The government may grant infrastructure status to the shipping industry to help improve India’s position to the top five countries countries globally in shipbuilding and ownership by 2047, two persons aware of the development said.
The status would allow shipping entities to secure funds on easier terms with long-term repayment and low rate of interest from commercial banks. This would allow improved purchase of ships from Indian shipyards and raise Indian ownership.
The country ranks 18th globally currently.
According to the first of the two persons quoted above, the ministry of ports, shipping and waterways (MoPSW) has asked the Department of Economic Affairs (DEA) to consider providing infrastructure status for ships in the harmonized list of infrastructure, which could be announced as part of budget proposals on 1 February.
The infrastructure status to shipping will be an extension to similar status already given to the shipbuilding industry, which enables shipbuilding firms to avail flexible structuring of long-term project loans at lower rates of interest for longer tenure equivalent to the economic life of their assets. This also enables builders to issue infrastructure bonds for meeting working capital requirements and get tax benefits to increase shipbuilding activities.
But the shipping industry has not been granted infrastructure status so far, which deprives shippers, who also need long-term funds for capital-intensive vessel buying plans, and support the domestic shipbuilding industry with bigger orders.
Better funds access
“Infrastructure sector status would allow Indian companies access to long tenure low-cost funds which will help Indian companies acquire and operate more ships, both for coastal and global shipping operations. This will help reduce the cost of operations of Indian entrepreneurs and considerably ease operational cash flows since funds available for capital intensive purchases will match repayments linked to asset’s life spanning 12-15 years. This has been a demand of the industry for a while now,” said Anil Devli, CEO of the Indian National Shipowners’ Association (INSA).
“Currently, our foreign competitors have access to low-cost funds and once we get these kinds of tenors that will promote acquisition ships, offshore rigs and expand the country’s maritime footprint,” he added.
MoPSW has already proposed inclusion of coastal shipping as a sector in the ‘harmonized list of Infrastructure’ to make the sector eligible for various concessions and help in attracting cargo and passengers to this mode of transport. The second person quoted above said that the scope of this proposal may be expanded to include the entire shipping sector to bring about rapid growth of the country’s maritime sector.
“It is not just awarding the status, but government should also ensure and direct infrastructure finance companies such as NaBFID (National Bank for Financing Infrastructure and Development) or NIIF, to grant access to the Indian shipping industry to such kind of funds. In fact, the government must have a mechanism that would help monitor allocation of these kinds of funds to Indian entrepreneurs for expansion of fleet under the Indian flag,” Devli said.
Queries sent to MoPSW remained unanswered till the press time.
Extending capital subsidy scheme
Apart from infrastructure status, the government is also likely to extend MoPSW’s capital subsidy scheme – Shipbuilding Financial Assistance Policy (SBFAP) – for shipbuilding by another 10 years under Amritkaal Maritime Vision 2047.
The scheme, which ends in March 2026. provides financial assistance to Indian shipyards for shipbuilding contracts signed between 1 April, 2016, and 31 March, 2026 with the rate of financial assistance starting from 20% in 2016 and diminishing to 11% in 2026.
Also, a mega shipbuilding policy is expected to be announced along with fiscal and non-fiscal incentives including support from a ₹25,000 crore Mare Development Fund (MDF).
India currently has less than 1% share of the global shipbuilding market (rank 22), which is dominated by China, South Korea, and Japan. It also ranks 18th globally in terms of ship ownership with a fleet size of around 1550 registered vessels and carrying capacity of 13.5 million gross tonnage GT). Under the Vision 2047 plan, India wants to take up its ship ownership to being among the five biggest globally with 100 million GT cumulatively by 2047. Also, the plan is to scale up shipbuilding within the country to be among the top five shipbuilders by 2047 with a production capacity of 4.5 million gross tonnage per annum (GTPA) from just about 0.1 million GTPA now.
Source: Livemint
