The Union shipping ministry has requested the finance ministry to provide an interest subvention scheme for the shipbuilding industry as the sector grapples to attract commercial shipbuilding orders.
In a bid to reduce the cost disadvantage that Indian shipbuilders have in comparison to their global peers, including China, Korea and Japan, the ministry is also seeking tax incentives from the finance ministry, a move if provided, could rejuvenate the sector.
The sector currently contributes 0.l per cent to the global shipbuilding industry and the ministry is looking to increase the share to at least 5 per cent in the next few years.
"The ministry wants to improve prospects of the shipbuilding sector. We have lined up measures which include providing cheap loans to the companies," PK Sinha, union shipping secretary told ET.
According to officials in the ministry of shipping, one of the key measures that the ministry is seeking from the finance ministry is interest subvention on loans taken by private shipbuilders.
Interest subvention is a scheme where the government pays a certain percentage of the borrowing cost to bring down the net borrowing cost. The government currently extends the scheme to textile manufacturing units.
"The ministry had earlier sought a 15 per cent subsidy scheme for the shipbuilding sector which the finance ministry was not keen on implementing. To create a level playing field for the shipbuilding sector as compared to their global peers we want the ministry to offer certain schemes to improve the situation," a senior official at the ministry of shipping said.
The ministry has also made a recommendation to the cabinet committee of secretaries in their last meeting to introduce the interest subvention scheme, the official added.
Indian shipbuilders were earlier provided a subsidy scheme which was withdrawn in 2007 and the domestic shipbuilders have been looking forward to the defence manufacturing sector to receive fresh orders. In addition, domestic shipping companies have also been importing vessels from outside the country due to the low costs.