Edited excerpts:

The Maritime Development Fund (MDF) with an initial target corpus of ₹25,000 crore till 2030, with 49 per cent equity investment from the Centre and the remainder 51 per cent will be from major ports, financial institutions, private investors and sovereign funds, among others. Additionally, multilateral agencies and international development banks are potential partners for funding support.

By 2030, the MDF is expected to generate ₹1.3-1.5 lakh crore of direct and indirect investments in the shipping sector. Additionally, employment generation of 9-11 lakh is expected.

The MDF from FY25 to FY29 is proposed to be ₹25,000 crore, with the option to revise as per requirements by the MoPSW in consultation with the Ministry of Finance. The fund will be aligned with industry’s financial needs by providing financial assistance via equity or debt securities.

As and when private parties show interest to invest in the fund, the government’s share may gradually be reduced but will not be allowed to fall below 26 per cent. The MDF aligns with global priorities such as sustainability, decarbonisation, and responsible ship recycling. The fund is expected to attract significant capital through co-financing, concessional funding, and blended finance models, ensuring risk-mitigated, long-term returns.

With the fund now formally announced in the Budget, a stronger response from the investors is anticipated.

India currently ranks 22 in shipbuilding and has less than 0.1 per cent share of shipbuilding globally with the maximum output of 0.1 million Gross Tonnage (GT) in the last 10 years. In ship ownership, India’s position is 17.

The Indian industry currently spends more than ₹6.2 lakh crore ($75 billion) annually on freight charges and leasing ships from othercountries. About 94-95 per cent of India’s cargo is carried on foreign ships. Therefore, it becomes critical for a developing country like ours to ensure economical and dependable shipping resources.

Under the new policy, the government is focusing on both the supply side — with the financial incentives under the SBFAP 2.0 scheme — as well as the demand side by speaking to major ship procuring entities in India to understand their requirement and how that can be met with domestically-built ships and making this demand visible to Indian shipbuilders.

Prime Minister Narendra Modi has been bringing in radical legislative reforms and stable policy interventions, including improving the ease of doing business here. There is a boost in investor confidence and there is a huge interest to explore shipbuilding activities in India.

Today, 89 per cent of shipbuilding globally happens in China, South Korea and Japan; and we at the Ministry are in discussions with the shipbuilders of South Korea and Japan. All of the three largest shipbuilders of South Korea have either visited India or are in the process of organising a visit to seek opportunities for setting up shipyards here.

A delegation of Japanese shipbuilders is expected to visit India in about a month’s time.

Leading shipping players from countries like France, Denmark have also shown keen interest in participating, through various mechanisms, towards boosting domestic shipbuilding and ship repair. Therefore, it is safe to say that globally there is healthy interest in the industry to explore shipbuilding in India.

With regard to customs duty on shipbuilding parts, it is informed that presently, because of the weak ecosystem, imports form around 40 – 70 per cent of the material cost of the vessels constructed. Therefore, the exemption of the Customs Duty will significantly aid new construction and repair activities.

This continued exemption will allow new construction and Indian shipbuilding and MRO work competitive.

The Budget introduces specific benefits for ship-leasing units, encouraging foreign investment in maritime financing and reducing tax burdens for global shipping companies.

In order to attract and promote additional activities in the IFSC, it has been proposed that specific benefits to ship-leasing units, insurance offices and treasury centres of global companies which are set up in IFSC would be given.

Further, to claim benefits, the cut-off date for commencement in IFSC has also been extended by five years to March 31, 2030, providing more time for businesses to establish operations and ensuring greater investment certainty.

The cargo transported by Inland Waterways has seen an exceptional increase of over 600 per cent in the last 10 years. India’s River Cruise Tourism is today creating global headlines.

A tonnage tax system is a special taxation policy for shipping companies where tax is not based on actual profits but on the size (tonnage) of the vessel. It provides stable, predictable, and lower taxation for vessel owners, reducing their financial burden. This scheme is already in place for sea-going ships, but is now available for inland vessels operating on rivers and waterways.

So, instead of paying corporate income tax on profits, companies operating inland vessels will now pay a fixed tax based on vessel size. Since the tax burden is lower and more stable, more private companies may be willing to invest in inland water transport.

Companies operating cargo and passenger vessels will find it more attractive to expand their operations. And, with reduced tax costs, shipping companies and logistics operators can afford to buy and operate more inland vessels. This can improve connectivity across rivers and national waterways. Businesses are more likely to shift to river-based cargo movement, reducing highway congestion and fuel consumption. Inland water transport is also a more affordable alternative, with costs 30–50 per cent lower than road and rail.