Scheme for Merchant Ships

News: The scheme for promotion of flagging of Merchant Ships was approved by the union cabinet recently.

Background:

  • Despite having a 7,500 km long coastline, a significant national EXIM trade that is steadily growing on an annual basis, a policy of 100% FDI in shipping since 1997 and Indian shipping industry and India’s national fleet is proportionately small when compared with its global counterparts.
  • Currently the Indian fleet comprises a meagre 1.2% of the world fleet in terms of capacity.
  • The share of Indian ships in the carriage of India’s EXIM trade has drastically declined from 40.7% in 1987-88 to about 7.8% in 2018-19. This has led to an increase in foreign exchange outgo on account of freight bill payments to foreign shipping companies.

Details:

  • The scheme seeks to provide Rs.1624 crore over five years as a subsidy to Indian Shipping companies in global tenders floated by Ministries and CPSEs for import of government cargo.
  • The budgetary support would be provided directly to the Ministry/Department concerned.
  • The subsidy support would be extended only to those ships which have bagged the award after the implementation of the scheme. Flexibility in the allocation of funds for expenditure from one year to another and within the various Ministries/Departments of the scheme.
  • Ships older than 20 years would not be eligible for any subsidy.

Significance:

  • Potential to generate employment: Increase in Indian fleet will provide direct employment to Indian seafarers since Indian ships are required to employ only Indian seafarers.
  • Cadets wishing to become seafarers are required to obtain on-board training on ships. Indian ships will therefore provide training slots for young Indian cadet boys and girls.
  • This shall enhance the share of Indian seafarers in global shipping, and thus Indian supply of Seafarers to the world will increase manifold.
  • The increase in Indian fleet will also generate indirect employment in development of ancillary industries such as shipbuilding, ship repair, recruitment, banking, etc. and contribute to the Indian GDP.