CCEA revives defunct shipbuilding subsidy scheme after 12 years

The CCEA decision to revive a defunct subsidy scheme will help L&T, Reliance Naval, Cochin Shipyard, ABG, Bharati.

Months after they were liquidated by a bankruptcy court due to a pile of unpaid bank dues, two of India’s private shipbuilders - ABG Shipyard Ltd and Bharati Defence and Infrastructure Ltd - will receive a subsidy from the government on confirmed orders signed before a shipbuilding subsidy scheme ended more than twelve years ago.

On 9 October, the cabinet committee on economic affairs (CCEA) approved a proposal filed by the shipping ministry to settle subsidy claims submitted by yards for executed shipbuilding contracts under the shipbuilding subsidy scheme that ended on 14 August 2007 after a five-year run. The decision, however, has not been made public yet, say reports.

“The CCEA has approved our proposal for extension of timeline and budgetary support beyond March 31, 2014 for release of committed liability of shipbuilding subsidy through budgetary support of approximately Rs153 crore for a total number of 51 vessels, including retained subsidy for 47 vessels and full subsidy for 4 vessels,” a ministry official said.

“This subsidy is to be released in the financial year 2019-20, 2020-21 and 2021-22. Guidelines for the release of the subsidy are being formulated by the ministry,” he added.

“The ministry has asked us to submit proposals for availing the subsidy,” an executive with one of the private shipyards said.

The shipbuilding subsidy scheme offered shipbuilders, both state-owned and private, 30 per cent extra on building ocean-going merchant vessels that are more than 80m in length if they were manufactured for the domestic market.

For export orders, however, ships of all types and capacities were eligible for the subsidy.

This government subsidy was given to public sector yards in instalments, while private companies got it after the ship was built and delivered to the buyer.

In March 2009, the CCEA headed by Manmohan Singh agreed to liquidate the committed liability for payment of subsidy on confirmed orders signed before the scheme ended.

In this regard, a budgetary provision up to 31 March 2014 only was approved by the government. “After that nothing happened and the approval lapsed,” the shipyard executive mentioned earlier said.

Since then, the ministry has been holding inter-ministerial consultations on extending the timelines beyond 2013-14 for payment of subsidy to Indian shipyards for shipbuilding contracts signed up to 14 August 2007, the official added.

“Now, it has been revived with the backing of the shipping minister Mansukh Mandaviya,” he said. “They are going to give all the subsidy. Some amount of subsidy of about 10-15 per cent on each vessel was retained by the government earlier. So, whatever was the subsidy on eligible vessels, they are now going to release it fully to all the yards,” he added.

Reliance Naval and Engineering Ltd, L&T Shipbuilding Ltd and Cochin Shipyard Ltd would also benefit from the cabinet decision on extending the timeline for paying the subsidy.

In the case of ABG Shipyard, the subsidy would be paid to the liquidator appointed by the National Company Law Tribunal (NCLT), Ahmedabad. Whereas the subsidy would be paid to Bharati Defence and Infrastructure because the Mumbai bench of NCLT had ordered the liquidation of the yard and sold as a going concern, a person briefed on the matter said.