Monday, December 15, 2008

Govt may give interest subsidy to keep shipping cost afloat

NEW DELHI: The government may bail out the shipping sector from rising cost of borrowings by providing 2-3% interest subsidy. The sector, which

needs about Rs 100,000 crore by 2012 to expand capacity and replace ageing fleets, pays about 11% interest for dollar loans and approximately 14% for rupee loans.

The domestic shipping industry prefers borrowing from European banks. “These banks have larger appetite for lending and a much longer repayment tenure than Indian banks. In addition, the interest rate charged is relatively low. But due to the global meltdown, foreign banks have almost frozen their lending activities.

The industry has been lobbying in the government to ease its cash-flow situation. Top executives of state-owned Shipping Corporation of India have also met officials in the shipping ministry over this issue.

The interest subsidy scheme is part of a proposal to boost the shipping industry. The proposed package will have other fiscal and monetary measures, the ministry official said, without giving details of the package.

“It is being worked out by the ministry,” he said. It is likely that the government would increase public spending in the sector and grant it infrastructure status. With the status, shipping industry will be eligible for tax holidays.

Shipping firms, however, say mere interest subsidy will not help the industry. “There is a need to boost the demand for various commodities to check freight rates from falling.

Source: http://economictimes.indiatimes.com/Economy/Govt_may_bail_out_shipping_sector_/articleshow/3837641.cms

No comments: