Govt sets stiff terms on granting shipbuilders state aid

Local shipyards will be entitled to a maximum state aid of Rs.40 crore to build a standard ship within

three years from the date of contract, according to norms framed by the shipping ministry following

the shipbuilding financial assistance policy approved by the Union cabinet in December 2015.

The financial assistance to shipbuilders–both state-owned and private–will be valid for a 10-year

period beginning 1 April 2016, scaling down the quantum by three percentage points every three

years, starting with 20% during the first three years, 17% for the next three years, 14% for the next

three years and 11% in the 10th year.

The quantum of financial assistance for a vessel will be a product of the applicable rate of financial

assistance prevailing on the date of contract, and the lower of the contract price or the fair price

when converted into rupees.

A standard vessel is not a specialized vessel. Its fair price will be determined on a periodic basis by

the competent authority based on international price trends.

Shipbuilders will get an extended time frame of six years for constructing specialized vessels such as

liquefied natural gas (LNG), liquefied petroleum gas (LPG), passenger ships built under the Indian

Merchant Shipping Act with a minimum capacity of 500 passengers, chemical tankers, floating or

submersible drilling or production platforms; floating, production, storage and offloading (FPSO)

units, floating, storage and offloading (FSO) units, floating, storage, regasification units (FSRUs),

mobile offshore drilling unit (MODU) rigs and mobile offshore production units.

The maximum state aid for specialized ships has not been spelt out.

At the time of release of financial assistance, if the actual payment received for a vessel is lower than

the contract price, the payment will replace the contract price in computing the formulae for

financial assistance.

In case of a contract won in a global tender or competitive bidding, the bid price will be treated as

contract price for computing aid.

For shipbuilding contracts signed for construction of more than one vessel, only those vessels under

the contract whose date of delivery falls within the three year period or extended period of six years

for specialized vessels will be eligible to claim financial assistance. And, only those ships that are

delivered within three years or six years from the date of contract will be entitled to receive the aid.

A major portion of the hull of the vessel for which financial assistance is claimed has to be built in

India. Besides, installation and commissioning of the major machinery and equipment and

tests/trials of the vessel has to be done in India. In case any test/trials are required to be conducted

outside India in terms of the contract/owner requirements, it shall also be included for grant of

financial assistance.

The financial assistance scheme does not cover vessels built for an Indian buyer or ship owner, which

does not exceed 24 meters, vessels made of wood irrespective of their lengths, vessels for

construction of which, monetary subsidy, grant or incentive is being given under any other policy or

scheme of the central or state government, vessels built for defence purposes or for use by Navy or

Coast Guard, vessels built under contracts secured on nomination basis from the central or state

government or their agencies excluding central public sector enterprises or state public sector

enterprises.

If any of the information furnished in the claim is found to be incorrect at a later stage, the shipyard

must return the money along with interest at the rate of 18% computed from the date of release of

such financial assistance till the date of repayment.

NGS INDIA