To give a competitive advantage to Indian shipbuilding industry, the Parliamentary Standing Committee on Transport has suggested the formation of a cluster concept in the country for benefiting shipbuilding and repair industry.
Shipbuilding industry world over is developed in a cluster concept and most of the original equipment manufacturers (OEMs) and raw material suppliers are ideally located in and around a shipyard, which gives the yard logistical advantage and competitive strength, the committee noted.
Wondering why such cluster concept could not take off in India, the panel headed by Sitaram Yechury asked the Government to create a business environment for the growth of OEMs and raw material suppliers in nearby localities of the 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.
Tax provisions
In its 200th report submitted to Rajya Sabha, the committee also questioned the prevailing tax provisions in the ship repair industry, which negatively impact the competitiveness of the public sector Cochin Shipyard Ltd.
The ship repair market is highly competitive and in order to secure orders against international competition, the existing tax provisions should be changed, the committee observed.
VAT, service tax exemptions
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 the Kerala Government to re-evaluate the various taxes imposed on the ship repair industry to enable Cochin Shipyard to compete with other major ship repair dockyards.
The committee noted that Cochin Shipyard had entered into the ship repair business in 1981 and since then, it has gained expertise in undertaking complex and sophisticated repairs in various types of ships, including bulk carriers, tankers, oil rigs etc. It has one of the best infrastructures in India.
Panel proposals
Taking into account these advantages, the committee recommended various PSUs and government entities such as SCI, DCI, DRDO, Fishery Survey of India etc to place orders with CSL on a nomination basis to meet their requirements.
In view of the various problems faced by Cochin Shipyard, the panel recommended invoking of shipbuilding subsidy as prevalent earlier to foster shipbuilding activities as well as consideration of Customs duty exemption for capital goods imported for various works related with shipbuilding.