Indian shipping companies to get govt subsidy in global tenders

The union cabinet chaired by Prime Minister Narendra Modi approved the scheme for promotion of flagging of merchant ships in India by providing subsidy support, as part of the `Atmanirbhar Bharat’ initiative.

For a ship which is flagged in India after 1 February 2021 and is less than 10 years at the time of flagging in India, the subsidy support would be 15 per cent of the quote offered by the L1 foreign shipping company or the actual difference between the quote offered by the Indian flag vessel exercising ROFR and the quote offered by the L1 foreign shipping company, whichever is lower. For a ship which is flagged in India after 1 February 2021 and which is between 10 to 20 years old at the time of flagging in India, the subsidy support would be 10 per cent of the quote offered by the L1 foreign shipping company or the actual difference between the quote offered by the Indian flag vessel exercising ROFR and the quote offered by the L1 foreign shipping company, whichever is lower.

The rate at which the above subsidy support is extended would be reduced by 1 per cent every year, till it falls to 10 per cent and 5 per cent, respectively, for the two categories of ships.

For an existing Indian flagged ship, which is already flagged and less than 10 years old on 1 February 2021, the subsidy support would be 10 per cent of the quote offered by the L1 foreign shipping company or the actual difference between the quote offered by the Indian flag vessel exercising ROFR and the quote offered by the L1 foreign shipping company, whichever is lower. For existing Indian flagged ship which is between 10 and 20 years old on 1 February 2021, the subsidy support would be 5 per cent of the quote offered by the L1 foreign shipping company OR the actual difference between the quote offered by the Indian flag vessel exercising ROFR and the quote offered by the L1 foreign shipping company, whichever is less.

The provisions of this subsidy support would not be available in case where an Indian flagged vessel is the L1 bidder.

The budgetary support would be provided directly to the ministry/department concerned.

The subsidy support would be extended only to those ships which have bagged the award after the implementation of the scheme.

The scheme would have flexibility in allocation of funds for expenditure from one year to another and within the various ministries/departments.

Ships older than 20 years would not be eligible for any subsidy under the scheme.

In view of the enlarged scope of the scheme this ministry would seek allocation of additional funds from the Department of Expenditure as may be required.

The scheme would be reviewed after 5 years.

In order to address the cost disadvantage suffered by Indian ships, finance minister Nirmala Sitharaman had, in the Union Budget for financial year 2021-22, announced a scheme providing an amount of Rs1,624 crore over five years to promote flagging of merchant ships in India by providing subsidy support to Indian shipping companies in global tenders floated by the various ministries and CPSEs.

Registration of ships can be done online within 72 hours like the world's best ships registries. This will make it easy and attractive to register ships in India and thereby aid in boosting the Indian tonnage.

In addition to this, it is intended to provide 30 days to any in-flagging vessel to replace the crew on board with Indian crew.

Similarly, steps are also being taken to rationalise the manning requirements on the ships by aligning them with international standards.

The scheme has laid out a detailed monitoring framework and also provides for effective monitoring and review of the scheme. For this, a 2-layer monitoring system which includes an Apex Review Committee (ARC) and a Scheme Review Committee (SRC).

The implementation schedule as well as the year-wise breakup assuming the maximum outgo at 15 per cent of proposed subsidy to be paid has also been estimated.

This will result in a larger and healthy Indian fleet, which will enable greater training and employment opportunities for Indian seafarers besides enhancing Indian companies' share in global shipping.

The scheme has immense potential to generate employment. Increase in Indian fleet will provide direct employment to Indian seafarers since Indian ships are required to employ only Indian seafarers.

Cadets wishing to become seafarers are required to obtain on-board training on ships. Indian ships will therefore provide training slots for young Indian cadets - both boys and girls. It would also enhance the share of Indian seafarers in global shipping.

Further, increase in Indian fleet will generate indirect employment in development of ancillary industries such as shipbuilding, ship repair, recruitment, banking, etc and contribute to the Indian GDP.