The ministries of finance and defence have opposed the shipping ministrys demand for subsidies to the ship-building industry. While the defence ministry has said that it will benefit private players and deny a level playing field for defence shipyards,the finance ministry has argued that open-ended subsidies cannot be given and shipyards must become self-reliant and the maritime states should provide free land and infrastructure support to them.
Participating in a recent meeting of the Committee of Secretaries (CoS) chaired by cabinet secretary Ajit Seth,defence ministry officials said domestic military shipbuilding capability needs to be strengthened and if any such subsidy is extended,then it must include the defence shipyards as well.
In their arguments,the officials said that the proposed subsidy scheme would not be a correct policy measure in the long run as it would favour private shipbuilders,who were competing with military shipyards for defence orders.
The government did introduce a subsidy scheme between 2002 to 2007,but thereafter discontinued it.
The scheme offered shipyards a 30 per cent subsidy on the bid price would be available to shipyards on domestic orders for the construction of a merchant vessel of minimum length of 80 metres and for export orders,ships of all types and capacities were eligible.
While public sector shipyards got subsidy in instalments,private shipyards could receive it after the vessel was delivered to the buyer.
The shipping ministry has sought the CoSs nod for re-introducing the subsidy scheme for the shipyards amounting to Rs 7,243 crore for five years from 2012-13 to 2017-18.
The ministry has justified the demand saying that Indian shipyards need to regain their competitiveness that has been eroded by high customs duties and high capital costs.