Reviving India’s Shipbuilding Sector: A ₹1.3 Lakh Crore Initiative

The Indian government is reportedly gearing up to introduce a new scheme aimed at revitalizing the country’s shipbuilding industry. With earlier initiatives from 2015 and 2021 about to reach their conclusion next year, there is a pressing need to evaluate and potentially reshape the future of a vital segment of India’s logistics and maritime landscape.

Current Landscape of India’s Shipbuilding Sector

Historically, India’s share in global shipbuilding has remained stagnant, especially as competitors like China continue to expand their order books. There’s a buzz in the Ministry of Shipping, which has reportedly informed the Economic Times about a collaborative effort with the Petroleum, Steel, and Fertilizer Ministries. This cooperation aims to create a demand for 200 ships, aggregating a total gross tonnage of 8.6 million, with an estimated value of around ₹1.3 lakh crore. Constructed in Indian shipyards, these vessels will have a joint ownership setup involving public sector undertakings (PSUs).

Failure of Previous Schemes

Despite the ambitious plans, previous government initiatives have yielded minimal results. The first shipbuilding financial assistance policy, rolled out in April 2016, intended to foster local shipbuilding through financial support, but it fell short of expectations, achieving only about 8% utilization of its ₹4,000 crore corpus. This scheme was primarily introduced as part of the broader Make in India initiative and was aimed at providing post-delivery financial assistance to eligible shipyards. However, financial incentives and subsidies, which were initially set to taper down from 20% to 11%, were modified in 2023 to include enhancements for green-fuel vessels.

Realization of Maritime India Vision 2030

The government’s vision, aimed at enhancing India’s shipbuilding capabilities to compete globally by 2025, remains ambitious yet uncertain. The strategy focuses on boosting domestic demand, improving productivity among ancillary industries, and introducing government measures to create more equitable conditions in the market. The end goal is to escalate India’s shipbuilding output to over 500,000 gross tonnage (GT) from the current figure of approximately 30,000 GT.

Concerns Raised by Industry Experts

The Standing Committee’s recent report highlighted concerning patterns regarding the low utilization rates of earlier schemes. It pointed out that despite an increase in claimed financial assistance, the actual uptick in shipbuilding activities has not been witnessed.

Understanding the Financial Metrics

With only 31 shipyards approved under the initial policy producing a mere 99 ships, it’s hard not to ask why more has not been achieved. Financial disbursement figures show that only ₹275.7 crore was allocated by shipyards as support, culminating in an overall allocation of just 8.71% of the total outlay.

What Questions Need Answers?

The Standing Committee has requested clarity on the extent to which these shipyards are taking advantage of the assistance policy, particularly concerning private shipyards like Cochin Shipyard, which have made strides in securing global orders. Additionally, the government needs to address its reliance on imported materials, which may be stifling competitiveness in the local market.

Evaluating the Flagging Scheme

In a bid to further the growth of Indian-flagged merchant vessels, a new scheme was introduced in 2021 with a budget of ₹1,624 crore. This initiative, aimed at offsetting operational costs associated with foreign ships, offers financial subsidies for flagging Indian vessels and has been accompanied by a right of first refusal for Indian-flagged vessels in specific cargo tenders.

Challenges with Cost Competitiveness

However, data indicates that shipments processed through Indian-flagged ships account for only a meager share of the global market. With declining national tonnage and issues with fund utilization resulting in paltry disbursement figures, questions remain about how effectively government measures are penetrating the market landscape.

Global Standing and Current Shipbuilding Orders

According to research by Clarksons Research, India currently ranks as the 19th largest ship-owning nation, capturing about 1.5% of the world fleet share. The potential for growth and exploration remains; however, many challenges continue to prevail, especially regarding cost structures and international competition.

A Revamped Shipbuilding Support Plan

In light of these ongoing struggles, the interim Budget for 2025 revealed a revamped Shipbuilding Financial Assistance Policy (SBFAP 2.0) with an outlay of ₹18,090 crore. This new scheme not only offers generous subsidies but also introduces a Shipbreaking Credit Note Scheme, promoting sustainable recycling approaches within the shipbuilding sector.

Future Prospects and Conclusion

As India strives toward becoming a leading force in global shipbuilding, the path ahead remains laden with challenges and opportunities. The interplay between governmental support and real-world application will be crucial. Indeed, successful navigation through this intricate landscape requires keen attention and resource optimization.

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