India Gaining the Favour of Shipbuilders

India is stepping up its efforts to support the shipbuilding industry as it endeavors to establish a fund that would provide loans to its shipbuilders.

The country’s shipping ministry has launched discussions with financial institutions such as IFCI and IDBI to establish a fund of as much as Rs.15,000 crore to extend low-cost loans to shipbuilders, according to India’s business news site LiveMint.

The fund is aimed at promoting local shipbuilding and attracting foreign investments to Indian shipyards which are having various difficulties in keeping up with the competition.

Having in mind that Japanese, Chinese and Korean competitors enjoy various financial benefits from their governments, India has decided to follow in their footsteps.

This means that shipbuilding could be given a status of strategic importance and could get special economic zone (SEZ) status.

Significant burden is put on Indian shipyards as they have to pay an interest of 13-14% on capital expenditure and working capital loans for purchasing raw materials and other inputs as against around 4-6% in countries such as China and South Korea, LiveMint adds.

In an attempt to encourage building ships at home,  India’s gas utility Gail India Ltd confirmed in a filing it will shortly come out with an LNG ship charter hire tender specifying that one ship out of every lot of three ships each it plans to build within a deal with US counterparts, would be built in India.

Indian shipbuilders still lag behind their competitors in building specialized ships, such as cryogenic LNG carriers, it may take them longer to overcome the technological challenges, as first estimates indicate it would take up to six years to build these indigenously.

However, this is seen as a positive sign for local shipbuilders to invest in developing this kind of technology and acquiring the necessary know-how.