India is developing a fresh strategy to promote its domestic shipping industry, as the current scheme is likely to miss its intended targets. This initiative underscores the government's ambition to become a key player in the global maritime trade.

Ambitious Targets and Current Scenario

The current scheme, which was approved in July 2021 with funds to be disbursed until FY26, aimed to provide subsidies of up to 15% to Indian shipping companies participating in global tenders issued by the government. The scheme also offered incentives for importing government cargo using Indian vessels. However, the share of Indian vessels in the country's export-import (EXIM) trade has declined significantly, from 40.7% in 1987-88 to about 7.8% in FY19. This has resulted in an estimated $70 billion annual foreign exchange outflow to foreign shipping lines. Despite the current scheme, the share of cargo carried by Indian-flagged ships remains around 8%, unchanged since 2021.

New Plan and Demand for Ships

The new plan follows inter-ministerial consultations that identified a demand for approximately 200 new Indian ships, valued at ₹1.3 lakh crore, for imports in the petroleum, steel, and fertilizer sectors. These ships, with a total capacity of 8.6 million Gross Tonnage (GT), are expected to be jointly owned by public sector companies and built in Indian shipyards over the next few years. The Ministry of Ports, Shipping, and Waterways (MoPSW) is collaborating with the Ministries of Petroleum and Natural Gas, Steel, and Fertilizers to address the low import rates on Indian-flagged ships.

Boosting Domestic Shipbuilding

The government is inviting shipbuilders from Japan and South Korea to partner with Indian companies to construct vessels in India. South Korea's HD Hyundai Heavy Industries is reportedly in talks with the state-owned Cochin Shipyard. Samsung Heavy Industries has also engaged in discussions with the Japanese shipowner NYK. To support indigenous shipbuilding, the government has launched the Shipbuilding Financial Assistance Policy (SBFAP) 2.0, which offers direct financial subsidies to Indian shipyards to enhance their global competitiveness. Additionally, a 40% credit note on the scrap value of old ships is provided under the Shipbreaking Credit Note Scheme for shipbreaking in Indian yards, which can be used to purchase new 'Made in India' vessels. Customs duty exemptions are also available on inputs used for shipbuilding and ship-breaking.

Financial Support and Infrastructure Status

The Union Budget 2025 includes a ₹25,000 crore Maritime Development Fund to provide long-term, low-cost financing for shipbuilding, repair, and maritime infrastructure projects. The government will contribute 49% of the fund, with the remainder coming from ports and the private sector. Furthermore, infrastructure status has been proposed for large ships to promote ship ownership and shipbuilding in India, potentially placing it among the top five countries in this sector by 2047. This infrastructure status will allow shipping entities to secure funds with easier financial terms, longer repayment periods, and lower interest rates from commercial banks.

Long-Term Vision

The government aims to increase the share of domestically built tankers in its fleet to 7% by 2030 and 69% by 2047. To achieve this, India plans to invest ₹850 billion ($10 billion) to purchase 112 crude transporters by 2040. The first phase involves contracting 79 ships, including 30 medium-range product carriers. A deal for 10 ships is expected imminently, with only domestic shipbuilders considered, although foreign partnerships are permitted. India also intends to increase its shipping capacity to transport steel, coal, and fertilizer, gradually replacing foreign ships with those manufactured in India. The establishment of a new shipping company, in collaboration with state-run oil, gas, and fertilizer companies, aims to expand India's fleet by at least 1,000 ships over the next decade. This initiative is projected to reduce reliance on foreign shipping services and cut freight costs by at least 33% by 2047.