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India: Shipping may get infra tag in boost for shipbuilding, vessel owners

The Union government is working on a plan to grant infrastructure status to the shipping industry, including coastal shipping, two people aware of the development said. The move aims to promote ownership and construction of vessels in the country.

A proposal in the works will allow shipping entities to secure earlier financial access from commercial banks with long-term repayment periods at low interest rates.

Shipyards were granted infrastructure status since 2016, enabling them to avail of flexible structuring of long-term project loans at lower interest rates for tenures equivalent to the economic life of their assets. This also means ship builders can issue infrastructure bonds to meet working capital requirements and enjoy tax benefits. However, this status remains closed to the shipping industry, depriving shippers who need long-term funds to purchase vessels and support domestic shipbuilding with bigger orders.

“Infrastructure sector status would allow Indian companies to buy more ships, both for coastal and global shipping operations, as banking funds would be available for capital-intensive purchases with repayments linked to the asset’s life spanning 12–15 years. This has been a demand of the industry that will promote acquisition of ships, barges, offshore rigs and expand the country’s maritime footprint,” said Anil Devli, CEO of the Indian National Shipowners’ Association (Insa).

The ministry of ports, shipping, and waterways (MoPSW) has already proposed including coastal shipping as a sector in the “Harmonized list of Infrastructure” to make it eligible for various concessions and help in attracting cargo and passengers to this mode of transport. One of the two persons quoted above said that this proposal is being expanded to include the entire shipping sector to promote faster growth and development of the sector.

A query sent to the shipping ministry remained unanswered.

The proposal may form part of the interim budget to be presented on 1 February.

Apart from infrastructure status, the government is also likely to extend MoPSW’s capital subsidy scheme—Shipbuilding Financial Assistance Policy (SBFAP)—by another 10 years under Amritkaal Maritime Vision 2047. The scheme ends in March 2026.

The scheme provides financial assistance to Indian shipyards for shipbuilding contracts signed between 1 April 2016 and 31 March 2026, with the rate of financial assistance starting from 20% in 2016 and diminishing to 11% in 2026.

As per shipping ministry data, as on 31 December 2022, India had a fleet strength of 1,520 vessels with 13.69 million gross tonnage (GT), compared with 1,491 vessels with 12.99 million GT at the end of December 2021. This reflects a net addition of 29 vessels with an increase of 0.7 million GT during the calendar year 2022.

India currently has less than 1% share of the global shipbuilding market, which is dominated by China, South Korea, and Japan.

Out of the 1,520 vessels registered as on 31 December 2022, 1,034 vessels (68%) with 1.58 million GT were engaged in coastal trade and the remaining 486 vessels (32%) with 12.11 million GT were deployed for overseas trade. The age profile of Indian merchant shipping vessels indicates that about 44.2% of the fleet is above 20 years of age, 13.7% between 16 and 20 years, 20.3% between 11 and 15 years, 13.2% between 6 and 10 years, while 8.7% was below 5 years. This means that a lot of replacement of existing merchant ships would be required over next couple of years. Infrastructure status is expected to promote this replacement while also supporting buying of new ships.
Source: Livemint

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