The Government of India (GOI) plans to seek Cabinet approval for a policy to increase India’s presence in the global shipbuilding market. The proposed policy encompasses a credit note scheme for recycling, fixed subsidies for shipbuilders, and the establishment of the three maritime clusters in Andhra Pradesh, Gujarat, and Odisha.

The new policy presents a significant opportunity for fleet owners. It offers a credit note worth 40% of the scrap value for ships dismantled at Indian breaking yards. This credit can substantially reduce the cost of building new vessels at Indian shipyards, making it an attractive proposition.

The policy is designed to encourage both domestic and international fleet owners to recycle ships in India and construct new ones locally, thereby contributing to the growth of the Indian shipbuilding industry.

Fleet owners play a crucial role in the transportation industry. They can be individuals, firms, or companies that own and operate a group of vehicles for various purposes. These vehicles are used in a wide range of transportation sectors, including logistics, trucking, delivery services, public transportation, and more. Their participation in the policy is key to its success.

Under the new policy, fleet owners will be granted a credit note equal to 40% of the scrap value for ships dismantled at Indian breaking yards. This credit is a strategic move to offset the costs of building new vessels at Indian shipyards.

The policy is designed to encourage both domestic and international fleet owners to recycle ships in India and construct new ones locally, thereby boosting the Indian shipbuilding industry.

An official informed The Economic Times that this scheme will incentivise ship recycling in India. Fleet owners must construct new ships in India to benefit from the credit note. If they decide to order new ships from overseas, the credit will not be applicable. The objective is to enhance the competitiveness of Indian shipyards internationally and attract more orders.

Currently, India holds less than 1% of the global shipbuilding market and aims to secure a position in the top 10 by 2030 and the top five by 2047. The latest policy will offer graded subsidies to shipyards – 20% for standard vessels, 25% for special category ships such as oil, gas, and chemical tankers, as well as container ships, and 30% for eco-friendly boats and those featuring advanced technology.

These subsidies will remain fixed until March 2034, possibly extending until 2047, providing long-term stability for shipyards securing orders.

This new program will replace the financial assistance initiative launched in April 2016. The current program, which offered decreasing subsidies over 10 years, has experienced limited uptake, partly due to the pandemic and a focus on building naval and coast guard vessels rather than commercial ships.

The government had earmarked Rs 4,000 crore for the existing program, but only 10% of this funding has been utilised, with less than two years remaining. The new policy, known as ‘Shipbuilding Policy 2.0,’ aims to address the deficiencies of the current program and boost local shipbuilding.

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