Will support brownfield projects with 25% of ₹8.2K cr fund: Shipping secy

Financial aid, cluster development, and credit note scheme aim to modernize Indian shipyards

The central government will provide up to 25 per cent financial assistance to shipbuilders from the ₹8,261 crore fund for brownfield expansion, incentivising public and private sector companies to invest in adding capacity, Shipping Secretary T K Ramachandran told Business Standard. 

This fund is part of the recently announced ₹70,000 crore package for the shipbuilding sector.  

On Wednesday, the Union cabinet had approved the shipbuilding cluster development scheme worth ₹20,000 crore, which will be utilised for developing both greenfield and brownfield shipbuilding clusters over 10 years.  

Existing shipyards will be supported by double benefits: First, capital support from the Centre for the yard, and second, the ₹25,000 crore revamped Shipbuilding Financial Assistance Scheme (SBFAS) which will partly fund the delivery of the vessel itself (up to 25 per cent), Ramachandran said. 

Under the scheme, vessels valued at less than ₹100 crore will get a support of 15 per cent, while those valued higher will get benefits of up to 25 per cent depending on the type and modalities. 

For new shipyards, the Centre has identified around a dozen locations for the development of three shipbuilding clusters attracting investment of ₹3,000 crore under the ₹9,930 crore greenfield expansion component of the shipbuilding cluster development scheme, the secretary said. These clusters are Tuticorin in Tamil Nadu, Dugarajapatnam in Andhra Pradesh, Kendrapada in Odisha, Dighi, Jaigarh and Vijaydurg in Maharashtra, and the Kutch, Porbandar and Bhavnagar regions in Gujarat.  

“The offer for the land will be made by the states and then there will be an assessment of which three locations will be finalised based on the availability of ancillary industries, techno-economic feasibility reports, and preferences of anchor investors for setting up of the facility,” Ramachandran said. 

The government has been working on a plan to develop three mega shipbuilding clusters worth around ₹25,000 crore in the long-term and is looking for large anchor shipbuilders who would kickstart the development. The secretary said the top shipyards in the world have been approached to be the anchors. 

The cabinet also approved a credit note scheme worth ₹4,000 crore, which is similar to the vehicle scrappage policy for automobiles. Under this, a credit note of 40 per cent of the vessel’s scrap value will be issued when scrapped in an Indian yard, which will be reimbursable against the cost of constructing a new vessel in an Indian shipyard. “Our yards are compliant with the Hong Kong Convention. With the recent sea incidents, international players are realising that there is a need to replace old ships. With this, international shipping firms have told us that they will look increasingly at India for many of their ships to be broken,” he said.