Foreign funds set sail for Indian shipyards

 Expected investments are to the tune of $3-5 billion per shipyard and India is looking at offering joint ventures (with public and private sector companies) or could offer a stake in the shipyards to these foreign investors who set up shops here. It could also explore a model where State and Centre jointly provide land; or any one of the two.

Odisha and Andhra Pradesh have been finalized as the two possible States where greenfield shipbuilding yards are expected to come up, while Maharashtra and Gujarat will be explored for brownfield expansion, the official said.

Union Minister Sarbananda Sonowal, along with officials including those from the Shipping Corporation of India (SCI), are expected to visit Korea next year to further the discussions.

“Brownfield expansion can be looked at in both public and private sector yards. Right now, there are four to five companies across these Asian countries that have expressed interest in setting up ship-building yards in India or investing in the expansion of existing ones. We are in talks with banks too to act as guarantors for these investments,” the official said on the sidelines of an event in Delhi. “Modalities on ownership are being worked out,” the official added.

In India, shipyards enjoy infrastructure status, but not the entire shipping industry.

As per an ICICI Direct report, in 2024, the Indian shipbuilding industry is valued at $1.12 billion, which is a significant jump from the valuation of $90 million back in 2022. Since it is in its nascent stage, the industry currently accounts for less than one percent (0.6 – 0.7 per cent) of the global shipbuilding market. In contrast, China has a near 47 per cent market share, followed by South Korea at 29 – 30 per cent and Japan at 17 per cent.

As per ministry data, India owns about 1,526 ships with a gross tonnage of about 13 million tonnes. Of these, one-third (or about 487) are used for overseas trade. Incidentally, the ministry is also pushing a new incentive program in the second phase of the existing Shipbuilding Financial Assistance Policy (SBFAP), which was adopted in 2016 and is slated to expire in 2026.

In the second phase, the thrust would be on green ships. Subsidy schemes are proposed for specialised vessels to the tune of 25 percent, and rising to 30 percent for green and highly specialised ones. Hoping to encourage the fleet renewal of Indian vessels, the government is also pushing for ship-breaking credit notes in SBFAP 2.0 among other policies. Credit note—to the tune of 40 per cent or so of the cost— will be issued to the shipowner when their vessel is scrapped in an Indian yard and would be reimbursable against the cost of construction of a new vessel if the same is being constructed at an Indian shipyard.

Around 44 percent of India’s merchant shipping fleet is above 20 years of age, data from MoPSW shows. Also proposed is the establishment of an apex body to steer the implementation of SBFAP 2.0. In the first phase of SBFAP, there were 313 vessel orders encompassing both domestic and export ops. These were to be procured across 39 shipyards. Around 135 vessels have been delivered, sources said.