India is in the advanced stages of setting up the second phase of the Ship Building Financial Assistance Policy (SBFAP), with a fund outlay of around ₹18,000 crore, Sarbananda Sonowal, Union Minister for Ports, Shipping and Waterways, told businessline in an exclusive interview.

The SBFAP 2.0, is “awaiting Cabinet approval”, and will be financed “in its entirety through budgetary support”.

The new policy, mentioned by Finance Minister Nirmala Sitharaman in her Budget, will offer subsidy on the contracted price or fair value for vessels built in India over a 10-year timeframe from 2024 to 2034.

“The policy proposes subsidies for specialised, green and other highly specialised vessels, while also including non-combat defence auxiliary vessels exported to friendly foreign nations,” Sonowal said.

For instance, under the proposed policy, shipyards would receive around 20 per cent subsidies for standard ships, around 25 per cent for specialised vessels (e.g., oil, gas, chemical tankers, and container ships), and about 30 per cent for green or technologically advanced vessels. The subsidy rates will remain fixed throughout the scheme’s tenure , which is set to run until March 2034, those in the know said.

Existing SBFAP will be replaced by SBFAP 2.0 once Cabinet approval is obtained.

Under the existing scheme, shipyards such as Cochin Shipyard, Chowgule Shipyard, Mazgaon Shipyard, and Garden Reach Shipbuilders secured shipbuilding orders. Around 313 vessel orders — domestic and export — were procured by 39 shipyards. Financial assistance of ₹337 crore was provided for the delivery of 135 vessels.

Credit Note

The SBFAP 2.0, Sonowal said, will push for ship-breaking. Under this, a credit note of 40 per cent of the ship’s scrap value will be issued to the shipowner when their vessel is scrapped at an Indian yard. The note is reimbursable against the cost of constructing a new replacement vessel if the latter is at an Indian shipyard.

“We plan to set up a National Shipbuilding Mission for implementation of SBFAP 2.0 and coordinate the other initiatives,” he said.

Mega Clusters

Work is also underway to develop shipbuilding mega clusters to enhance shipbuilding capacities. States like Andhra Pradesh and Odisha are already being explored.

Ministry sources said, that companies like Mediterranean Shipping Company SA (MSC) – amongst the largest shipping liners in the world - have initiated preliminary discussions to identify a suitable greenfield location for establishing a shipyard to address its in-house shipbuilding and repair needs. This move is driven by a global shortage of shipbuilding slots, prompting the company to explore alternatives.

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