Bengaluru: In a bid to give a shot in the arm to PM Modi's “Make in India” initiative, Finance minister Arun Jaitley may announce a fund of Rs 10,000 crore for shipping development in Union Budget 2015. The sum will also be utilised to disburse low-cost funds to shipbuilders.
Earlier while inaugurating General Electric Co.'s multi-modal manufacturing facility at Chakan in Pune on February 14, the prime minister had said, “India offers immense potential for the shipbuilding industry.”
Shipping secretary Rajive Kumar said on Wednesday that such a fund is under the consideration of the government.
A senior official also revealed that financial institutions like IFCI Ltd, Exim Bank and IDBI Bank Ltd have agreed to contribute to the dedicated fund, which is likely to be augmented by budgetary support from the government. This will help fleet owners buy some locally built ships.
An Indian naval architect working with a Hong Kong-based shipyard said “Getting local bank funding was a critical issue for fleet owners in the tender issued by GAIL (India) Ltd for hiring nine new LNG (liquefied natural gas) ships of which three were to be built in Indian yards.”
“The high interest cost on Indian loans would hike the ship construction costs significantly, upsetting the calculations of fleet owners,” he added.
Earlier in September, it was reported that the shipping ministry was in talks with financial institutions such as IFCI and IDBI to establish a fund for extending low-cost loans to shipbuilders, as part of a policy the ministry is drafting to promote local shipbuilding.
The price of the ship is an important factor in calculating the daily hire rates, which, in turn, is one of the criteria for deciding the contract which makes it crucial for ship owners.
Lack of response from fleet owners forced GAIL to scrap the tender on 17 February. “We are not defining the type of ships which can avail money from the planned fund. It can be used for constructing all kinds of ships including LNG carriers,” shipping secretary Kumar said.
The shipping ministry has drafted a comprehensive policy to promote the local shipbuilding industry and the shipbuilding development fund will be part of it as announced by finance minister Jaitley in his first budget speech on 10 July 2014.
Other features of the policy may include granting Special Economic Zone (SEZ) status to shipyards and declaring it as a strategic and infrastructure sector with attendant fiscal incentives.
During the foundation stone ceremony for an SEZ and road connectivity project at the Jawaharlal Nehru Port Trust near Mumbai on 16 August 2014 PM Modi had said, “Shipbuilding is a very vast sector. We have young people, skilled manpower who can be easily mobilized. Shipbuilding is also not about technology. Turner, fitter, welder also are involved in shipbuilding. The poorest of the poor gets employment.India's contribution to global shipbuilding has been very low. South Korea, a very small country, smaller than the state of Maharshtra, today alone has a 40% share of global shipbuilding. We want to encourage shipbuilding.”