India Announces $600 Million Shipyard Subsidy


By MarEx 2015-12-10 16:49:29

As part of the government's “Made In India” initiative, Prime Minister Narendra Modi's cabinet has approved $600 million in direct cash subsidies for Indian shipyards over a ten year period. The subsidy will be used to discount the price after delivery of new vessels by 20 percent.

All vessel types are eligible for the program.

The proposal, described by the government as “financial assistance” rather than a “subsidy,” is reported to have strong backing from the Prime Minister. In addition to the cash assistance, it gives Indian shipyards the right of first refusal for government purchases, as well as tax advantages.

As with shipbuilders in other nations, Indian yards have struggled to find new orders in a tough shipping environment.

ABG Shipyard senior vice-president Narendra Kumar told media that “we are passing through a difficult phase. Our order books have no significant work to show, but we are hopeful about a recovery in view of the steps taken by the Central Government."

Bharati Shipyard in Goa is even worse off. The company was forced into insolvency several years ago after the debt burden it assumed in the purchase of an offshore supply company proved too much to bear. It is now under the management of an asset restructuring company, Edelweiss ARC, which is attempting to revive the business.

But a handful are thriving. Cochin Shipyards, one of India's largest for government contracts in defense and commercial shipbuilding, is set for an IPO with the government selling off 10 percent of its stake. Thanks to a long orderbook and little debt, its future looks secure.

“Government defense orders, as well as those from state-owned Shipping Corporation of India (SCI), will flow to Cochin Shipyard, which is like business flowing from one government department to another,” an industry observer told media.

The funds raised in the offering will be used in the construction of an International Ship Repair Facility (ISRF) and a drydock for very large vessels, rigs and semi-submersibles.