Govt moves to support Indian shipbuilders

Discussion in 'Economy & Infrastructure' started by AVERAGE INDIAN, Jun 27, 2013.



    Sep 22, 2012
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    The shipbuilding yard at Pipavav in Gujarat is one of the two to have come up in India in the last decade—the second one being at Kattupalli in Tamil Nadu.

    SCI directed to tweak ship acquisitions to favour Indian shipyards; only ships made and registered here will be allowed to transport goods within India

    Ship manufacturing has not taken deep root in India though the country has all the ingredients that go into the making of a successful shipbuilding nation such as a long coastline, abundant supply of cheap labour and an export-import sector that ships about 90% of its merchandise by sea.
    In India, most classes of ships can be imported without paying any customs duty, unlike most other manufacturing industries.
    Indian shipyards continue to be outbid by Chinese and South Korean shipyards due to cost differentials arising out of a perceived lack of support for the industry. On the other hand, it is said that foreign shipyards benefit from direct fiscal and non-fiscal support from their respective governments.

    An aggressive investment plan worth Rs.39,000 crore outlined by local firms to expand existing facilities and create new ones in the wake of the shipping boom of 2004-2007 failed after the global financial crisis ravaged economies about five years ago.
    The industry is yet to pick itself up after that.

    Only two new shipbuilding yards have come up in India in the last decade—one at Pipavav in Gujarat and the second at Kattupalli in Tamil Nadu. Other potential investors have either deferred their plans or abandoned them altogether due to the weak outlook/market.
    During this period, India converted a state-run commercial shipyard located at Visakhapatnam on India’s eastern coast into a naval shipbuilding unit.

    Existing yards, facing a dearth of new commercial ship orders, are now heavily reliant on government-funded defence contracts to stay afloat.
    Besides this, the government hasn’t re-introduced a subsidy scheme for shipbuilders that ended in August 2007 after a five-year run. The scheme is credited with India’s impressive show during the time it was in force.
    As the situation turns grim, the government has, without much fanfare, introduced some key policy measures to support the local shipbuilding industry.

    To start with, The Shipping Corp. of India Ltd has been directed by the shipping ministry to tweak its ship acquisition processes.
    Accordingly, the Mumbai-based state-run firm, India’s biggest ocean carrier, will grant purchase preference to Indian shipyards in all its ship acquisition tenders. It has also incorporated changes in the eligibility criteria for short-listing shipyards to a selection based on the availability of requisite infrastructure and not on the basis of experience.

    The lack of a good track record has often been cited as a weakness for Indian shipbuilders in winning new orders.
    Local builders are pushed out of the reckoning due to cost disadvantages, along with an inability to demonstrate a track record of delivering ships on time.

    Shipping Corp. will issue local tenders for certain categories of ships in which sufficient shipbuilding capacity is available with Indian yards and proper competition could be expected.

    Where global tenders are issued, Shipping Corp. will give 10% purchase preference to Indian bidders by providing them with a so-called right of first refusal in case their offer is within 10% of the lowest international bidder.
    This is not expected to have any financial implication on Shipping Corp. as the Indian shipyards will be asked to match the lowest international bidder.

    This policy is being extended to other state-run entities such as Inland Waterways Authority of India, Oil and Natural Gas Corp. Ltd, Dredging Corp. of India Ltd, Island State Administrations (administrations of Andaman and Nicobar Islands and the Union Territory of Lakshadweep), major ports and ministry of earth sciences to provide a boost to the shipbuilding industry.

    Also, beginning January 2015, India may mandate that only ships manufactured and registered locally will be allowed to transport goods in the country’s coastal waters. Local laws currently restrict the movement of cargo between Indian ports to ships registered in India but not necessarily to those built here.

    The defence ministry, which has a huge budget to buy ships for patrolling India’s long coastline, has also started restricting its tenders for certain types of ships to domestic yards.
    The government has also notified guidelines for state-run defence shipyards to set up joint ventures with private shipbuilders to enhance self-reliance in defence shipbuilding.

    Pursuant to this policy, Mazagon Dock Ltd, India’s top warship building yard, has signed shareholder agreements to set up joint ventures with private yards Pipavav Defence and Offshore Engineering Co. Ltd and Larsen and Toubro Ltd, to construct warships and conventional submarines respectively.

    All these have the potential to create a reliable market by incentivizing the purchase of ships manufactured by Indian yards.
    The idea is to encourage “buy India” sentiment. Such a policy is followed in countries such as the US, Brazil and Indonesia, among others. The Jones Act mandates that all goods transported by water between US ports be carried on US flagships that are constructed locally, owned by its citizens, and crewed by citizens and permanent residents.

    Govt moves to support Indian shipbuilders - Livemint

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