Fleet owners jittery as FinMin favours ₹100 crore value-based criteria for infra status to ships, ET Infra

Time of India

2 days ago

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ETInfra
MUMBAI: The Ministry of Finance is pushing ahead with a value-based - vessels costing ₹100 crore and above - criteria for granting infrastructure status to ships, to implement a Union Budget announcement, a move that will exclude small ship owners or as much as 80 per cent of the Indian fleet from its scope and potentially be challenged in courts, multiple sources said.The Ministry of Ports , Shipping and Waterways had endorsed that ships of 24 metres and above by length or 500 gross tonnage (GT) and above by capacity should be accorded infrastructure status to help fleet owners access long-term, low-cost funds.After years of lobbying by the local shipping industry due to challenges associated with securing long-term, low-cost funds, Finance Minister Nirmala Sitharaman announced in her Budget speech to Parliament on February 1 that 'large ships above a specified size will be included in the infrastructure harmonised master list'.The shipping industry is miffed at the Finance Ministry 's stand on setting value-based criteria for granting infrastructure status to ships.'The government is supporting micro, small and medium enterprises (MSME's) from every side and here the Finance Ministry is advocating ₹100 crore and above as the eligibility criteria because the Finance Minister used the words 'large ships' in the Budget speech. If this sails through, then 80 per cent of our industry, which is less than ₹100 crore, will be left out of the infrastructure status,' said a ship owner.'The ₹100 crore value-based threshold will exclude the whole offshore fleet, ship owners mostly bring in second hand vessels which are less than ₹100 crore and the entire coastal shipping industry where you want to connect the hinterland through inland waterways and move the cargo along the coast, every vessel is less than ₹100 crore,' the ship owner said.Besides, new policies like the green tug transition programme where the ministry is nudging fleet owners to move to green ships, most of the vessels are less than ₹100 crores.'So, who are you trying to deny? You are trying to deny the whole medium-scale ship owners who are mainly catering to coastal movement of cargo which is a focus area for the government,' the ship owner stated.'More importantly, there is no revenue loss to the government by setting 24 metres by length or 500 GT by capacity as eligibility criteria for infrastructure status to ships. It will allow the Reserve Bank of India to include the defined ships in its master list of infrastructure sectors to facilitate long-term, low-cost funds from banks. Then, why this value based ₹100 crore system. If you see the sectors covered under infrastructure in the harmonised master list, hardly one sector may have some value associated with it, most of the sectors in the list have some kind of objective qualifying criteria. For ships, it should be length and gross tonnage, which is internationally accepted. It's an objective criterion,' he added.To substantiate this point, a second ship owner referred to the shipbuilding financial assistance given by the government wherein shipyards are entitled to receive funds for constructing normal ships having length of 24 metres and above for domestic use. For hybrid and green vessels, a lesser length is accepted under the shipbuilding financial assistance scheme to handhold adoption of new technology.By stipulating a length of 24 metres and above for funding the construction of normal ships for domestic use under the shipbuilding financial assistance scheme, the government seeks to ensure that such ships comply with international conventions on load lines, tonnage etc.For infrastructure status, the ministry has endorsed setting 24 metres and above by length or 500 GT and above by capacity, the latter criteria will also comply with the Safety Of Life At Sea (SOLAS) convention of the International Maritime Organisation (IMO), a treaty that sets minimum safety standards for merchant ships.'Quality will be maintained with these parameters. There are different types of vessels with different shapes. GT is a function of volumes, so with a lesser length also you can have a higher GT,' the second ship owner said.'Now, if you put ₹100 crore as the criteria, there will be a difference between the vessels of ₹100 crore and the vessels of 24 metres and above or 500 GT and above in the funding mechanism. In the Indian context, if the government is only looking at bigger vessels, then what about the smaller ship owners. Are you trying to create a difference between the big and the small ships for the funding mechanism and denying the benefits associated with infrastructure status to the whole medium-scale ship owners which is the largest chunk of the domestic industry,' the second ship owner asked.Even adopting the 24 metres length criteria would exclude vessels such as small boats, launches, ferries, wooden boats, passenger boats etc from the ambit of infrastructure status. 'These ships which are small will still not get infrastructure status,' he said.With the Finance Minister mentioning the words 'large ships' for infrastructure status in the Union Budget, most likely to garner some eyeballs, the Finance Ministry is yet to come to terms with the needs of the shipping industry.'Somebody in the finance ministry wanted some colour to the Budget speech and gave infrastructure status a 'large ships' spin. Now they want to define large ships with a value of ₹100 crore. You are looking to benefit the local shipping industry and there is no revenue loss for the government if the infrastructure status is based on 24 metres and above by length or 500 GT and above by capacity. So, what is the problem?' the second ship owner asked.