Shipbuilders will however get no benefit from this exemption, as they still have to import steel for ships
Domestic steel companies need not pay excise duty henceforth for supplying steel plates to shipbuilders as the government has exempted them from doing so. This move of the government will largely benefit the steelmakers.
Indian shipbuilding industry imports the required quantity of steel at present, which constitutes over 33% of the total ship cost. Around 60% of the overall body of ship is made of steel.
Domestic steelmakers have been looking forward for this exemption so that they could compete with the foreign mills.
According to the experts, this exemption should help the domestic steelmakers to boost their business in the long run. However, presently there is no demand for new ships in the market due to the oversupply of vessels.
A senior executive from the shipbuilding company said, “Ship building companies don’t buy raw material from the domestic steel companies not because of the cost but because of the variety and quality of steel not available here. This will make little difference, because we would still need to import steel.”
FY 14 Budget announcement in February 2013 had removed excise duty on vessels. This move was beneficial for the shipbuilding sector. It had also announced the removal of countervailing duty on imported ships.
India has a total of 27 shipyards, out of which 8 are of the public sector and the remaining belongs to the private sector.