ABG, Bharati Shipyard, Pipavav to get big subsidy booster

ABG Shipyard Ltd. | Ship Building | Construction & Infrastructure | BSE: 532682 | NSE: ABGSHIP

08 Sep 2009 Evaluate

Payments towards the shipbuilding subsidy scheme, which ended on August 14, 2007, will be settled by 2013, says Rajeev Gupta, joint secretary (shipping). 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.

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.

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. It has received Rs 19.8 crore last year in February and the payment due now is Rs 150 crore. Its total claim stands at Rs 1,700 crore (which will be eligible for payment as and when the ships are delivered).

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.

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.

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