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The government has exempted domestic steel companies from paying excise duty on supplying steel plates to shipbuilders, a move that would help both the steelmakers and shipbuilders.
Indian shipbuilding companies currently import most of the steel required, which constitutes over 33 per cent of the total ship cost.
Around 60 per cent of the overall body of a ship is made using steel.
Domestic steel makers have been pitching for this exemption so that they can compete on equal footing with foreign mills. Experts say the move will boost the business of steel companies in the long run. At present, the demand for new ships has taken a severe hit due to an oversupply of vessels in the market.
“The global shipbuilding industry is heavily subsidised. This move (tax exemption) will hardly make a difference, though it will reduce the costs by maximum four per cent,” said a shipping industry analyst, who did not want to be named.
Shipbuilding companies in India mostly buy raw materials from overseas not because of the cost in the domestic market, but due to the variety and quality issues, a senior executive at a shipbuilding company said.
“This (tax exemption) will make little difference, because we would still need to import steel,” added the official, who also preferred anonymity.
This year’s Budget had doled out some benefits to the shipbuilding sector by removing excise duty on vessels. The Budget had also announced the removal of countervailing duty on imported ships.
The government has also increased the time limit for consumption of imported goods by ship repair units from three months to one year.
This will help the shipping companies keep “critical spares”, which are not available on a short notice, in stock for at least a year after which an import duty will have to be paid.
There are 27 shipyards in the country, eight in the public sector and the rest in the private sector. The government had extended the shipbuilding subsidy scheme for both export and domestic orders on October 25, 2002.
The shipping ministry has been trying to get a further extension of the subsidy since the scheme was applicable for contracts till August 14, 2007.
LAYING AN EVEN KEEL
Indian shipbuilding companies currently import most of the steel required, which constitutes over 33 per cent of the total ship cost.
Around 60 per cent of the overall body of a ship is made using steel.
Domestic steel makers have been pitching for this exemption so that they can compete on equal footing with foreign mills. Experts say the move will boost the business of steel companies in the long run. At present, the demand for new ships has taken a severe hit due to an oversupply of vessels in the market.
“The global shipbuilding industry is heavily subsidised. This move (tax exemption) will hardly make a difference, though it will reduce the costs by maximum four per cent,” said a shipping industry analyst, who did not want to be named.
Shipbuilding companies in India mostly buy raw materials from overseas not because of the cost in the domestic market, but due to the variety and quality issues, a senior executive at a shipbuilding company said.
“This (tax exemption) will make little difference, because we would still need to import steel,” added the official, who also preferred anonymity.
This year’s Budget had doled out some benefits to the shipbuilding sector by removing excise duty on vessels. The Budget had also announced the removal of countervailing duty on imported ships.
The government has also increased the time limit for consumption of imported goods by ship repair units from three months to one year.
This will help the shipping companies keep “critical spares”, which are not available on a short notice, in stock for at least a year after which an import duty will have to be paid.
There are 27 shipyards in the country, eight in the public sector and the rest in the private sector. The government had extended the shipbuilding subsidy scheme for both export and domestic orders on October 25, 2002.
The shipping ministry has been trying to get a further extension of the subsidy since the scheme was applicable for contracts till August 14, 2007.
LAYING AN EVEN KEEL
- Indian shipping industry imports a majority of its steel requirement, constituting 33 per cent of the total ship cost
- At present, the demand for new ships has taken a severe hit due to an oversupply of vessels in the market
- The annual Budget had doled out some benefits to the industry by removing excise duty on vessels
- The Centre has increased the time limit for consumption of imported goods by ship repair units from 3 months to 1 year
