Shipyards see small gain from excise sop

The government's proposal to waive excise duty on spare parts used in repairing ships is not expected to benefit local shipyards.

"The revenue from the ship repair business is extremely low. With not all ships being employed due to weak trade, only those vessels that need regular dry docking come to yards," said an executive with GOL Offshore. "And the vessels that come for dry docking ask for the main basic services unlike five years ago when they would ask for repair services," he added.

Dry docking, a compulsory exercise carried out twice in five years, is used for repairs or when a ship is taken to the service yard.
 

"The contribution of the ship repair business is very small to the total revenue and many times this runs into a loss," the GOL Offshore executive said.

Mumbai-based GOL Offshore is in several businesses apart from ship repair such as offshore drilling and port and terminal services. The company's ship repair services form just about 5 per cent of its total revenue.

"This exemption will help in the long term once trade picks up. Currently, the recession is strong," said Nasir S, technical officer at Lilly Maritime Ship Repair.

The ship repair industry is scattered across the country's 7,500 km coastline. Apart from the proposed excise duty exemption, the industry is exempt from customs duty on spare parts.

Industry executives said the excise duty exemption would lower costs but efficiency and infrastructure remained hurdles. The cost of dry docking in India is about 15 per cent higher than in Dubai, Sharjah and Colombo.

"If a ship takes two weeks to be repaired in Dubai, it takes four weeks in an Indian shipyard," said a former general manager of ABG Shipyard. "It is difficult for shipping companies to switch to local repair units even if the quality of work is better here," he added. Cochin Shipyard is better placed than existing yards in Goa, Gujarat and Andhra Pradesh. "Domestic ship repair yards cannot take big vessels and so the benefit is limited. These yards lack infrastructure," said Anoop Sharma, managing director of Essar Shipping.

State-owned Shipping Corporation of India has the largest fleet of about 69 vessels comprising bulk, tanker and offshore.

"The pressing need for the industry is to improve earnings per vessel. With crude oil prices on a decline and trade weak, there is little business," said the GOL Offshore executive.