Chief Minister Anandiben Patel announced the policy.
"The state government has decided to implement a new policy for consistent development and uplift of ship recycling industry at Alang where more than 1.50 lakh people get direct or indirect employment," she said in a statement.
Finance Minister Saurabh Patel said the state government and Gujarat Maritime Board formulated the policy to promote the industrial activity at Alang.
The policy extends utilisation period of ship-breaking plots to 10 years from five years, and provides for resizing, readjustment, realignment of the plots to enable accommodation of bigger vessels in a safe manner.
The policy will be reviewed after three years to ensure its practical implementation, he added.
Alang ship-breaking yard comprises 167 plots along a 10-km long coastal strip leased out by the Gujarat Maritime Board. Since the ship-breaking activities began there in 1983, more than 7,000 vessels have been recycled at Alang.