Are Better Days Ahead For The Indian Ship Building Industry?

In line with trends in global trade, the global ship building industry witnessed a continued contraction during the period 2008 to 2012. The industry in major ship-building nations such as China, Korea, Japan, Philippines, Vietnam and India witnessed this contraction. However, when India's competitors received financial support from their respective governments, the Indian ship building industry was burdened with levies and duties. 

In India, the major policy support mechanism for the ship building industry has been the ship building subsidy scheme 2002, which provided a 30% subsidy and extended to cover private shipyards. However, the subsidy scheme was withdrawn in August 2007. Apart from the subsidy scheme, the Indian ship building sector is subject to taxes and duties such as excise duty, customs duty, as well as value added tax. The other challenges faced by this industry also include lack of high capacity shipyards and lack of skilled labor.

The Director General of Shipping, Gautam Chatterjee on Tuesday made an appeal to ease down the burden of heavy taxes on the ship building industry. "High interest rates to increasing working capital accounts for 25-30% of the cost of the ship, which is too expensive," he added. 
The Indian ship building industry has been in turmoil not only because of the economic downturn but also due to lack of support from the government. The newly elected government in its recent union budget has given massive boost in promoting Indian ship building. The government has promised that the ship building industry has better days ahead.

The industry has been looking at the advantages as the new government had promised launching of a holistic policy. Also out of the 28 shipyards eight are government owned and 20 are private sector. India has a vast coastline for about 7517 km with a strong low cost labour force.

Yaduvendra Mathur, Chairman and MD, Exim Bank commented, 65% of the value of the ship is accounted for by ancillaries, India should focus on developing a local ancillary industry. However, a notable suggestion was given by Vijay Kalantari, "Industry should explore demand for smaller boats for coastal shipping and tourism."

R C Arora, General Manager Gail added that, "Ship building industry has the potential to significantly contribute to the GDP. The sector has an immense impact on manufacturing industry, besides its huge dependence on infrastructure and services sector in economy."