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| Photo Credit: Reuters
The Union Budget presented by Finance Minister Nirmala Sitharaman on Saturday (February 1, 2025) made some significant proposals for promoting indigenous ship building as also acquisition of Indian-flagged ships. Among them, the Budget has proposed the setting up of a Maritime Development Fund (MDF) to support India’s maritime sector by providing financial assistance, via equity or debt securities, which will directly benefit in financing for ship acquisition and aims at boosting Indian-flagged ships’ share in the global cargo volume up to 20% by 2047.
“The initial corpus of the fund is pegged at ₹25,000 crore — where the government contribution will be 49%. The remaining balance will be contributed by major port authorities, other government entities, Central public sector enterprises, financial institutions as well as private sector. This fund will directly benefit in financing for ship acquisition,” the Union Ministry of Ports, Shipping and Waterways said in a statement. “Further, indigenous fleet will reduce dependability of foreign ships, improve balance of payment and secure strategic interests of the country. By 2030, the MDF is aiming at generating up to ₹1.5 lakh crore investment in the shipping sector.”
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New clusters
Stating that the budgetary initiatives for India’s marine sector are focused on unlocking its vast potential and enhancing existing assets through upgrades, modernisation, and automation, Minister Sarbananda Sonowal said, “A key highlight is our Ministry’s development of new shipbuilding clusters of 1.0 to 1.2 Million Gross Tonnage (GT) each. This strategic push is crucial in realising India’s vision of becoming a $30 trillion economy by 2047.”
These efforts will enhance India’s global competitiveness, drive sustainable growth, and solidify its position as a leading global maritime hub.
“Considering that shipbuilding has a long gestation period, I propose to continue the exemption of Basic Customs Duty on raw materials, components, consumables or parts for the manufacture of ships for another 10 years,” Ms. Sitharaman said in her budget speech. “I also propose the same dispensation for ship breaking to make it more competitive.”
The scheme for mega shipbuilding clusters will provide direct capital support in the form of creating the breakwater along with capital dredging and also proposes a 10-year rent holiday for the land, if not provided at a nominal rate, the Ministry said in a statement. Investment is also designed to support creation of trunk infra like roads, utilities, sewage treatment among others. “The proposed allocation of ₹6,100 crore aims to support India’s existing shipyards in upgrading, modernising, and automating their operations, enhancing efficiency, utilisation, and overall output.”
The Budget has also extended the Shipbuilding Financial Assistance Policy 2.0, aimed at providing direct financial subsidies to Indian shipyards. This initiative seeks to help in securing orders by offsetting operational cost disadvantages, thereby strengthening the domestic shipbuilding industry. To be financed via budgetary support, the total outlay of the scheme is ₹18,090 crore, the statement added. The Budget also has an allocation of ₹6,100 crores to upgrade, modernise and automate Indian ports operations to upscale efficiency.
In addition, Ms. Sitharaman noted that presently the tonnage tax scheme is available to only sea going ships and added that the benefits of existing tonnage tax scheme are proposed to be extended to inland vessels registered under the Indian Vessels Act, 2021 to promote inland water transport in the country.
Published – February 01, 2025 10:08 pm IST
