India: Government Announces $600 Million Shipyard Subsidy

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Indian Prime Minister Narendra Modi’s cabinet has approved $600 million in direct cash subsidies for Indian shipyards over a ten year period.

The subsidy will be used to discount the price after delivery of new vessels by 20 percent.

All vessel types are eligible for the program.

The proposal, described by the government as “financial assistance” rather than a “subsidy,” is reported to have strong backing from the Prime Minister. In addition to the cash assistance, it gives Indian shipyards the right of first refusal for government purchases, as well as tax advantages.

The quantum of aid will come down by three percentage points every three years, starting with 20% for the first three years, 17% for the next three years, 14% for the next three years and 11% in the 10th year.

The assistance will be given on the contract price or fair price, whichever is lower. The government has set aside a budget of Rs.4,000 crore to implement the scheme over 10 years. Mint first reported the government’s plan on 1 September 2015.

Shipbuilders say the financial assistance would help spur new orders.

The shipbuilding policy approved by the cabinet also includes granting tax incentives and infrastructure status for shipbuilding and ship repair industry.

It further grants a so-called right of first refusal for Indian shipyards for government purchases, whereby local shipbuilders can take up state-funded contracts by matching the lowest price quoted by an overseas entity in a public auction.

India is looking to achieve a 5% share of the global shipbuilding market by 2020, according to the country’s shipping ministry.

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