Shipping industry likely to get ₹25,000-crore boost

According to two persons aware of the development, the Centre is finalizing the contours of a ₹25,000-crore maritime development fund (MDF) that would provide long-term and low-cost financial support for shipbuilding in India, and other blue-water infrastructure projects. They added that the new scheme is expected to be announced and operationalized as part of the Union budget for 2025-26.

To attract pension funds and sovereign wealth funds to participate in the fund, the Union ports, shipping and waterways ministry is planning investor meets and road shows in Europe, the US and key Asian markets, the first person cited above said on condition of anonymity.

The Centre would stand guarantor for all investments into the MDF and would also be its biggest participant. The finance ministry is working out the Centre’s share and giving final touches to the proposal based on suggestions given by the shipping ministry, the first person added.

Mint had earlier reported about the MDF to be structured as a corporate entity, with the government holding a minority stake of at least 26%, while the majority shareholding will be offered to multilateral financial institutions and global funds.

Also read | Govt plans incentives, ban on foreign vessels to boost local shipbuilding

The fund is being set up to provide various forms of financial support, including debt, equity, viability gap funding (VGF), and buyer credit. It will be similar to the National Bank for Financing Infrastructure and Development (NaBFID), which provides long-term funds to infrastructure projects, but will have a dedicated focus on the maritime sector.

The second person quoted above said the MDF was earlier planned to be announced as part of the government’s 100-day agenda, but inter-ministerial consultations suggested that the groundwork for mobilising global investors into the fund should be done ahead of operationalizing the scheme.

The person added that discussions were also inconclusive on the size of the fund and the extent of equity contribution by the government. “Suggestions are for keeping minority or equal government holding in the funding entity with stakes around 26% or going higher up to 50% while keeping fund size around ₹20,000-25,000 crore," this person said, also requesting anonymity.

Queries sent to the ministries of finance, and ports, shipping and waterways remained unanswered till press time.

What the new fund will do

The MDF is expected to meet the long-term funding required for putting up shipbuilding infrastructure in the country. Apart from promoting domestic manufacturing, the fund would also promote development of cruise tourism in the country by funding the creation of requisite infrastructure, said the first person cited above.

Further, it would support activities like mechanization and capacity expansion of existing ports through PPPs (public-private partnerships), dredging activities, development of inland waterway systems, and coastal shipping. The initial plan for the fund is to have a corpus of ₹25,000 crore spread over a seven-year-period, according to the first person.

Also read | Shipping may get infra tag in boost for shipbuilding, vessel owners

The second person cited above said that the fund would explore giving out long-term loans extending beyond the 10-year period to 15-25 years to enable the credit period to be in line with the life of a vessel, which is around 30 years. It would also consider tax sops that similar funds in countries such as Norway, Korea, Japan extend to domestic ship lessors and ship management companies.

Industry upbeat

Pointing out that growth of the maritime sector is a strategic imperative for India’s export-oriented growth agenda, Mihir Shah, partner, transport and logistics at audit and consulting firm EY India, said, “Systematic support through MDF should help catalyse development across the maritime value chain and enhance India’s maritime supply chain resilience and global competitiveness."

Pushpank Kaushik, CEO of Hyderabad-based global shipping and logistics firm Jassper Shipping, said MDF would help open avenues for domestic business owners to explore maritime and logistics as an industry for investment and growth. “How India has been a pioneer in fintech, I believe the government’s support and industry’s willingness to grow will make maritime the biggest force of the nation," he said.

Also read | Govt plans incentives, ban on foreign vessels to boost local shipbuilding

Another official from PwC India said on condition of anonymity that maritime projects typically involve high upfront capital expenditure, and the break-even period can be long, especially for IWT (inland waterway transport) infrastructure and fleet expansion. It is here that MDF could provide longer debt repayment periods, allowing projects more time to achieve profitability.

Role model

MDF may be set up on the lines of the country’s youngest development financial institution, the NaBFID, which was set up in 2021. In fact, an earlier proposal was to set up MDF as a dedicated vertical under NaBFID, but given the specialised nature of funding and the need to provide large-scale, focused funding to the sector, a dedicated fund or entity has been considered the best option.

The primary focus of the new entity would be to promote manufacturing of ships of all make and sizes within the country and make India a global hub for ship manufacturing.

And read | With thaw in India-China ties, TCI orders two cargo ships from Chinese shipyards for delivery in 2026

Currently, India has less than 1% share of the global shipbuilding market, which is dominated by China, South Korea and Japan, according to data from the shipping ministry. 

According to directorate general of shipping (DGS) that functions under MoPSW, India spends close to $75 billion annually on leasing ships from overseas. DGS data also shows that India owns just about 2% of the world’s total tonnage and has some 1,500-odd ships under its flag.