The Indian shipbuilding and ship repair industry is expected to grow from the current level of Rs73.1bn to reach Rs92bn ($1.75bn) by 2015 at compounded annual growth rate (CAGR) of about 8%, according to a new study by apex industry body Assocham.
The global shipbuilding industry is worth approximately Rs73tn ($1.3tn) with India accounting only 1% of it, according to the study titled ‘Shipbuilding Industry in India: An overview’.
A CAGR of about 24% is seen in the worldwide shipbuilding and ship repairing industry, which is likely to reach Rs 140tn ($2.6tn) by 2015 due to increase in global sea borne trade, the study found.
Assocham secretary general DS Rawat said lower costs of labour, availability of skilled workforce together with robust demand in the domestic market and a growing steel industry are certain factors that build up a strong case for the shipbuilding sector in India.
"For a well balanced and comprehensively developed domestic shipbuilding and ship repair industry, the government should provide fiscal incentives to develop strong research and development facilities, designing capabilities and set up an auxiliary base to encourage the growth of the sector," Rawat said.
The study indicated the overall cargo traffic at major Indian ports is expected to reach 1,230 million tonnes by 2015 and 3,000 million tonnes by 2020 from the current 600 million tonnes, growing at 20% CAGR.
"For this India needs to furbish up its ports and the whole shipping infrastructure to enhance the handling capacity and facilitate operation of larger shipments to increase its share in the global maritime business," Rawat said.
"The government should rope in maritime states to identify and make land available, thereby seeking their contribution for setting up a new port or a shipyard in each of these states."
Leading shipbuilding nations China, South Korea and Japan cater to over 80% of the global shipbuilding industry, with China alone accounts for over 35%.
The Assocham study found that shipbuilding in India is nearly 50% cheaper than other countries, where high input costs and rising costs of raw material, freight together with miscellaneous duties and taxes contribute to the cost.
Assocham indicated that government has to play a key role to boost domestic shipbuilding companies, and recommends easing tax related regulations, revival of subsidy scheme, and declaring the shipbuilding a status of strategic industry.