More subsidy wanted for Indian-made LNG ships

Vol 19, PW 25 (25 Aug 16) People & Policy

If the government wants to kick-start LNG shipbuilding in India it must offer additional financial concessions to Cochin shipyard and GAIL, say analysts.

Cochin is the only shipyard eligible to build tankers in India under GAIL's tender to hire nine or possibly 11 tankers, of which two or three should be built locally in line with Narendra Modi's 'Make in India' mantra. Cochin has quoted $338m for each tanker built at its Kerala yard.

Unfortunately the shipping ministry's offer of a 20% subsidy and the finance ministry waiver of 15% service tax to bring the price down to $230m is sadly not enough compared to the $200m cost of building a tanker in South Korea. "There's definitely scope for more concessions," says a source.

He suggests the government could subsidise Cochin's technology tie-up with Samsung. "Cochin must pay Samsung $45m for each tanker for technology, design, supervision and expertise," we hear.

"Why should the yard pay this?" If the government agrees to reimburse this amount then the cost of a LNG tanker built at the Cochin yard becomes viable at $185m. South Korean yards can deliver a tanker in 30 months unlike the 72 months allowed by GAIL's tender for Indian yards.

"Interest costs will be much higher for Indian-built tankers because of the longer construction times," we hear. "So overall costs must be lower to compete with South Korean tankers."

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