India will set up a 250 billion rupee ($2.9 billion) Maritime Development Fund to provide long-term financing for the shipbuilding and ship repair industry, Finance Minister Nirmala Sitharaman said on Feb. 1 local time.
The program is said to be in line with Indian Prime Minister Modi’s goal of becoming a “shipbuilding nation by 2047.” India’s goal is “to be among the top 10 shipbuilders in the world by 2030 and among the top five shipbuilders in the world by 2047”, and to this end, India is investing heavily in infrastructure to enhance its shipbuilding capacity.
According to the plan, the Government of India will fund 49% of the Maritime Development Fund (MDF), with the remaining 51% to be raised from ports and the private sector. Sitharaman will start presenting his budget proposal on April 1 for the current fiscal year.
India’s shipping fleet has been unable to keep pace with its surging trade, including energy imports and product exports. To address this problem, the Government of India plans to set up a new shipping company in partnership with oil refiners and Indian shipping companies with the aim of expanding the fleet and reducing dependence on foreign carriers.
Sitharaman said the government will also promote shipbuilding clusters to increase ship production capacity and increase the types and specifications of ships built in India. “This will include additional infrastructure, skills and technology to develop the entire ecosystem.”
In order to further incentivize the shipping industry, India will also provide shipowners with a 40 per cent subsidy on the value of scrap for shipbreaking, which will be issued in the form of credit notes that can be used to offset the cost of constructing a new ship in Indian shipyards. In addition, import duty exemptions on materials for shipbuilding and shipbreaking operations will be extended for another 10 years.
A series of initiatives by the Government of India to revitalize the shipbuilding industry have been interpreted as a result of deepening supply chain pressures in the wake of the Red Sea crisis. In fact, Indian exporters are facing a difficult situation of rising freight rates due to the Red Sea crisis. According to the World Bank’s Trade Watch report released in September last year, freight rates in West Asia, the Mediterranean and Asia were more than double those of the previous year.