Indian shipyards get their subsidies back

The industry was hit hard by the ending in 2007 of a subsidy scheme that had helped Indian shipyards edge up from the tenth place in the world shipbuilding league table (0.4% market share) in 2006, to fifth position (1.1% market share) in 2009. Since then, India has plunged to eleventh position (0.6% market share).

A plan for Indian yards to build three of nine LNG carriers required by state owned GAIL to import LNG from the U.S. has gone nowhere and yards have put all their focus on the defense sector.

India has been struggling to come up with a replacement for the previous scheme since 2008. Wednesday, the Cabinet approved a ten year, $600 million scheme

According to Indian business publication Mint, the financial assistance (it.s no longer called subsidy) to shipbuilders – both state-owned and private – will be for 10 years.

"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," according to Mint.

The assistance will be given on the contract price or fair price, whichever is lower. The shipbuilding policy approved by the cabinet also includes granting tax incentives and infrastructure status for the 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.

The assistance will be given for all types of ships, though smaller boats and fishing vessels are not included in the scheme.
Both state-owned and private yards will get the assistance only after they construct and hand over to the ship to the buyer.