India’s shipping industry gets a boost.

Government’s Commitment to Maritime Sector Development

• The government’s flagship program, Sagarmala, outlines 839 projects requiring investment of ₹5.8 lakh crore by 2035.

• 241 projects worth ₹1.22 lakh crore have been completed, 234 projects valued at ₹1.8 lakh crore are under implementation, and 364 projects with an estimated investment of ₹2.78 lakh crore are in various stages of development.

• Over 50% of Sagarmala is allocated for port modernisation, port connectivity, port-led industrialisation, and coastal community development.

India’s Economic Growth and EXIM Trade

• India’s GDP rose from ₹153 trillion in 2016-17 to ₹272 trillion in 2022-223, an increase of 43%, growing at a CAGR of 7%.

• The economy is projected to reach $3.7 trillion this year, $5 trillion by 2027, and $7 trillion by 2030.

• India’s EXIM trade has grown from $66 billion in 2016-17 to $116 billion in 2022, a cumulative increase of over 77% and an annual growth rate of 12.83%.

Indian Shipping Industry Stimulation

• Despite high economic growth and increased investments in the maritime sector, the Indian shipping industry has remained stagnant.

• The cargo handled at major ports has only marginally increased from 1,071.76 million tons in 2016-17 to 1,249.99 million tons in 2020-21.

• The number of vessels handled at these ports has actually declined by 5.93%, from 21,655 vessels in 2016-17 to 20,371 in 2020-21.

• Indian-registered ships have increased from 1,313 in 2016-17 to 1,526 in September 2024, a cumulative rise of 16.77% and an average annual growth of 2.4%.

Challenges in Shipbuilding

• Indian shipping faces multiple challenges hindering its competitiveness, including lack of capital and high borrowing costs, short loan tenures, rigid collateral requirements, limited understanding of the industry’s cyclical nature, unfavourable taxation laws, delays in repatriating funds for ship acquisitions, stringent regulatory requirements, and additional financial burdens on mandatory training of Indian seafarers and higher port charges.

• The Indian National Shipowners Association has advocated measures to ease capital constraints and eliminate discriminatory tax policies.

The Union Budget 2025

• The government has announced a ₹25,000 crore MDF, infrastructure status for large vessels, facilitation of shipbuilding clusters, a 10-year extension of the basic customs duty exemption on shipbuilding spares and equipment, a revamped financial assistance policy for shipbuilding, credit incentives for shipbreaking in Indian yards, and an extension of the tonnage tax scheme to inland vessels.

• However, the details of the MDF’s mobilization and the need for long-term financing with lower interest rates and repayment tenures of 7-10 years remain unclear.