The government announced additional income tax incentives for the domestic shipbuilding industry in a bid to help Indian shipbuilders remain afloat at a time when the global industry is going through an extended slump.
The new tax incentives include an exemption of all raw materials and parts used in the manufacture of ships, vessels, and tugs from customs and central excise duties, according to a statement from the Ministry of Finance. The sops will make the industry more competitive globally, Dhananjay Datar, CFO and Executive Director, ABG Shipyard told The Hindu.
“The shipbuilding industry worldwide is not doing well. For example, China had at a point 45 very large shipyards, now there are only eight. The rest have all been closed down. One of their biggest has gone bankrupt. Similarly, in Korea, they have a lot of large shipyards such as Hyundai and Samsung. Their combined loss for the first six months of this financial year was $6.5 billion,” Mr. Datar said. The slump started about eight years ago.
India has a small percentage of the global market share and other countries actively back the shipyards by making sure they get the necessary loans and capital, he said.
Recently, the government realised that the state-owned shipyards do not have the required capacity for the government’s defence orders, leading to large delays in delivery, Mr. Datar said. So, it gave licenses to three private shipyards — ABG, Pipapav, and L&T — for defence construction.
The government notification did away with the requirement stating that only vessels manufactured in custom-bounded warehouses were eligible for customs and excise duty exemptions. These exemptions will now be subject to actual user conditions, a move that is will make shipbuilding more efficient going forwards, Mr. Datar said.
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