Fishing is not a very sexy business. The enduring image of the industry in Ireland is one of rusty, unpleasant, smelling old boats tied up by harbour walls leaking oil and other noxious liquids into the water. Any remotely modern looking craft in an Irish port almost always turns out to be flying a foreign flag and crewed by people who hail from one of our more nautical European neighbours.

The explanation for this sorry state of affairs runs along the following rather simplistic lines. When Ireland joined the European Economic Community in 1972 it effectively traded its extensive fishing rights to ensure a favourable deal for the farmers.

The fishing industry - which was not in good shape to begin with - went into decline while agriculture prospered under the Common Agricultural Policy.

It is surprising then that two of the State's more entrepreneurial businessmen should decide to get involved in this seemingly moribund enterprise. As reported in this paper last month Mr Philip Lynch, the managing director of IAWS and Mr Denis O'Brien, the former Esat Telecom chairman have both invested in fishing boats.

They are among a group of individuals backing Mr Brendan McGrath, a Waterford-based skipper who has just spent £25 million (€31.7 million) on two new boats.

Mr McGrath has availed of the Whitefish Renewal Scheme which was introduced to encourage the modernisation of the whitefish fleet. Whitefish are species such as cod which tend to live on the sea bed, as against pelagic species such as mackerel which live midwater. They also tend to have white flesh, hence the name.

Mr McGrath financed the boat, including the £8 million from Mr Lynch, Mr O'Brien and other investors. The limit on the absolute size of the Irish whitefish fleet placed by Brussels meant that he also had to buy out the tonnage of several other boats in order to be able to fish within EU waters. Tonnage costs up to £3,500 per ton which becomes expensive when you are building two 885-ton boats.

It is by any standards a complex business venture which carries a significant risk.

Mr Lynch's involvement is perhaps not too surprising. IAWS is involved in fish processing and he would be aware of opportunities in the industry. Mr O'Brien's decision to invest appears to be much more of a leap of faith as he has no known connections to the fishing industry.

What attracted both men may have been the generous tax break available on their investments. Under the scheme private investors can offset their investment against their top rate of income tax.

Regardless of their motivation their involvement was seen as a significant coup by BIM, the sea fisheries development agency, which operates the scheme and the Minister of the Marine, Mr Frank Fahey.

The scheme - which ends this month - is considered to have been a great success. Around 200 small boats were taken out of the fleet - some of which were 70 years old - and replaced by 33 new larger boats and 15 modern second-hand craft. Over £80 million was invested of which the Government put up £17 million. The involvement of high-profile businessmen was the icing on the cake. It was a powerful sign that fishing was in fact quite sexy.

It is strange then that the Minister for Finance decided that the successor to the scheme - the Fleet Development Measure - should not be allowed offer the sort of tax incentives that got Mr Lynch and Mr O'Brien on board.

The lessening of the tax incentives was part of a general tightening of tax breaks on schemes. Despite pleadings from Mr Fahey and his officials the fleet renewal scheme was cut back. It appears that in some areas of the Government attitudes towards the fishing industry have not changed.

Under the Fleet Development Measure private individuals who invest as a partnership can no longer offset their investment against income tax. Inventive accountants may yet find a way around the obstacle but as it stands the new scheme is significantly less attractive.

This in turn means that entrepreneurial skippers looking to buy new boats will have a harder time finding the cash to match the Government grants.

In recognition of this reality the targets set for the new scheme are less ambitious. The £17 million in grants awarded under the last scheme generated total investment of £80 million, while the £20 million that will be awarded under the current scheme is only expected to generate £75 million.

The good news is that the commercial success of the boats introduced under the first scheme means that the Irish banks are much more favourably disposed to such ventures. BIM hopes that the outcome will be broadly similar with another 200 or so older boats replaced by around 30 larger, more modern craft.

This will also mean the continued concentration of ownership. There is a real risk that the scheme will merely create a handful of new fishing millionaires without doing much for the lot of the smaller owners, who will find themselves as employees of the new breed of entrepreneurial fishermen.

The challenge for BIM and the Department is to ensure this does not happen.

jmacmanus@irish-times.ie