India’s Maritime Development Fund Likely to Be in Place by Year-End

Contours of the fund, and guidelines towards spending the same, is currently under-discussion and it will have participation from industry stakeholders, financial institutions and Ministries.

Sources said, the two options under discussion include setting up dedicated maritime vertical under a proposed development finance institution, while the second one involves having a standalone company with multi-agency equity.

Right now India spends close to $75 billion annually on leasing ships from outside. India owns about 2 per cent of the world’s total tonnage and has some 1500-odd ships under its flag.

“We want to ensure that we have a ship-building industry that is local. So we want to do the entire value chain here – that include ship-building, flagging, ownership financing, leasing, among others. If not the entire, we want to have upto 5 per cent of world’s tonnage soon. That is what the Maritime Development Fund will work towards,” TK Ramachandran, Secretary, Ministry of Ports, Shipping and Waterways (MoPSW) told businessline, on the sidelines of an event orgainsed by FICCI here in the city.

Documents show, that the Maritime Development Fund is proposed to start with a corpus of ₹25,000 crore spread over a seven-year-period. “Multiple funding mechanisms— Debt, Equity, VGF and buyer credit support will be part of the fund mandate,” the official explained. The official maintained that, internal review of the Ministry has shown that Indian shipping companies struggle to grow tonnage “due to difficulties in accessing required finance”, as there is a mismatch in tenure of loan offered (5 to 10 years) versus life of vessel ( generally 30-odd or more years).

“We have compared working of similar funds in Norway, Korea and Japan. Found out what more we can add, so as to benchmark and better the provisions making it more attractive to invest here,” the official said. Factors like buyer default cover or vendor default cover are being included in the Indian version.

The official added that global benchmarking reveals, tax incentives are being provided for ship leasing that include having concessional rate of 0 per cent and 8.25 per cent for ship leasing management activities. “It is proposed to evaluate similar tax benefits to be extended to domestic ship – lessors and ship management companies. Detailed proposal to be developed in consultation with Ministry of Finance,” the official said.

Tags : Capital funding, Maritime Development Fund, Ministry of Ports Shipping & Waterways, ship building, Ship finance