Make in India: Shipyard industry gets infrastructure status, move expected to bring down costs

NEW DELHI: The government has granted infrastructure status to the shipyard industry in a boost to its Make in India initiative.

The move is expected to bring down borrowing costs for the industry. At present, companies pay average interest of 14 per cent-15 per cent on their borrowings.

"Shipyards industry has been granted infrastructure status. It will create right environment for the growth of shipbuilding industry that would now become globally competitive," a senior shipping ministry official said.

Infrastructure status will also give a boost to government’s 'Make in India’ initiative and is expected to help the industry raise its share in global market to 5 per cent by 2020 from less than 1 per cent now.

Indian shipbuilders carry a minimum cost disadvantage of about 30 per cent on the price of a ship. The promotion of the shipbuilding and ship repair industry in India will lead to higher multiplier effect on investment and turnover (11.6 and 4.2) and high employment potential due to multiplier effect of 6.4.

In December last year, the government had granted Rs 4,000 crore subsidy to the shipbuilding industry to be paid over 10 years. The government will give a subsidy 20 per cent to private players on total contract cost after delivery of the ship. The subsidy will be reduced 3 per cent every three years and will be phased out in ten years. The step would make India’s ship building industry more competitive globally.

The government is also likely to make it mandatory for Indian state-owned firms to give half of their freight business to local shippers to help rescue an industry battered by the global commodities downturn. The step is being taken to protect the ailing local shipping firms.