India to approve Rs 25,000 crore for shipbuilding and infrastructure

India's Maritime Development Fund (MDF) is likely to receive a Rs 25,000 crore boost to support low-cost, long-term indigenous manufacturing projects

The Indian government is likely to approve Rs 25,000 crore Maritime Development Fund (MDF) later this month, aimed at providing long-term, low-cost financial support for indigenous shipbuilding and blue water infrastructure projects, according to a report by Mint. The fund will play a crucial role in advancing India’s maritime sector, aligning with the nation’s Make-in-India initiative aimed at establishing the country as a global manufacturing hub.

The MDF is expected to be structured as a corporate entity, with the government holding a minority stake of at least 26 per cent, while the majority shareholding will be offered to multilateral financial institutions and global funds. The fund will provide various forms of financial support, including debt, equity, viability gap funding (VGF), and buyer credit. It will be similar to the National Bank for Financing Infrastructure and Development (NaBFID), but will have a dedicated focus on the maritime sector.

The Maritime Development Fund will have a corpus of Rs 25,000 crore over seven years, providing long-term loans of up to 25 years to align with the 30-year lifespan of vessels.

How many vessels does India currently have?

India’s fleet currently stands at 1,526 vessels with a gross tonnage (GT) of 14 million as of December 2023. However, about 44 per cent of these vessels are over 20 years old, indicating a need for replacement in the coming years.

The move comes amid inter-ministerial consultations, with a final cabinet note to be submitted by the end of September for approval.

Key objectives of the MDF

- The fund will promote domestic shipbuilding of all types and sizes to reduce India’s dependence on foreign ships. Currently, India spends close to $75 billion annually on leasing ships and controls only 2 per cent of the world’s total tonnage.

- India holds less than 1 per cent of the global shipbuilding market, which is dominated by China, South Korea, and Japan. The MDF aims to boost this to 5 per cent in the coming years.

- It will also support the development of cruise tourism, expand port capacity, promote coastal shipping, and develop inland waterways through public-private partnerships (PPP).

Tax incentives similar to those offered in countries like Norway, Korea, and Japan will also be considered to attract domestic and global players into the Indian ship leasing and management sector.