India is exploring a plan to subsidize its shipbuilding industry in its latest push for industrialization as part of an India first campaign. The details emerged as Finance Minister Nirmala Sitharaman is preparing to present India’s annual budget for 2023/24 to parliament on February 1.
Part of the plan is to offer cash subsidies, lower taxes, and grant the shipbuilding an infrastructure status. This would help the industry in securing financing from banks.
The proposal behind the incentives is to expedite the construction of at least 50 new vessels. Since shipping disruptions began over two years ago, the Indian government has accelerated plans to reduce the impact of high freight rates on the nation’s manufacturers. Increasing the national fleet has gained favor from policymakers as a viable solution.
According to senior government officials interviewed by Reuters, they said the incentive plan also hopes to encourage the building of small vessels fitted with battery propulsion. The idea is to help India keep up with emerging trends. The future of shipbuilding is expected to be driven by green and cost-efficient technologies they noted in the plan.
“A $123 million maritime development fund is likely to be established as the plans already have the support of economic advisors of Prime Minister Narendra Modi,” said the government officials.
According to India’s Maritime Vision 2030 released in 2021, shipbuilding was identified as one of the top ten essential areas to establish the country as a global maritime leader.
Some of the action plans proposed by the Finance Ministry, such as financial assistance and granting shipbuilding the infrastructure status, were initially recommended in the vision document.
Industry statistics show that the share of India’s domestic ships carrying export-import cargo was less than 7 percent in 2019/20. In addition, the Indian shipbuilding global market share has declined to less than 1 percent whereas in the early 2000s, it ranked among the top 10 in the world.
India currently has 28 shipyards, six under the Central Public Sector, two under state governments, and 20 in the private sector.
The Federation of Indian Export Organizations (FIEO) has been calling for reforms in the shipbuilding industry.
“India’s exporters and importers paid nearly $100 billion in freight last year, almost double the amount three years ago. If government incentives helped private companies to develop the local shipping industry, India could save at least $25 billion in foreign exchange,” said FIEO director general Ajai Sahai.
India joins with a growing number of countries around the globe that responded to the problems in shipping over the past two years by proposing efforts to expand their national shipping industries. Australia is currently developing a government-led plan to expand its domestic shipping operations while South Africa also released a compressive plan to build a new national shipping company. Thailand and Vietnam are other emerging nations that have also proposed the creation of domestic shipping.
Source – THE MARITIME EXECUTIVE