ABG, Bharati Ship, Pipavav to get big subsidy booster

Payments towards the shipbuilding subsidy scheme, which ended on August 14, 2007, will be settled by 2013, Rajeev Gupta, joint secretary (shipping), told DNA.
“The government has decided to spend Rs 5,000-6,000 crore to settle the subsidy claims, of which a major chunk will go to private players,” he said. So far, a major part of the money went to public sector players.

As per the scheme, launched in 2002, the government provided a 30% subsidy on all ship sales to foreign companies and for vessels over 80 metres long sold in the local market.
Only contracts entered into before August 14, 2007, are eligible for the subsidy claim. There are 228 claims pending under the scheme.

“Before the date for making payments under the scheme was extended (beyond August 2007), a major portion of the money went to the public sector players and only three private sector players’ claims were settled in part. But from this year, more money will flow to the private sector,” said Gupta.

Shipbuilding companies like ABG Shipyard, Bharati Shipyard and Pipavav Shipyard are thus likely to be significant beneficiaries.ABG Shipyard, which is eligible for the largest chunk of the subsidy, has an order book of $2.6 billion. Dhananjay Datar, chief financial officer of the company, said, “So far the government has not paid anything to anyone out of the amount that has spilled over. It’s just that the process has been set in motion. We received Rs 19.8 crore last year in February and the payment due now is Rs 150 crore.

Our total claim stands at Rs 1,700 crore (which will be eligible for payment as and when the ships are delivered).” According to industry experts, Bharati Shipyard has a total claim of approximately Rs 1,000 crore, of which around Rs 275 crore is due for payment. Like other private players, Bharati too received a very insignificant amount of reimbursement earlier. Its order book stands at Rs 5,500 crore.

Pipavav Shipyard, which has 22 Panamax vessels to be delivered starting April 2010, has so far not lodged any claim for subsidy. An official, on condition of anonymity, said, “The company has contracts worth Rs 818 crore for 22 vessels and the Director General, Shipping, is yet to certify the value that can be claimed. Roughly, we can claim 30% of the contract value.”

In order to promote the domestic shipbuilding industry, the government extended the subsidy scheme to private shipbuilding companies. Earlier, only state-owned companies were eligible for the subsidy.