In Shipbuilding News 11/05/2015
India should follow the ‘cluster’ concept adopted by China in shipbuilding, which will reduce cost of making ships, say industry observers who see great potential for the sector in the “Make in India” programme.
In a cluster concept, suppliers of materials and equipments and the ancillary units that provide support services will be located in and around shipyards.
Tax structure
This ensures timely supply of materials and helps reduce delivery time. In India, since most of the materials are imported, there is a considerable lag in procuring materials. There is a lack of ease and flexibility in procuring also.
Moreover, the ancillary units are burdened by high service tax. The tax regime in the shipbuilding sector needs to be aligned with international practices.
When the industry is closely competing with international yards, the stringent tax regime undermines the competitiveness of the industry, K Subramanian, Chairman and Managing Director, Cochin Shipyard Ltd, said. Citing the service tax levied on ancillary activities in shipbuilding, he said the Indian yards and small fabricators and other ancillaries are grappling with service tax notices running into crores.
Ancillaries at risk
The domestic ship builders want the ancillaries to survive. If ancillaries are shut down their operations due to tax burden, the shipyards will be immediately hit, he said.
Another issue is the local availability of basic ship designs. In other countries, designs are standardised — be it for inland water crafts or coastal crafts — so that it is simpler for costing and ordering equipments, or even for bidding for construction.
Funds for working capital and expansion are other areas where the industry is lacking support.
Ship building is a typical industry where the working capital funds are tied for long gestation periods. This may range between ₹25-100 crore. There is hardly any source for low cost funds to support entrepreneurs, he said.
Infrastructure status, coupled with arrangements for low funds, is a must for the industry, senior officials in the shipyard points out. The industry hopes the proposed policy of the Shipping Ministry for shipyards will address these issues. The Ministry has been trying to provide shipbuilding opportunities to Indian shipyards by trying to source domestic requirement of ships from the Indian yards.
