NEW DELHI 06/NOV/2014: Prime Minister Narendra Modi\'s \'Make in India\' initiative may come to the rescue of an industry that has its fate closely tied to economic cycles - shipbuilding. The shipping ministry has asked the central bank to relax rules allowing shipbuilding companies which are sitting on huge losses to go in for a second round of debt restructuring. \"We are not in favour of a bail-out package for the sector, but we want to address the systemic issues,\" said a Senior Government Official on the ministry\'s proposal. Banks have to write off part of their loans if the first round of debt recast fails. The shipping ministry wants the Reserve Bank of India to ease this rule for fund-starved shipbuilders so that they could undertake a fresh round of restructuring and raise finance as they try to revive business. An RBI approval for a plan that won\'t increase their bad loans would likely encourage banks to extend more money. The RBI has given such leeway to certain sectors, including the solar industry, the official said, justifying the demand.
The shipbuilding industry in India is in a turmoil. Manufacturers had built up large capacities, often by taking on debt, when growing global trade had driven up demand for ships. But, over the past five years, as the global economy hit an uncertain patch, new orders dried up and existing orders were either postponed or cancelled. To add to the local industry\'s woes, the Government withdrew a programme that offered a 30% subsidy on the cost of building ships. Lack of Government support led overseas competitors to outbid Indian manufactures in a market where new contracts had become few and far between. \"Companies were hit from multiple angles as they had already borrowed loans and gone for capital expansion, buoyed by so many orders,\" said Manish Sharma, executive director-infrastructure, at PricewaterhouseCoopers India.
The \'Make in India\' campaign aims to boost manufacturing as a way to increase employment opportunities and speed up economic growth. Getting the shipbuilding industry, which has immense potential to generate jobs, back on track would provide a fillip to this initiative. Among the top shipbuilding companies, Bharati Shipyard, ABG Shipyard, Hindustan Shipyard and Goa Shipyard are all in some sort of stress. Some public sector shipbuilding companies like Cochin Shipyard have managed to stay afloat because of orders from the navy and air force, where the profit margins are decided in advance. \"This (Government\'s) move will help us in giving a leeway. But the process would not be smooth, involving a lot of paperwork, meetings, etc.,\" said Dhananjay Datar, Chief Financial Officer of ABG Shipyard.