New Delhi rides to shipyards’ rescue

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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 local media. 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 state-owned 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.
New Delhi is following other Asian nations such as China and Vietnam in aiding shipbuilding during the downturn.  [19/02/09]