To give competitive advantage to the Indian shipbuilding industry, the Parliamentary Standing Committee on Transport has suggested the formation of a cluster concept in the country.
Globally, shipbuilding industry is developed in a cluster concept and most original equipment manufacturers (OEMs) and raw material suppliers are ideally located in and around shipyards — this gives shipyards logistical advantage and competitive strength, the committee noted.
Wondering why this concept has not taken off in India, the panel headed by Sitaram Yechury has asked the Government to create a favourable business environment for the growth of OEMs and raw material suppliers near shipyards.
The committee feels that the introduction of such a concept would go a long way in strengthening the country’s shipbuilding and repair industry.
In its 200th report submitted to the Rajya Sabha, the committee also questioned the prevailing tax provisions in the ship repair industry, which negatively impacts the competitiveness of public sector Cochin Shipyard Ltd.
The ship repair market is highly competitive and to secure orders, the existing tax provisions should be changed, the committee observed.
It, therefore, recommended that work contracts related to ship repair should be exempted from VAT, and ship repair activities from service tax. It also suggested that the Kerala Government re-evaluate the various taxes imposed on the ship repair industry to enable Cochin Shipyard compete with other major ship repair dockyards.
The committee noted that CSL entered the ship repair business in 1981 and since then it has gained expertise in undertaking complex and sophisticated repairs of various types of ships, including bulk carriers, tankers and oil rigs.
Taking into account these advantages, the committee recommended various PSUs and Government entities such as SCI, DCI, DRDO and Fishery Survey of India to place orders with CSL on nomination basis to meet their requirements.
In the face of various problems faced by CSL, the panel recommended invoking ship building subsidy to foster ship building activities; it also recommended a Customs duty exemption for capital goods imported for various works related to ship building.