There is a lot to cheer for the shipping sector in the Union Budget with Finance Minister Nirmala Sitharaman announcing a slew of incentives to boost domestic shipbuilding, inland waterways and ship recycling. Stocks of top shipping companies, including Shipping Corporation of India, GE Shipping and Essar Shipping, responded positively to the announcements.

The setting up of the Maritime Development Fund of ₹25,000 crore or nearly $3 billion is one of the biggest announcements for the sector in recent times with regards to long-term financing. This corpus will be for distributed support and promoting competition in the maritime industry. The fund will have up to 49 per cent contribution by the Government, and the rest will be mobilised from ports and the private sector, Finance Minister announced.

The Union Budget also proposes to facilitate ‘Shipbuilding Clusters’ to increase the range, categories and capacity of ships. This will include additional infrastructure facilities, skilling and technology to develop the entire ecosystem.

In addition, Sitharaman announced that at present 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.

At present, India is short of an inland water transport vessel fleet and requires higher investments in the sector which is capital intensive. To provide a boost to inland water transportation, it was represented to include inland vessels under the ambit of tonnage tax scheme, says the memorandum explaining the provision in the Finance Bill, 2025.

Ship building Financial Assistance Policy will be revamped to address cost disadvantages, which will also include Credit Notes for shipbreaking in Indian yards to promote the circular economy. Further, the large ships above a specified size are also proposed to be included in the infrastructure harmonised master list.

Acknowledging that the shipbuilding has a long gestation period, the minister proposed to continue the exemption of Basic Customs Duty on raw materials, components, consumables or parts for the manufacture of ships for another ten years. She also proposed the same dispensation for ship-breaking to make it more competitive in the Budget.

“Merry moves for the maritime sector,” said Jagannarayan Padmanabhan, Senior Director & Global Head, Consulting - Transport, Mobility and Logistics, Crisil Intelligence.

“The constitution of a sector-focussed fund for the maritime sector will help both major and non-major ports and the ecosystem to tap into project-based financing, moving away from balance sheet financing. Shipbuilding, which has been included in the harmonised list, will generate competitive sources of funds with longer tenure. The ship repair segment also stands to benefit. Among other infrastructure sectors, roads and railways have got more than 50 per cent of the budgetary provisions, though increase in budgetary spend has been maintained at last year’s level.”

The Budget allocation to the Ministry of Ports, Shipping and Waterways for 2025-26 increased to ₹3,471 crore (revenue of ₹1,709 crore and capital of ₹1,761) for the year 2025-26. This is 21 per cent increase over revised budget of ₹2,859 crore (revenue of ₹1,516 crore and capital of ₹1,342 crore) for 2024-25.

Related Topics