Large ships get infrastructure status in boost to maritime industry

Move seen to ease financing woes of India's nascent shipbuilding industry

The Ministry of Finance has finally given infrastructure status to large ships, meeting one of the shipping industry’s longest-standing demands. This comes seven months after Finance Minister Nirmala Sitharaman announced it in her Budget speech.

 

In a notification on September 19, the department of economic affairs of the finance ministry notified a modification to the harmonised master list of infrastructure sectors.

 

“‘Large ships’ are included in the harmonised master list of infrastructure sub-sectors by insertion of a new item in the category of ‘Transport and Logistics’,” the finance ministry’s gazette notification said.

 

A footnote in the notification further explained that ‘large ships’ means commercial vessels having a gross tonnage of 10,000 or more, which are under Indian ownership and flag, or commercial vessels having a gross tonnage of 1,500 or more, which are built in India and under Indian ownership and flag.

 

Inclusion in the harmonised master list of infrastructure sectors allows developers in the sector to access infrastructure lending at easier terms with enhanced limits.

 

They also have access to larger amounts of funds as external commercial borrowings (ECB), access to longer tenor funds from insurance companies and pension funds. They are also eligible to borrow from India Infrastructure Financing Company Limited (IIFCL), among others.

 

In February, Sitharaman had announced, “Large ships above a specified size will be included in the infrastructure harmonised master list. Shipbuilding clusters will be facilitated to increase the range, categories and capacity of ships. This will include additional infrastructure facilities, skilling and technology to develop the entire ecosystem.”

 

Despite a legacy of maritime activity and previous calls for fostering an ecosystem, India currently accounts for only 0.06 per cent of global shipbuilding. Indians paid $109 billion in sea freight to foreign operators. According to Sarbananda Sonowal, minister of ports shipping and waterways, the government wants to be among the top five shipbuilding nations by 2047.

 

The government foresees an investment of ₹54 trillion into building indigenous shipping and shipbuilding capabilities running up to 2047, according to the Maritime Amrit Kaal Vision 2047 report.

 

Demands for enabling low-cost financing for ships have been as old as the turn of the century. In 2001, the Rangarajan Commission had asked for infrastructure status to be granted to ships. Since 2016, shipyards have been granted the status of infrastructure.

 

The government also has a large agenda of enabling shipbuilding finance through multiple entities. This, officials say, is to avoid the situation of shipyards, many of which struggled to get finances despite being granted infrastructure status.

 

The government would soon launch a maritime development fund (MDF), which will have a large corpus of over ₹25,000 crore. It would support maritime financing, which was also announced by Sitharaman in her Budget speech.

 

Moreover, Sagarmala Finance Corporation has also been launched as a maritime non-banking financial company (NBFC) to further boost credit access to maritime projects. 

Path cleared for smooth sailing

  Large ships added to infra list under ‘Transport & Logistics’ category  Infra tag enables easier loans, higher ECB limits, longer tenor funds, and IIFCL borrowing

India has just 0.06% of global shipbuilding share, pays $109 bn in sea freight to foreign firms

Govt eyes ₹54 trillion investment in indigenous shipping & shipbuilding by 2047