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Shipbuilding India Case Study

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The following course of action, which is an integrated approach, is suggested for ensuring development of shipbuilding sector in India. It is believed that this will remove the structural weakness of the industry as well as address other concerns.

Dedicated SEZ
All ships including dredgers imported by Indian owners from abroad are fully exempted from customs duty. Hence the existing shipbuilding industry is totally unprotected. In fact customs duty of the order of about 35% is imposed on all capital equipment required for shipbuilding even though this measure does not protect any industry in India. There is therefore a need to accord export status for building ships which are built in India for Indian owners. Both existing and future shipyards …show more content…
Presently most of the designs or part thereof are imported from abroad and virtually there is no innovation indigenously. Availability of design and a strong capability in the Shipyard will enable keeping delivery schedules and cut cost dramatically. The credibility of the shipyard also goes up. There is a need to encourage design and provide fiscal benefits as given to R&D investments in the pharma sector.

Ancillary Industry Development
Almost all the machinery and equipment required inside a ship are presently imported, because it is cheaper as well as of good quality. The same is not produced in India because of low volumes eg. Main engine, gear boxes, shafting, propellers, generators, switchboards, valves, pumps etc. Therefore even though India has the industrial capability, there is no incentive to produce in the country due to low volumes. Hence dedicated areas in the SEZ must be earmarked for ancillary industry also to come up.

Subsidy
Shipbuilding skills take a long time to nurture and build up and industries take time to be set up. Hence the present subsidy scheme needs to be extended for at least the next 10 years so that Indian shipbuilding fully establishes itself in the global …show more content…
This is totally unwarranted as it does not protect any indigenous industry. This inflates the cost of establishment/expansion of shipyard as compared to International Yards and permanently disables the shipyards in terms of higher capital cost, interest cost and depreciation charges. This also results in reduced return on capital employed and inherently increases the risk profile of investment. Therefore, it is recommended that these investments be exempt from customs/excise duty till such time as the SEZ status is not accorded to the shipyards.
Custom bonded warehouse Rules should be amended to suit Shipbuilding industry including the period for which materials can be stored. Presently, Sec 65 of the Customs Act and its varied interpretations results in a huge increase in cost of production. The whole issue of storage and issue of material for shipbuilding is totally oriented to meet customs procedures and NOT commensurate with industry practice abroad.
There is a need to promote single point taxation or rationalize tax structure (State and Central) in line with competitive yards in South East Asia, viz. Colombo, Dubai, etc. since it is a global market we are

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