Longer loan tenure for shipbuilders likely

The Union shipping ministry has sought longer working capital loan tenure for the shipbuilding industry, following a demand from the debt-heavy sector.
 
The current tenure is six months. A letter had gone to the department of financial services (DFS) on this issue.
 
According to an official, “Shipbuilding takes two to three years. We want the tenure increased to cover the entire manufacturing process of a ship.”
 

This comes against the backdrop of the central government’s effort to revive stalled projects across sectors. In a review meeting with public sector banks in 2015, DFS took up the issue. Each ministry was asked to detail the problem and the initiatives needed to address the hurdles.

 
Some media reports based on March 2015 data indicated 299 mega projects involving an outlay of Rs 18.13 lakh crore remain stalled with the Project Management Group. A government report had stated that between October and December 2013, banks received 194 projects involving an investment of Rs 4,68,665 crore. However, during the period April 2014-January 2015, the number of new projects were down to 88, with an investment of Rs 1,41,830 crore.
 
A new shipbuilding policy was approved by the Cabinet last year. It grants a right of first refusal to Indian shipyards on government purchase and ship repair, whereby local shipbuilders can take up state-funded contracts by matching the lowest price offered by foreign entities in a public auction.

 
The shipyard should have positive net worth during the immediate preceding financial year. If it does not, it should provide a letter from a scheduled bank on providing the needed financial support (at least 60 per cent of the value of contract for shipbuilding and 50 per cent for repair).