New Shipbuilding Policy On Anvil To Propel India Into Global Top 10 By 2030

The Union Cabinet is expected to soon approve a new shipbuilding policy aimed at significantly boosting India's share in the global shipbuilding market.

Although India currently accounts for less than 1 per cent of the global shipbuilding industry, the country is setting ambitious targets to rank among the top 10 by 2030 and the top five by 2047.

The proposed policy, as reported by ET, includes several key initiatives: a recycling credit note scheme, a fixed-rate subsidy for 10 years, and the establishment of three maritime clusters in Andhra Pradesh, Gujarat, and Odisha.

Under this proposal, fleet owners, both domestic and international, will receive a credit note equivalent to 40 per cent of the scrap value of ships dismantled in Indian ship-breaking yards. This credit can be applied toward the construction costs of a new vessel at an Indian shipyard.

India’s leadership in ship recycling underpins the policy’s focus on linking shipbuilding with recycling through this credit note incentive.

Alang, located in the Gulf of Khambhat in Gujarat, is home to the world’s largest ship-breaking yard, where numerous freight and cargo ships from around the world are dismantled.

Established in 1983, Alang has 183 yards spread across 14 kilometres of coastline and beached 125 vessels for recycling in financial year 2024 (FY24), compared to 131 in the previous year, according to the Gujarat Maritime Board.

The new policy also proposes a tiered subsidy structure for shipyards, based on the types of vessels they produce. Standard vessels would qualify for a 20 per cent subsidy, specialised ships such as oil, gas, and chemical tankers and container ships would receive a 25 per cent subsidy, and green vessels and those with advanced technologies would benefit from a 30 per cent subsidy.

This subsidy rate will remain fixed for the policy's duration, which extends until March 2034, with the possibility of extension until 2047, providing shipyards with long-term "visibility" for booking orders.

This new approach marks a departure from the current shipbuilding financial assistance scheme launched in April 2016, which offered a decreasing subsidy over a 10-year period, starting at 20 per cent and decreasing by three percentage points every three years.

However, the financial assistance scheme has not met expectations, partly due to disruptions from the Covid pandemic and limited capacity at Indian shipyards to build commercial vessels, as many were focused on constructing warships for the Indian Navy and Coast Guard.

India’s efforts to enhance its shipbuilding industry are critical, as highlighted by Maritime India Vision 2030 (MIV 2030), which emphasises the need for a vibrant and robust shipbuilding sector for both economic and strategic reasons.

One of the main challenges facing Indian shipbuilding today is the high cost disadvantage compared to global competitors. To regain tonnage, India must achieve a 25-30 per cent improvement in cost competitiveness by increasing automation levels and reducing material and financing costs.

Countries like China and South Korea, leaders in shipbuilding, currently offer subsidies of 20-30 per cent to their shipbuilders. India’s new policy aims to close the gap and position the country as a major player in the global market.