Russian President Dmitry Medvedev signed a federal law on Monday offering tax and other incentives to stimulate domestic shipbuilding and shipping companies.
The law, already approved by the lower and upper houses of Russia's parliament, offers Russian shipyards the status of industrial and production special economic zones in a bid to boost their output.
Russian shipyards will be exempt from land and property tax for 10 years while ship owners will also be tax-exempt from profits received from the operation or sale of Russian-built vessels.
The new law will also exempt domestic shipbuilding and shipping companies from insurance payments to Russia's Pension, Social Insurance and Compulsory Medical Insurance Funds.
Russia's shipping industry has experienced two decades of crisis caused by the collapse of the Soviet Union and disruptions in the supply chain across the country, and the country is now largely reliant on foreign shipyards for the construction of new ships.
The new law, which aims to revive the domestic industry, offers only half-hearted measures to remedy the situation, analysts said.
"To boost domestic shipbuilding, the Russian government needs to review its entire financial policy and introduce a principally different taxation regime. Special economic zones are not enough to get things off the ground," said Investcafe analyst Dmitry Adamidov.
Shipbuilding is a stage by stage process and few suppliers will be able to qualify for special economic zones status, he said. He also criticized the lack of an adequate finance system for the industry.
"If a supplier fails to meet the deadline, the entire project may fail. Under the current financing scheme, a shipyard has to borrow funds on its own and may have to use up all its profits to pay interest," he said.
At the same time, the idea of providing support to the domestic shipbuilding industry is right, he said.
"Companies should rebuild the very close operational ties that were lost after the breakup of the Soviet Union and which exist for any western shipyard where market mechanisms rule out any problems with price and supply uncertainty," he said.