Mix of reservation and price preference, instructs shipping ministry.
The Union shipping ministry has told government-owned Shipping Corporation of India (SCI) to favour Indian firms in any global tender. The ministry has said if an Indian company is within 10 per cent of the lowest international bid, it should get the contract. And, for smaller vessels, SCI should issue only domestic tenders.
“The purchase preference can incentivise Indian shipbuilding companies and gradually it can act as a booster,” a senior ministry official said.
Experts feel a 10 per cent concession isn’t enough. “The main competition we face is from Chinese shipyards and they have massive subsidies. Ship production in India is very expensive. It is difficult to match even up to 10 per cent,” said Hemant Bhatbhat, senior director, Deloitte.
The Shipbuilders Association of India agrees. “We do not have a level playing field compared to countries like China, Japan, Korea and Vietnam. Financing is so expensive in India that we cannot come close to the foreign bidders,” said P R Govil, advisor, Shipbuilders Association of India.
A Deloitte report says, “The abolition of the subsidy scheme, according to Shipyard Association of India, has adversely affected new orders, as Indian vessels are now pitched unfavourably against those from Korea, Japan and China, where subsidies are as high as 40 per cent.”
The shipbuilding subsidy was introduced in 1993 and revised several times up to 2002. The latest scheme allowed a subsidy of 30 per cent to both public and private sector shipyards on all ship sales to foreign firms and on ocean-going merchant vessels of more than 80-metre length to domestic clients.
The Maritime Agenda 2020, issued by the government earlier this year as a vision document for the next decade, has estimated the present value of the subsidy outlay required till 2017-18 to be Rs 3,484 crore.
India’s share in new orders placed, globally, has been declining. It was 1.3 per cent in 2007, about 0.01 per cent in 2009 and 0.13 per cent in 2010.
The Maritime Agenda has identified capital investment worth Rs 10,785 crore to be made in the shipbuilding and repair sector, with two new shipyards on each coast. SCI had expressed interest in participating in shipbuilding on a public-private partnership (PPP) basis. It is in the process of appointing a consultant for a feasibility study. The Maritime Agenda says a joint venture is likely to be set up under PPP by the year 2014 at a cost of Rs 3,500 crore.
“Being the flagship shipping company of India, SCI understands the shipbuilding sector well. But nothing has happened because the government has been confused whether it wants growth via profitability or just sectoral development so the business community can take forward the baton,” Bhatbhat said.
