The Visakhapatnam-based shipyard has been in financial crisis for many years due to several factors, including poor order book, lack of working capital, managerial inadequacies and inability to raise funds from financial institutions due to a negative networth.

However, driven by recent surge in the shipping industry, the order books of all shipyards in India, including HSL, have begun to look up.

The restructuring package for the shipyard was earlier approved by a group of ministers (GoM) headed by External Affairs Minister Pranab Mukherjee.

The shipping ministry has also allocated Rs 30 crore (Rs 300 million) for ship-building and ship-repairs for annual Plan 2008-09. The ministry has decided that the creation of any additional capacity and revival and restructuring of sick shipyards will be funded through internal extra budgetary resources and bankable proposals.

In the Eleventh Five-Year Plan (2007-12), the Indian shipbuilding industry is envisaged to grow 30 per cent per annum and maintain its growth for 10 years to reach to a level of 5 million deadweight tonne and attain a 2.2 per cent share of the global industry by the end of the Plan period.

"While no final decision has been taken by the GoM on the ownership of HSL, which is likely to be transferred from the shipping ministry to the defence ministry, indications are that the GoM will favour use of HSL to meet the strategic requirements of the Indian Navy," sources said.

The proposal for rehabilitation of HSL and its transfer to the defence ministry was sent to the GoM in March last year. The complete transfer, however, is likely only by around 2010.

Budget 2008: Complete coverage