Cabinet okays scheme to provide Rs 1,624 cr over 5 years as subsidy to Indian shipping companies

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Updated: July 14, 2021 6:48 PM

It said that the rate at which the above subsidy support is extended would be reduced by 1 per cent every year, till it falls to 10 per cent and 5 per cent, respectively, for the two categories of ships.

The statement said steps are also being taken to rationalize the manning requirements on the ships by aligning them with international standards. (Representative image)

The Union Cabinet on Wednesday approved a scheme to provide Rs 1,624 crore over five years as subsidy to Indian shipping companies in global tenders floated by ministries and CPSEs for import of government cargo, an official statement said.

According to the statement, registration shall be done online within 72 hours like the world’s best ships registries and this will make it easy and attractive to register ships in India and thereby aid in boosting the Indian tonnage.

“In addition to this, it is intended to provide 30 days to any in-flagging vessel to replace the crew on board with Indian crew,” it added.

In order to address the cost disadvantage suffered by Indian flag ships, Finance Minister Nirmala Sitharaman in her Union Budget for 2021-22 speech had announced a scheme providing Rs 1,624 crore over five years to promote flagging of merchant ships in India by providing subsidy support to Indian shipping companies in global tenders floated by ministries and central public sector enterprises (CPSEs).

The statement said steps are also being taken to rationalise the manning requirements on the ships by aligning them with international standards.

It further explained that for a ship which is flagged in India after February 1, 2021 and is less than 10 years at the time of flagging in India, the subsidy support would be extended at 15 per cent of the quote offered by the L1 foreign shipping company or the actual difference between the quote offered by the Indian flag vessel exercising Right of First Refusal (ROFR) and the quote offered by the L1 foreign shipping company, whichever is less.

According to the statement, for a ship which is flagged in India after February 1, 2021 and which is between 10 to 20 years old at the time of flagging in India, the subsidy support would be extended at 10 per cent of the quote offered by the L1 foreign shipping company or the actual difference between the quote offered by the Indian flag vessel exercising ROFR and the quote offered by the L1 foreign shipping company, whichever is less.

It said that the rate at which the above subsidy support is extended would be reduced by 1 per cent every year, till it falls to 10 per cent and 5 per cent, respectively, for the two categories of ships.

The statement pointed out that the provisions of this subsidy support would not be available in case where an Indian flagged vessel is the L1 bidder.

The budgetary support would be provided directly to the ministry/department concerned, it said.

According to the statement, the subsidy support would be extended only to those ships which have bagged the award after the implementation of the scheme and ships older than 20 years would not be eligible for any subsidy under the scheme.

The scheme would be reviewed after 5 years, the statement said adding that the scheme has immense potential to generate employment.

“Increase in Indian fleet will provide direct employment to Indian seafarers since Indian ships are required to employ only Indian seafarers,” it said.

The statement pointed out that despite having a 7,500 km long coastline, a significant national EXIM trade that is steadily growing on an annual basis, a policy of 100 per cent FDI in shipping since 1997 and Indian shipping industry and India’s national fleet is proportionately small when compared with its global counterparts.

Currently, the Indian fleet comprises of a meagre 1.2 per cent of the world fleet in terms of capacity. The share of Indian ships in the carriage of India’s EXIM trade has drastically declined from 40.7 per cent in 1987-88 to about 7.8 per cent in 2018-19.

This has led to an increase in foreign exchange outgo on account of freight bill payments to foreign shipping companies, to the tune of around USD 53 billion in 2018-19 and approximately USD 637 billion during the last 13 years.

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