Rs 4,000 Cr State-Aid for Shipbuilding Go Abegging as Yards Collapse

A Rs 4,000 crore state aid budgeted by the government for local shipbuilders for a ten-year period starting April 2016, is going abegging after a spate of yard collapses resulted in just Rs 241 crores or a paltry 6 per cent of the total corpus being used up so far, with three years left for the scheme to end.

The financial assistance to Indian shipyards is applicable for shipbuilding contracts signed between 1 April 2016 and 31 March 2026.

Some 28 shipyards had registered under the scheme of which nine have utilized the benefits, building 80 vessels for which financial assistance of Rs 241 crore has been approved, the Union Minister of Ports, Shipping, and Waterways, Sarbananda Sonowal told Rajya Sabha in a written response to a question on 28 March.

The government disbursed Rs 58.03 crores as shipbuilding financial assistance for FY21, Rs 64.62 crores for FY22 and Rs 58.04 crores for FY23 (up to 24 March 2023), Sonowal added.

State-run Cochin Shipyard Ltd secured a major chunk of the subsidy approved so far (Rs 68.83 crores for building 11 vessels) and is the only government-owned shipyard out of the nine from the list that have utilised the scheme.

Goa-based Chowgule and Company Pvt Ltd has secured financial aid of Rs55.13 crores for constructing seven ships, while Mandovi Drydocks, also based in Goa, has got Rs42.50 crores for building 26 ships.

The other shipyards that have been given financial assistance are Gujarat-based Shoft Shipyard (Rs 19.13 crores for 15 vessels), West Bengal-based Titagarh Wagons (Rs 18.29 crores for 2 ships), Goa-based Vijai Marine Services (Rs 12.60 crores for 8 vessels), Sembmarine Kakinada Ltd (Rs 11.23 crores for 2 ships), Kolkata-based A C Roy & Company (Rs 9.76 crores for 8 vessels) and Goa-based Dempo Shipbuilding & Engineering Pvt Ltd (Rs 3.98 crores towards one ship).

The financial assistance to shipbuilders, both state-owned and private, is valid for a ten-year period beginning 1 April 2016, scaling down the quantum by three percentage points every three years, starting with 20 percent during the first three years, 17 per cent for the next three years, 14 per cent for the next three years and 11 per cent in the tenth year.

The scheme was designed to promote the government’s ‘Make in India’ programme, encourage the local shipbuilding industry by providing a level playing field vis-a-vis foreign shipyards and help India raise its stature as a ship building nation.

But local shipyards have not been able to take advantage of the scheme mainly because some big shipbuilders such as Pipavav Shipyard, ABG Shipyard and Bharati Shipyard collapsed under a huge pile of debt and had to be sold or liquidated under India’s bankruptcy law.

The government and the new owners of yards should sit across the table and discuss ways to tweak the policy to align it with the Maritime India Vision 2030. Shipbuilding is a business which is a huge employment generator and an employment multiplier with all the ancillary units, he stated.

“Whatever is feasible and within its framework, the government should look at how much they can stretch themselves to assist the new owners. That is the key,” he added.