It will also increase training opportunities and employment for seafarers.
The Union Cabinet on Wednesday approved a subsidy scheme for shipping companies during global tenders for import of government cargo.
The scheme provides a subsidy of ₹1,624 crore over five years.
The subsidy support varies from 5% to 15% of the lowest bid by a foreign shipping company depending on whether the ship was flagged after or before February 1, 2021, and the age of the ship at the time of flagging in India. However, ships older than 20 years will not be eligible under the scheme, according to the Ministry of Ports, Shipping and Waterways.
The provisions of this scheme will not be available if the lowest bidder is an Indian flagged vessel.
Finance Minister Nirmala Sitharaman had first announced the scheme during her Budget speech earlier this year.
“A strong and diverse indigenous shipping fleet will not only lead to foreign exchange savings on account of freight bill payments made to foreign shipping companies but would also reduce excessive dependence on foreign ships for transporting India’s critical cargoes,” according to the press statement. Additionally, the scheme is likely to lead to increase in training opportunities and employment for Indian seafarers, increase in collection of various taxes, development of ancillary industries and improved ability to borrow funds from banks.
Despite having a 7,500-km long coastline, India’s fleet comprises a meagre 1.2% of the world fleet in terms of capacity. The share of Indian ships in the carriage of export and import trade has declined from 40.7% in 1987-88 to about 7.8% in 2018-19. This has also resulted in an increase in foreign exchange outgo on account of freight bill payments to foreign shipping companies, which was at $53 billion in 2018-19.
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