FM announces Rs 25K cr Maritime Development Fund to boost shipping

Sitharaman announces shipbreaking credit note scheme, Maritime Development Fund

As India’s nascent shipping sector struggles to make headway, Union Finance Minister Nirmala Sitharaman on Saturday announced a Rs 25,000 crore Maritime Development Fund — a long-awaited policy intervention to support the industry.

 

“For long-term financing for the maritime industry, a Maritime Development Fund with a corpus of Rs 25,000 crore will be set up. This will be for distributed support and promoting competition. This will have up to 49 per cent contribution by the government, and the balance will be mobilised from ports and the private sector,” Sitharaman said.

 

The central government will also grant one of the most significant and long-standing policy asks from the maritime industry, infrastructure status to large vessels over a certain size as part of the harmonised list of infra sectors, Sitharaman said in her speech.

 

 

Inclusion in the harmonised master list of infrastructure sectors will allow developers in the sector access to infrastructure lending at easier terms with enhanced limits, to larger amounts of funds as External Commercial Borrowing (ECB), and to longer tenor funds from insurance companies and pension funds. It will also make them eligible to borrow from India Infrastructure Financing Company Limited (IIFCL), etc.

 

The Shipbuilding Financial Assistance Policy will be revamped to address cost disadvantages, the FM said. This will also include Credit Notes for shipbreaking in Indian yards to promote the circular economy — similar to the vehicle scrappage scheme for cars, where 40 per cent of the scrap value of a vessel recycled at an Indian facility is reimbursed through a credit note redeemable against the purchase of a new vessel in India.

 

The first version of the assistance policy saw limited success and, therefore, increased benefits at a sustained level have been proposed in the new scheme, according to officials.

 

The FM also continued the exemption of basic customs duty (BCD) on raw materials, components, consumables or parts for the manufacture of ships for another 10 years.

 

Despite an ancient 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 in FY22.

 

The finance minister also proposed incentives to increase the use of inland water transport in the country, which currently has a mere 2 per cent modal share in national logistics.

 

“Presently, the tonnage tax scheme is available to only sea-going ships. The benefits of the 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,” she said.

 

India's 2047 shipbuilding dreams

 

Net potential commercial shipbuilding market: $237 billion

 

Potential value addition from the ancillary shipbuilding industry: $142 billion

 

Employment generation: 10-12 million

 

Budget Announcements:

 

Infra status to vessels: Allows low-cost finance

 

Maritime Development Fund: Easier access to finance through a dedicated fund

 

Shipbreaking Credit Note Scheme: Incentivises circular shipbuilding economy