateowned companies were
eligible for the subsidy. As per the scheme, the government provided a
30% subsidy on all ship sales to foreign companies and ocean-going
vessels of more than 80 m in length sold in the local market.
Following the expiry of the earlier scheme, the shipping ministry
proposed an extension of the scheme for another 10 years. The finance
ministry, however, turned down the proposal saying that the
shipbuilding industry had come of age and was in the position of stand
on its own. The finance ministry finally agreed to extend the scheme
with riders.

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