Shipping ministry seeks govt nod for maritime fund

Shipyard expected to have a positive net worth during the immediate preceding financial year

The Ministry of Shipping has sought the government’s approval for setting up a maritime development fund that will meet the financing needs of the entire maritime sector, including shipbuilding.

According to sources, this is part of the long-term solutions suggested by the shipping ministry to support and promote the domestic shipbuilding industry.

The ministry is also of the view that shipyards should be allowed to access external commercial borrowing by the Reserve Bank of India for working capital under the automatic route. 

The ministry has also suggested that the government or public sector undertakings, which are ordering ships for commercial use, should offer the right of first refusal policy to Indian companies so that they can match the lowest price offered by a foreign company. 

Also to make financing easier, foreign currency pre-shipment credit should be extended beyond the current stipulation of 30 days.

The Department of Financial Services, in a review meeting with public sector banks in 2015, took up the issue of stalled projects. The respective ministries were asked to spell out the stalled projects in their sectors and the initiatives the government needs to take to address the hurdles.

A government report had stated that between October and December 2013, banks received 194 projects involving an investment of Rs 468,665 crore. However, during the April 2014-January 2015 period, the number of new projects was down to 88 with an investment of Rs 141,830 crore.

The shipbuilding policy, approved by the Cabinet last year, grants the right of first refusal to Indian shipyards on government purchases and ship repairs whereby local shipbuilders can take up state-funded contracts by matching the lowest price offered by overseas entities in a public auction.

The shipyard should have a positive net worth during the immediate preceding financial year. In case an Indian shipyard does not have a positive net worth as required during the immediate preceding financial year, it should provide a comfort letter from scheduled banks indicating to provide necessary financial support (at least 60 per cent of the value of the contract for shipbuilding and 50 per cent of the value of the contract for ship repairs) to execute the project.

This is part of the guidelines to implement the financial assistance scheme cleared by the Cabinet last year.

The financial assistance to shipbuilders — both state-owned and private — will be valid for a 10-year period beginning April 1, 2016, scaling down the quantum by three percentage points every three years till 2025 when the financial assistance scheme ends.

Afterwards, only Indian-built vessels shall be procured by such departments and agencies for governmental purposes or for own purposes. Such departments and agencies have to undertake bulk tendering for their entire vessel-related requirements with deliveries starting from 2017-2018.

Indian shipyards will be qualified based on a technical qualification template drafted by the government.