Cabinet clears ₹69,725 cr package to boost shipbuilding, maritime sector

Union Cabinet approves ₹69,725 crore maritime reforms package to build shipyards, expand clusters, provide long-term funding and strengthen India's shipbuilding capacity

The Union cabinet on Wednesday announced a massive infrastructure boost for India’s maritime sector with a ₹69,725 crore package, aimed at building indigenous shipping and shipbuilding capabilities.

 

Following up on Finance Minister Nirmala Sitharaman’s budget announcements in February, the cabinet approved the maritime reforms package to revitalise India’s shipbuilding and maritime ecosystem, which included a ₹24,736 crore revamped shipbuilding finance assistance scheme (SBFAP), ₹25,000 crore Maritime Development Fund (MDF), and a shipbuilding cluster development programme worth ₹19,989 crore.

 

“The package introduces a four-pillar approach designed to strengthen domestic capacity, improve long-term financing, promote greenfield and brownfield shipyard development, enhance technical capabilities and skilling, and implement legal, taxation, and policy reforms to create a robust maritime infrastructure,” an official statement said.

   

The decade-long schemes will induce an investment of ₹4.5 trillion and result in an output of over 2,500 vessels, Union Information and Broadcasting Minister Ashwini Vaishnaw said in a press conference.

 

“Under this package, the Shipbuilding Financial Assistance Scheme (SBFAS) will be extended until 31 March 2036 with a total corpus of ₹24,736 crore. The scheme aims to incentivise ship building in India and includes a Shipbreaking Credit Note with an allocation of ₹4,001 crore. A National Shipbuilding Mission will also be established to oversee the implementation of all initiatives,” the statement said.

 

The first shipbuilding assistance programme saw little success with a limited offtake. The ministry of ports shipping and waterways has standardised the benefits to be given to shipyards over the delivery period to attract more players to avail the scheme.

Vessels worth below ₹100 crore will be given an assistance of 15 per cent, while those valued above that will be given a 20 per cent support by the government.

 

Moreover, special, green, hybrid, and specialised vessels will attract an assistance of 25 per cent.

The vessel credit note scheme is much like the Centre’s vehicle scrappage programme for automobiles. The scheme will allow ship owners to avail a credit note of 40 per cent of the vessel’s scrap value when scrapped in an Indian yard – this will be reimbursable against the cost of constructing a new vessel in an Indian shipyard.

 

“In addition, the Maritime Development Fund (MDF) has been approved with a corpus of ₹25,000 crore to provide long-term financing for the sector. This includes a Maritime Investment Fund of ₹20,000 crore with 49 per cent participation from the government of India and an Interest Incentivization Fund of ₹5,000 crore to reduce the effective cost of debt and improve project bankability,” the cabinet added.

 

The MDF will be the backbone of financing gaps in India’s maritime ambitions, and will offer equity support in projects for the blue economy.

The ministry is looking at institutions like National Bank for Financing Infrastructure and Development and IIFCL to manage the fund – part of which will also be used for interest incentivisation, which will enable lower cost of finance for maritime projects with the fund acting as a bridge.

 

Furthermore, the Shipbuilding Development Scheme (SbDS), with a budgetary outlay of ₹19,989 crore, aims to expand domestic shipbuilding capacity to 4.5 million gross tonnage annually, support mega shipbuilding clusters, infrastructure expansion, establish the India Ship Technology Centre under the Indian Maritime University, and provide risk coverage, including insurance support for shipbuilding projects, the cabinet said.

 

The scheme includes capital support for shipbuilding clusters, including ₹9,930 crore for greenfield clusters, and brownfield capacity expansions at ₹8,261 crore.

 

On September 4, Business Standard reported that the government has also added provision in the shipbuilding initiative to protect shipbuilders from buyer default in order to avoid the trouble that engineering giants such as Larsen & Toubro had to face in the past.

 

The risk coverage corpus is of ₹1,443 crore, the cabinet confirmed on Wednesday, along with capability development initiatives worth ₹305 crore.

 

The overall package is expected to unlock 4.5 million gross tonnage of shipbuilding capacity, generating nearly 3 million jobs.

 

“Beyond its economic impact, the initiative will strengthen national, energy, and food security by bringing resilience to critical supply chains and maritime routes. It will also reinforce India’s geopolitical resilience and strategic self-reliance, advancing the vision of Aatmanirbhar Bharat and positioning India as a competitive force in global shipping and shipbuilding,” the cabinet said.