Brownfield shipyard expansion projects to get up to 25% capital support under Centre Draft guidelines

The Central government has announced a significant capital support initiative aimed at expanding brownfield shipyards, allocating ₹8,261 crore under the Shipbuilding Development Scheme (SbDS). This funding, which represents up to 25% of the Fair Assessed Project Cost (FAPC), is designed to enhance the production capacity and infrastructure of operational shipyards across India. The initiative, detailed in draft guidelines from the Ministry of Ports, Shipping and Waterways, is expected to accelerate modernization efforts within the shipbuilding sector.

Details of the Capital Assistance Program

Under the new guidelines, capital assistance will be available to Indian shipyards that have been operational for at least three years and are registered under either Central or State Acts. The funding aims to support projects that involve expansion, modernization, or enhancement of production capabilities. Eligible projects must demonstrate a commitment to improving infrastructure through significant capital investments.

The FAPC will be determined based on the lowest value among three criteria: the project cost outlined in the detailed project report, the cost assessed by an Independent Evaluation Agency, and the actual capital expenditure certified by a chartered accountant. The initiative allows for expansions both within existing shipyard premises and at distant locations, provided these facilities are registered under the same legal entity as the base shipyard for at least one year prior to application.

The Ministry emphasizes that this capital support is intended to incentivize investments in critical infrastructure, such as dry docks, slipways, and fabrication facilities, which are essential for large-scale commercial shipbuilding. The guidelines state that the program aims to facilitate rapid implementation of modernization efforts, with projects expected to be completed within two to four years.

However, it is important to note that brownfield shipyards located within approved greenfield clusters managed by special purpose vehicles will not qualify for this separate capital assistance. Additionally, any shipyard receiving funding must commit to operating the upgraded facility for a minimum of ten years following project completion.

Funding Structure and Conditions

The capital assistance will be disbursed in four tranches: 20%, 30%, 30%, and 20%, linked to specific milestones in technical, physical, and financial progress. The first installment will be released upon the award of work and after all necessary statutory clearances are obtained. Subsequent installments will be contingent upon achieving defined physical progress milestones and submitting relevant documentation, including a Fund Utilization Certificate (FUC).

Shipyards must ensure that the expenditures incurred align with the project’s approved budget and cannot claim overlapping funding from other government schemes for the same project components. A self-declaration confirming this will be required at the time of application. However, shipyards may still benefit from general fiscal incentives that do not overlap with the SbDS-funded components.

This initiative marks a significant step towards bolstering India’s shipbuilding capabilities, ensuring that operational shipyards can modernize and expand effectively while adhering to stringent guidelines set forth by the government.