India’s maritime and shipbuilding segment received a boost with Finance Minister Nirmala Sitharaman announcing the setting up of the much-awaited ₹25,000-crore Maritime Development Fund. The Centre will contribute to 49 per cent of the fund while the remaining 51 per cent will be mobilised from ports and the private sector.

While the government will be the anchor for the fund, multilateral agencies could also be tapped as potential contributors, sources said. Institutional and venture capital funding will also be looked into. Surplus funds of the State-owned ports are to be brought in as “possible investors”.

“For long-term financing for the maritime industry, a Maritime Development Fund with a corpus of ₹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,” the Budget announcement said.

The Budget also promised to re-look into the Shipbuilding Financial Assistance Scheme 2.0, capability and capacity-building scheme.

According to Prime Minister, Narendra Modi, granting ‘infrastructure’ status to the shipbuilding industry will help “generate employment” and push investments in the sector. “Shipbuilding is one of the largest employment generators and the infrastructure status will help boost the sector in India,” he said.

Re-look at policy

The Shipbuilding Financial Assistance Policy will also be “revamped” to address cost disadvantages. This will include Credit Notes for shipbreaking in Indian yards to promote the circular economy.

The existing scheme, which ends in March 2026, provides financial assistance to Indian shipyards for shipbuilding contracts signed between April 1, 2016, and 31 March, 2026 with the rate of financial assistance starting from 20 per cent in 2016 and diminishing to 11 per cent in 2026.

Large ships of a specified size will be included in the infrastructure harmonized master list (HML), thereby giving a thrust to the industry.

“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,” the Budget document said.

According to officials, Shipbuilding Financial Assistance Policy (SBFAP) 2.0 will be aimed at providing direct financial subsidies to Indian shipyards. This initiative seeks to help in securing orders by offsetting operational cost disadvantages, thereby strengthening the domestic shipbuilding industry. The total outlay of the scheme is ₹18,090 crore.

Another innovative scheme announced in the Budget is the Shipbreaking Credit Note. This scheme incentivises ship scrapping by issuing a Credit Note of 40 per cent of the scrap value which can be reimbursed to buy new Made-In-India ships.

Other sops

A host of other sops have also been announced to bring in foreign investments and push domestic activity, including promoting inland waterways.

Presently, the tonnage tax scheme is available only to sea-going ships. But, the benefits of 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.

In shipping parlance, tonnage taxation is the way of taxing the shipping companies based on the net tonnage of the entire fleet under operation or use by the company.

Considering that shipbuilding has a long gestation period, the Budget had also proposed to continue the exemption of BCD (basic customs duty) on raw materials, components, consumables or parts for the manufacture of ships for another ten years.

“...propose the same dispensation for ship breaking to make it more competitive,” it said.

Push through IFSC

In order to attract and promote additional activities in the IFSC Gift City, the Budget has also proposed specific benefits for ship-leasing units, insurance offices and treasury centres of global companies which are set up in the Gift City.

Further, the deadline to claim benefits in IFSC has also been extended by five years to March 31, 2030.

The Budget proposes to extend the exemption to capital gains for non-resident or a unit of IFSC on transfer of equity shares of a ship-leasing domestic company; while it has also proposed to extend the exemption to dividend paid by a ship leasing company in IFSC (to another unit of IFSC engaged in ship leasing).

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