Shipbuilding Industry Urges India to Focus on Large Ships as Aid Falters
An executive from a private shipyard on India's western coast stated that India is focusing on smaller ships, but this approach must change. The executive, who requested anonymity, emphasized the need to shift this focus.
A shipbuilding industry veteran pointed out that while smaller ships for Europe are being targeted, key vessels like bulkers, tankers, and container ships are being overlooked. He clarified that he was not casting aspersions but merely stating that the construction of large bulkers, tankers, and container ships remains under the control of South Korean and Chinese policymakers. According to the veteran, sustaining power and localisation of critical ship equipment manufacturing is possible only through the construction of these "bread-and-butter" ships.
As of December 10, 19 shipyards have utilised less than 10 per cent of the total Rs 40 billion aid, amounting to just Rs 3.85 billion for the construction of 144 vessels, according to a response from Sarbananda Sonowal, the Union Minister of Ports, Shipping, and Waterways.
One executive attributed the low utilization to the lack of clarity in determining the "fair price" of a ship for aid purposes. They questioned the procedure and who is responsible for deciding the fair price.
The terms and conditions of the shipbuilding financial assistance scheme, introduced on April 1, 2016, outline that for a standard vessel, the fair price is determined by the competent authority based on international trends. For specialized vessels or those outside the standard category, three approved International Valuers determine the fair price. The approved valuers include Barry Rogliano Salles, Galbraiths, Gibson Shipbrokers, and others.
For contracts signed with government bodies, the fair price is determined by the L1 price discovered through competitive bidding. The financial assistance is available for ten years, with the percentage decreasing every three years, from 20 per cent in the first three years to 11 per cent in the tenth year.
Local shipyards are entitled to a maximum aid of Rs 400 million for building standard ships within three years of the contract, while there is no specified cap for specialized ships.
The assistance amount is calculated based on the lowest price between the contract price or fair price, converted into Indian rupees. If the actual payment received for a vessel is lower than the contract price, the actual payment is used for calculating the assistance.
The shipyard applying for financial assistance should not have availed of any other monetary support from government schemes. The support does not include exemptions on taxes, import duties, or fiscal benefits arising from the location of the shipyard.
The lack of clarity regarding the fair price is seen as a barrier for shipbuilders to pursue large projects, according to the industry veteran. The private shipyard executive described the initial step of building large ships as daunting, with no confidence in the price. They added that the Directorate General of Shipping, responsible for determining the fair price, does not provide the confidence needed to proceed.
The veteran further explained that subsidies for specialised vessels, such as those with methanol engines for European coastal shipowners, make sense due to emission regulations, but this approach does not suit Indian ships. For example, an ore carrier operating between Paradip in Odisha and the Gulf would not benefit from subsidies for vessels using alternative fuels like ammonia or methanol, which are more relevant to smaller European ships.
Independent shipbuilding consultant Syed Abdi suggested that it would be helpful to analyse the difference between planned and actual outcomes in the previous Maritime Vision. He emphasised the importance of confronting reality and improving control and monitoring for future plans, noting that all stakeholders are aiming for the same vision.