Twenty two private shipyards of India have asked the government to infuse Rs 50 billion in working capital in order to keep the industry afloat. The domestic shipyard industry has around Rs 250 billion of stressed loans. Two big players Bharati Shipyard and ABG Shipyard are on the insolvency route.
The private shipyards, including those belonging to L&T and Reliance, under the banner of Shipyard Association of India met Union Minister of shipping and ports Nitin Gadkari on Monday. Among their various demands, one was the setting up of a Shipbuilding Development Fund of Rs 150 billion to finance working capital, refinance existing credit and capital expenditure.
They also asked the government to set up an empowered Shipbuilding Division within the shipping ministry which would ensure higher utilization of capacity and liberalization of tender terms.
At the meeting, key players in India’s private shipbuilding sought a level playing field between the PSUs and private shipyards.
“Indian private sector shipyards have demonstrated world-class quality and workmanship, which we pride ourselves on. Despite all this, the industry is in turmoil due to circumstances beyond our control. We strongly urge the government to step in to ensure that this strategic sector is nurtured to achieve self-sustenance like China, Korea, etc.,” V Kumar, President of SAI, said.
He said the Indian Government is directing and awarding most of its orders today to public sector shipyards. Given present capacities, this would mean that the ships will be delivered in about 20 years, leading to a security vulnerability, he said.
Suresh cited reports of KPMG, PwC & E&Y to say the industry generates 6.4 times more employment through downstream industry segments. "Today’s private sector shipyards face extreme hardship and a starvation of orders due to the global meltdown of the shipbuilding market over the past 7-8 years, and deprivation of domestic orders on account of nomination to PSU shipyards,” he said.
They also pointed out that during between 2002 and 2007, the Government declared a subsidy scheme for all shipbuilding contracts made during the period. The majority of contracts, however, were signed at the fag end of the period as it took considerable time for Indian shipyards to market their capabilities in the international arena and convert them into orders. There were still outstanding dues that the Government has to pay shipyards. Put together, the total subsidy claim pending with the Government under the old subsidy scheme (2002-2007) is more than Rs 9 billion, they said.