Centre likely to shelve Rs 11,000 crore PLI scheme for manufacture of standard shipping containers - Moneycontrol

The Rs 11,000 crore production-linked incentive (PLI) scheme to manufacture shipping grade containers in India, floated by the Ministry of Ports, Shipping and Waterways, is likely to be shelved after facing a backlash during cabinet discussions, said multiple government officials.

“The launch timing, length, and quantum of the scheme is being reconsidered as the global shipping and trade industry is facing a downtrend at the moment,” a senior official from the Ministry of Ports told Moneycontrol.

He added that the initial plan was to launch the scheme in 2023-24, but for now, the proposal will be reworked and considered at the next cabinet briefing.

Similarly, another official from the Ministry of Ports said that the cabinet committee on economic affairs had highlighted three major issues, an overflow of containers in the shipping industry, falling global exports, and the slow recovery of global supply chains, which may hinder demand for shipping containers for the next two years.

“Discussions at the cabinet meeting highlighted the need for the PLI scheme to be of shorter tenure, with the aim of shipping grade container capacity to be established in India by 2025-26,” the second official said.

Container glut

A government official from the Ministry of Commerce and Industry said that while the scrapping of the PLI was discussed during the cabinet meeting, official paperwork is yet to be shared.

“A decision to begin a PLI was realised during covid. When the world faced a shortfall, the gap was taken over by production from China. The decision to scrap has mainly ridden on the fact that there is now a glut of containers in the world,” the official said.

Another official from the Ministry of Commerce and Industry said that the PLI scheme for containers was a strategic move that came to mind during COVID-19 when everyone realized containers were all made in China.

“However, there is now a glut in the market and the scheme may have been struck down due to this,” the official said.

Queries emailed to the Ministry of Ports, and the Ministry of Commerce had not elicited an answer at the time of publishing this article.

The scheme was discussed as part of the cabinet meeting between August 24 and 27.

PLI schematics

According to a Cabinet note accessed by Moneycontrol, the shipping ministry had suggested dispersing Rs 11,000 crore as the outlay for the scheme, over a nine-year period, to boost the manufacturing of shipping containers in India.

The scheme was envisioned to push India as a shipping container manufacturing hub, competing with the likes of China, and garnering at least 10 percent demand from global liners by 2030.

Feasibility studies for the PLI scheme were carried out by the Kolkata-based Indian Institute of Foreign Trade.

As part of the PLI scheme, multiple incentive schemes were proposed. The first one was based on the differential price between Indian and international manufacturers; and the second, a differential price calculation if the PLI beneficiary failed to generate incremental production.

According to the Cabinet note, there was a huge shortage of shipping grade containers globally during the COVID-19 pandemic.

The shortage had resulted in shipping lines increasing container freight rates phenomenally across the world, which badly impacted India’s export-import supply chain.

The note also mentioned that international container manufacturing is dominated by China and nearly 90 percent of global demand is met by that country.

China’s dominance

India also depends on China for such shipping containers, with Container Corporation of India (CONCOR) importing its entire 37,000 container stockpile from China.

CONCOR also has a requirement of around 50,000 containers in the next three years.

To increase domestic container manufacturing, the government has identified Bhavnagar in Gujarat as a hub, and a few companies have already started operations.

According to the Centre, India requires 350,000 containers every year, and the demand will only increase, with the government having set an ambitious export target of $2 trillion by 2030.

Containers handled by all ports grew 13.04 percent from 16.50 million TEUs (twenty-foot equivalent units) in 2020-21, to 18.66 million TEUs in 2021-22. The total traffic handled in the domestic segment stood at 803,899 TEUs in 2021-22, as against 607,536 TEUs in 2020-21, an increase of 32.32 percent.

Domestic containerised loading of Indian Railways increased by 40.03 percent to 17.35 mt in 2021-22, from 12.39 million tonnes in 2020-21.

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