India is embarking on an ambitious plan to transform its shipbuilding industry and become a global leader in maritime trade. The government is crafting a comprehensive strategy, including a massive 25,000 crore Maritime Development Fund (MDF), to boost domestic shipbuilding capacity and reduce reliance on foreign vessels. This move aims to bolster India’s position in the global shipping sector and contribute significantly to the country’s economic growth.
At the heart of this initiative lies the vision of a self-reliant India in maritime trade. The government is aiming to create a National Shipbuilding Mission, which will oversee the implementation of a new Ship Building Financial Assistance Program (SBFAP 2.0). This ambitious program, with an allocation of 18,000 crore for the next 10 years, is designed to propel India’s shipbuilding industry to new heights.
To further incentivize domestic shipbuilding, the government is also considering purchase preferences for vessels operating in Indian coastal cargo transport. This policy mandates that any vessel seeking new registration in India from fiscal year 2031 onwards must be built within the country. This move is intended to ensure a robust market for Indian-built vessels and promote the growth of the domestic shipbuilding industry.
The proposed Maritime Development Fund will play a pivotal role in this transformation. The fund will provide long-term, low-cost financing to support indigenous shipbuilding and the development of critical blue water infrastructure, including ports, trans-shipment hubs, terminals, ship-breaking and repair yards, marina development, dredging, and container manufacturing.
The government plans to hold a minority stake of at least 26% in the MDF, while the majority stake will be offered to multilateral financial institutions and global funds. This fund will provide a range of financial instruments, including debt, equity, viability gap funding, and buyer credit, to support the growth of the maritime sector.
Experts highlight the importance of a dedicated maritime financing institution in achieving India’s ambitious maritime goals. Manish R Sharma, Partner and Leader-Infrastructure, Transport and Logistics, PwC India, emphasizes that countries with strong maritime sectors, such as Singapore, Denmark, and Malaysia, have established similar institutions to provide stable, long-term capital. He believes that India needs a comparable institution to compete globally and achieve its vision of becoming a maritime powerhouse.
The proposed Maritime Development Fund addresses key challenges facing the Indian maritime sector, including the need for long-term and cost-effective capital. This initiative will support the expansion of Indian-flag shipping tonnage, decarbonization efforts, cruise tourism, port modernization, coastal shipping, inland waterways, and EXIM logistics.
The new policy also aims to address concerns about global uncertainties driving up shipping costs for Indian trade. By promoting domestic shipping lines, the government hopes to reduce freight rate volatility and enhance the country’s resilience to global shocks.
The government’s strategy is set to significantly impact the global shipbuilding landscape. Pushpank Kaushik, CEO & Head of Business Development at Jassper Shipping, believes that this initiative will help India achieve its target of at least 5% of global tonnage, which is currently less than 1%. He emphasizes that this is essential to meet the nation’s economic growth targets. Furthermore, he sees India emerging as an alternative shipbuilding destination, competing with Vietnam, Korea, Japan, and China.
The government’s ambitious plans for India’s shipbuilding industry are poised to transform the country’s maritime sector and contribute significantly to its economic growth. The creation of a National Shipbuilding Mission, the establishment of a 25,000 crore Maritime Development Fund, and the introduction of purchase preferences for domestically built vessels are significant steps towards achieving self-reliance and dominance in the global maritime arena. With these strategic initiatives, India is well-positioned to become a major player in the global shipbuilding industry and leverage its maritime capabilities to fuel its economic aspirations.
