Lok Sabha Question No. 708 (UNSTARRED), answered on 2024-07-26
Subject: Shipbuilding Financial Assistance Policy
Ministry: PORTS, SHIPPING AND WATERWAYS
Asked by: Shri Dushyant Singh, Dr. Rani Srikumar

## LOK SABHA UNSTARRED QUESTION NO-708

ANSWERED ON - 26.07.2024

## SHIPBUILDING FINANCIAL ASSISTANCE POLICY

## 708.  SHRI DUSHYANT SINGH: DR. RANI SRIKUMAR:

Will the Minister of PORTS, SHIPPING AND WATERWAYS be pleased to state:

## पȅन , पोत पįरवहन और जलमागŊ मंũी

(a) whether the government  has  evaluated effectiveness and utilization of the Shipbuilding  Financial  Assistance  Policy  for  Indian  Shipyards  and  if  so,  the  details thereof, if not, the reasons therefor;

(b)  whether  the  Government has identified any technical reasons like high imports of material  for  shipbuilding,  less  automation  in  the  shipbuilding  processes  etc.  that  are affecting the competitiveness of Indian Shipyards; and

(c) If so, the details thereof along with the Government initiatives to encourage domestic shipbuilding in the country?

## ANSWER

## MINISTER OF PORTS, SHIPPING AND WATERWAYS (SHRI SARBANANDA SONOWAL)

(a) Shipbuilding Financial Assistance Policy (SBFAP) provides Indian Shipyards a level playing  field  vis-à-vis  Foreign  Shipyards  for  domestic  and  international  shipbuilding orders. This scheme is aimed for revival and promotion of Shipbuilding industry in India for shipbuilding contracts signed from 2016 to 2026. It is noted that, public and private shipyards  like  Cochin  Shipyard  Ltd,  Chowgule  Shipyard,  Mazgaon  Shipyard,  Garden Reach  Shipbuilders  and  Engineers  etc  have  secured  several  domestic  and  foreign shipbuilding  orders,  thereby  leveraging  the  availability  of  financial  assistance  through SBFAP.  In  the  SBFAP  scheme,  a  total  of  313  vessel  ordersencompassing  both domestic and export orders have been procured by 39 shipyards since the inception of the  scheme,    with  a  total  value  of  approximately  Rs.  10,500  crore.  These  shipyards have received financial assistance totaling Rs. 337 crores for delivering 135 vessels to the domestic and international ship owners.

(b)  &  (c)    Lower  domestic  demand  for  commercial  shipbuilding,  high  cost  of  finance, relatively small ancillary industry, less automation etc. are seen as reasons affecting the competitiveness of Indian Shipyards.

The  details  of  the  Government  initiatives  to  encourage  domestic  shipbuilding  in  the country are as under:

(i).  To  increase  indigenous  shipbuilding  with  regard  to  modern  technologies  and machinery, the Ministry has amended the SBFAP guidelines to include

- a)  Wind  farm  installation  vessels  and  construction  of  sophisticated  dredgers  as specialized vessels which are eligible to get higher financial assistance, over and above  ₹40 Crores which is upper limit for non-specialized vessels.
- b)  Financial  assistance  of  30% for vessels  where  main propulsion  is  achieved  by means of green fuels such as Methanol/ Ammonia / Hydrogen fuel cells,
- c)  Financial  assistance  of  20%  for  vessels  with  electric  means  of  propulsion  or vessels fitted with hybrid propulsion system.

(ii).  To  promote  indigenous  shipbuilding,  the Government  entities  dealing  with  ship building and ship-owning are advised to ensure local content as per the Government of India Public Procurement (Preference to Make in India) Order, 2017. As per this Order, procurement of ships of less than ₹200 crores is required to be from Indian shipyards.

(iii).  Government  of  India  vide  Gazette  Notification  No.  112  dated  April  13,  2016  has provided infrastructure status to Shipyards.  The 'Shipyards' have been defined therein as a floating or land-based facility having requisite facilities for carrying on shipbuilding/repair/breaking activities. Infrastructure status would enable Indian shipyards to avail cheaper long-term source of capital and would enable the shipyards to  reduce  their  cost  disadvantage  and  invest  in  capacity  expansion  thereby  giving  a boost to the Indian shipbuilding industry.

(iv).  The  Government,  in  November,  2021,has  released  Standard  Tug  Designsof  five variants for use by Major Ports for procurement of tugs to be built in Indian Shipyards.

(v).  Government  has  issued  guidelines  on  19.05.2016  for  evaluating  and  awarding tenders  for  new  shipbuilding  orders  floated  by  government  departments  or  agencies including  public  sector  undertakings  for  acquisition  of  any  type  of  vessel(s)  used  by them  for  Governmental  purposes  or  for  their  own  use.  Whenever  acquisition  of  a vessel(s) is undertaken through tendering route, the qualified Indian Shipyards will have a 'Right of First Refusal' to enable them to match the evaluated lowest price offered by the  foreign  shipyard  which  is  aimed  at  increasing  ship  building  activities  in  Indian shipyards.

(vi). To promote indigenous shipbuilding, the Ministry of Ports, Shipping and Waterways on 20.09.2023 has revised the hierarchy of Right of First Refusal (RoFR) to be followed for all kind of tender. The revised hierarchy of RoFR is:

- (1) Indian built, Indian flagged and Indian owned
- (2) Indian built, Indian flagged and Indian IFSCA owned
- (3) Foreign built, Indian flagged and Indian owned
- (4) Foreign built, Indian flagged and Indian IFSCA owned
- (5) Indian built, foreign flagged and foreign owned
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