Shipping to get infrastructure status to boost domestic shipbuilding

The government may grant infrastructure status to the shipping industry to help improve India’s position to the top five countries globally in shipbuilding and ownership by 2047. The status would allow shipping entities to secure funds on easier terms with long-term repayment and a low rate of interest from commercial banks. This would allow improved purchase of ships from Indian shipyards and raise Indian ownership.

The Ministry of Ports, Shipping, and Waterways (MoPSW) has asked the Department of Economic Affairs (DEA) to consider providing infrastructure status for ships in the harmonized list of infrastructure, which could be announced as part of budget proposals on 1 February. The infrastructure status to shipping will be an extension to similar status already given to the shipbuilding industry, which enables shipbuilding firms to avail themselves of flexible structuring of long-term project loans at lower rates of interest for longer tenures equivalent to the economic life of their assets. This also enables builders to issue infrastructure bonds for meeting working capital requirements and get tax benefits to increase shipbuilding activities.

But the shipping industry has not been granted infrastructure status so far, which deprives shippers, who also need long-term funds for capital-intensive vessel buying plans, and supports the domestic shipbuilding industry with bigger orders.

“Infrastructure sector status would allow Indian companies access to long-tenure, low-cost funds, which will help Indian companies acquire and operate more ships, both for coastal and global shipping operations. This will help reduce the cost of operations of Indian entrepreneurs and considerably ease operational cash flows since funds available for capital-intensive purchases will match repayments linked to the asset’s life spanning 12-15 years. This has been a demand of the industry for a while now,” said Anil Devli, CEO of the Indian National Shipowners’ Association (INSA).

Apart from infrastructure status, the government is also likely to extend MoPSW’s capital subsidy scheme – Shipbuilding Financial Assistance Policy (SBFAP) – for shipbuilding by another 10 years under Amritkaal Maritime Vision 2047.  The scheme, which ends in March 2026. provides financial assistance to Indian shipyards for shipbuilding contracts signed between 1 April, 2016, and 31 March, 2026 with the rate of financial assistance starting from 20% in 2016 and diminishing to 11% in 2026.

Also, a mega shipbuilding policy is expected to be announced along with fiscal and non-fiscal incentives including support from a ₹25,000 crore Mare Development Fund (MDF). India currently has less than 1% share of the global shipbuilding market (rank 22), which is dominated by China, South Korea, and Japan. It also ranks 18th globally in terms of ship ownership with a fleet size of around 1550 registered vessels and carrying capacity of 13.5 million gross tonnage GT). Under the Vision 2047 plan, India wants to take up its ship ownership to being among the five biggest globally with 100 million GT cumulatively by 2047. Also, the plan is to scale up shipbuilding within the country to be among the top five shipbuilders by 2047 with a production capacity of 4.5 million gross tonnage per annum (GTPA) from just about 0.1 million GTPA now.