Maxim Kochetkov, Director of Shipbuilding Department at Russia’s Ministry of Industry and Trade: “Civil shipbuilding requires state support”

In the context of Russia’s urgent need in renovation of merchant fleet and substitution of imports amid sanctions, Russian Government elaborates measures to support domestic shipbuilding including marine engineering and instrumentation technology. Maxim Kochetkov, Director of Shipbuilding Department at Russia’s Ministry of Industry and Trade, tells IAA PortNews about the current status of domestic shipbuilding and the measures intended for its development.

- What measures aimed at localization of shipbuilding and substitution of imports are under development at the Ministry?

- The Ministry of Industry and Trade in conjunction with other federal authorities work on a package of measures intended to give an impetus to the development of domestic shipbuilding amid the current situation. In other words, those measures are to facilitate modernization and renovation of the fleet, primarily through the efforts of domestic shipyards. 

For example, we are elaborating the amendments into the Federal Law “On Fisheries and Conservation of Aquatic Biological Resources” (No166-FL). We are focused here on the fishing fleet 80% of which is operated beyond the standard service life. According to some experts, the demand of our economy for fishing ships by 2025 is estimated at about 180 large and average-size vessels and at least 220 small vessels with total value exceeding RUB 170 bln.

- Is our industry able to meet this challenge?

- Our shipbuilding can partially satisfy the domestic demand for fishing ships. The amendments into the above Law are to encourage ship owners renovate their fleets with the ships produced and fitted in Russia. When it comes to fishing quotas, we could foresee certain preferences for owners of fishing ships built in the Russian Federation.

- What is your opinion about the existing measures of state support and their impact on the industry? 

- We understand that civil shipbuilding requires state support. Let’s take river fleet, the significance of which is hard to overestimate. River ships are 36 years old on the average. As for specific types of vessels, the situation is even worse. For example, the age of cruise ships exceeds 43 years, self-propelled tankers - 39 years, self-propelled dry cargo carriers – 38 years. Notably, the mentioned vessels play the key role for freight and passenger transportation along the inland waterways.

Of course, certain state support measures have been undertaken already. In particular, I would mention the Decree of RF Government dated 22.05.2008 (No 383) aimed at subsidizing of Russian transport fleet operators … and the Federal Law No 305 dated 07.11.2011 “On Support of Shipbuilding and Shipping” providing for tax privileges when it comes to registration of vessels built by domestic shipyards after January 1, 2010, as well as creation of special economic zones with beneficial tax and customs treatment.

Those measures of state support to shipbuilding industry encouraged large shipping companies to renovate their fleet. Yet, we failed to achieve the result we had expected. Insufficient financing and no progress in establishment of SEZs at shipyards are among the key obstacles.

- What are the additional measures of state support?

- The analysis of the current situation has made us give thought to introduction of additional support instruments like ship utilization grant (SUG) to encourage ship owners renovate their vessels.
 
The Ministry of Industry and Trade is currently working on the mechanism to apply SUG which is to become operational from 2017. I’d like to emphasize that it can be obtained only for construction or purchase of a new vessel and is to make at the following parameters will be taken into consideration: deadweight, freight and passenger capacity as well the vessel’s power.

- What do you think about the project on creation of “Marine Engineering” concern initiated at the Marine Board of RF Government held in Saint-Petersburg in early July 2015?

- The order to elaborate proposals on creation of “Marine Engineering” concern was given to the Ministry of Industry and Trade and the United Shipbuilding Corporation on July 2, 2015, at the meeting of RF Government’s Marine Board. It is not a secret that this sector of domestic shipbuilding is a ‘bottleneck’ especially amid the sanctions. Therefore, our strategic task is to facilitate domestic manufacture of components. We think it is time to undertake structural changes in the sector. In particular, they mean the creation of a structure integrating the resources of both manufactures and such organizations as the research institute for marine engineering. This would contribute to the development of serial production and, consequently improve the production efficiency…

Localization in the sector of marine engineering is necessary first of all to escape parallel production of certain components and mechanisms by several plants and, secondly, create specialized hi-tech manufactures … . In this context, I’d like to remind that the programme on modernization of shipyards ensuring high quality of new vessels is being implemented in view of imports substitution.

Interviewed by Vitaly Chernov and Nadezhda Malysheva.