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CII seeks revival of subsidy scheme for shipyards, soft loans to buy ships - 2012-06-11

The Confederation of Indian Industry (CII) plans to draw up a growth strategy for shipping and shipbuilding sectors, which have been hit by weak freight market and global financial crisis. According to the CII, the Government support has become crucial for these sectors to survive the prolonged rough weather.

Most Indian shipping companies have reported loss or deep-drop in profit in the last fiscal. The CII National Committee on Shipping which met in New Delhi on Thursday identified areas where government supports are required urgently. The Committee, according to its Chairman, Mr S. Hajara, who is also the Chairman and Managing Director of Shipping Corporation of India, wants policy level actions on two important issues - revival of subsidy scheme to Indian shipyards and soft loans to domestic shipping lines to augment their fleet. Under the subsidy scheme which was withdrawn in 2007, Indian shipyards were eligible for cash subsidy up to 30 per cent of the price of the vessel.

According to Mr Hajara, countries such as China, Japan and Korea offer such subsidy to their yards. India's share in world shipbuilding dropped below one per cent, after the subsidy was withdrawn. Several new shipyards have come up in India in the recent past but most of them are nursing huge idle capacity.

The second issue is financial support for acquisition of ships. Several maritime countries offer low-cost finance for buying ships. In India, funds are expensive and banks are not too keen to provide shipping finance.

According to Mr Hajara, the Government should ensure funds for acquisition of ships at reasonable cost. Indian shipping lines have to compete with global operators who have access to low-cost funds. Besides low-cost funds, shipping sector also needs fiscal support. Despite the introduction of tonnage tax, overall tax burden of Indian shipping companies are one of the highest among the maritime countries, he said. The share of Indian ships in the national cargo is currently less than ten per cent. If the current situation continues the share can only go down. Today's meeting also decided to prepare white paper on shipping and shipbuilding.

Source : Hindu Business Line