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India’s Maritime Development Fund likely to be arranged by year-end

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NEW DELHI : India’s proposed Maritime Development Fund – that looks at providing long term, low cost financial support and push towards indigenous ship-building – is likely to be ready by the end of this year, multiple officials of the Ministry of Ports, Shipping and Waterways (MoPSW) said.

Contours of the fund, and guidelines towards spending the same, is currently under-discussion and it will have participation from industry stakeholders, financial institutions and Ministries.

Sources said, the two options under discussion include setting up dedicated maritime vertical under a proposed development finance institution, while the second one involves having a standalone company with multi-agency equity.

Leasing ships

Right now India spends close to $75 billion annually on leasing ships from outside. India owns about 2 per cent of the world’s total tonnage and has some 1500-odd ships under its flag.

We want to ensure that we have a ship-building industry, that is local. So we want to do the entire value chain here – that include ship-building, flagging, ownership financing, leasing, among others. If not the entire, we want to have upto 5 per cent of world’s tonnage soon. That is what the Maritime Development Fund will work towards,” TK Ramachandran, Secretary, Ministry of Ports, Shipping and Waterways (MoPSW) said, on the sidelines of an event orgainsed by FICCI here in the city.

Another official, requesting anonymity said, the Maritime Development Fund would also promote cruise tourism and other activities like mechanization and capacity expansion of existing ports through PPP, etc.

Infrastructure Status

Documents show, that the Maritime Development Fund is proposed to start with a corpus of ₹25,000 crore spread over a seven-year-period. “Multiple funding mechanisms— Debt, Equity, VGF and buyer credit support will be part of the fund mandate,” the official explained.

The official maintained that, internal review of the Ministry has shown that Indian shipping companies struggle to grow tonnage “due to difficulties in accessing required finance”, as there is a mismatch in tenure of loan offered (5 to 10 years) versus life of vessel ( generally 30-odd or more years).

“Lack of infrastructure status limit potential avenues for long-term low-cost funds for shipping making it less attractive sector. And we are working with the Finance Ministry for that. We have proposed to provide ‘infrastructure’ status to enable vessel operators shipping companies to raise long term-low cost finance,” the official said.

Other Provisions

“We have compared working of similar funds in Norway, Korea and Japan. Found out what more we can add, so as to benchmark and better the provisions making it more attractive to invest here,” the official said. Factors like buyer default cover or vendor default cover are being included in the Indian version.

The official added that global benchmarking reveals, tax incentives are being provided for ship leasing that include having concessional rate of 0 per cent and 8.25 per cent for ship leasing management activities.

“It is proposed to evaluate similar tax benefits to be extended to domestic ship – lessors and ship management companies. Detailed proposal to be developed in consultation with Ministry of Finance,” the official said.

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