The government has granted infrastructure status to the shipyard industry, a move that will help the sectoral players get long-term financing at cheaper rates.
A Gazette notification issued by Department of Economic Affairs in the Ministry of Finance last month issued an “updated Harmonized Master List of Infrastructure.”
“The new list incorporates the following change to the notification dated October 13, 2014: Under the Category of ‘Transport’ a new sub-sector – Shipyards is added,” the notification said.
The move will benefit private shipyards of L&T, Reliance Defence and Engineering Shipyard and ABG Shipyard.
The transport sector now has seven sub-sectors – roads and bridges, ports, shipyards, inland waterways, airport, railway tracksand urban public transport.
The infrastructure status would help shipyards avail cheaper financing. At present, companies pay average interest of 14-15 per cent on their borrowings.
The status is also expected to give a boost to government’s ‘Make in India’ initiative as cheaper finance will help Indian shipbuilders overcome, to a large extent, cost disadvantage on building ships.
With this, the shipyard industry will be able to avail flexible structuring of long-term project loans, long-term funding from infra funds at lower interest rates and longer tenure equivalent to the economic life of their assets, relaxed ECB norms, issuance of infrastructure bonds for meeting working capital requirements as well as benefits under Income Tax Act, 1961.
The notification defined shipyards as “a floating or land-based facility with the essential features of waterfront, turning basin, berthing and docking facility, slipways and/or ship lifts, and which is self sufficient for carrying on shipbuilding/repair/breaking activities”.
Other infrastructure sectors include energy, water and sanitation, communication and social and commercial infrastructure.
Energy includes electricity generation, transmission and distribution, oil pipelines, oil/gas/LNG storage facility and gas pipelines.
Solid waste management, water supply pipelines, water treatment plants, irrigation projects, storm water drainage system, slurry pipelines and sewage collection, treatment and disposal system are part of water and sanitation.
Communication includes fixed network and towers of telecommunication while social and commercial infrastructure includes education institutions, hospitals, three-start of higher category hotels, common infrastructure for industrial parks, post-harvest storage infrastructure, cold chains and convention centres with project cost of more than Rs 300 crore each.