Some wind behind the sails of India’s shipping industry
(Source – The Hindu, International Edition – Page No. – 8)
Topic : GS3: Indian Economy
Context
● The Indian government has made significant investments in the maritime sector through the Sagarmala Programme, but Indian shipping remains stagnant and faces various challenges.
● The 2025 Budget has introduced reforms, but key tax disparities persist, affecting competitiveness.

Government’s Commitment to Maritime Development
- The government has prioritized the development of the maritime sector through the Sagarmala Programme, which aims to complete 839 projects with a total investment of ₹5.8 lakh crore by 2035.
- Investment allocation within Sagarmala:
- ₹2.91 lakh crore (50%) for port modernization.
- ₹2.06 lakh crore (35%) for port connectivity.
- ₹55.8 thousand crore (10%) for port-led industrialization.
- The remaining 5% for coastal community development, infrastructure for coastal shipping, and inland water transport.
India’s Economic and Trade Growth
- India’s GDP grew from ₹153 trillion in 2016-17 to ₹272 trillion in 2022-23, achieving a 7% CAGR despite COVID-19.
- The economy is projected to reach $3.7 trillion in 2024, $5 trillion by 2027, and $7 trillion by 2030.
- India’s EXIM trade increased from $66 billion in 2016-17 to $116 billion in 2022, reflecting a 12.83% annual growth rate.
- India aims to boost exports to $2 trillion by 2030 to strengthen global trade.
Challenges in the Indian Shipping Industry
- Capital Constraints – High borrowing costs, short loan tenures, and rigid collateral requirements make financing difficult for shipowners and shipbuilders.
- Tax Disparities – Indian-flagged vessels face higher taxation, including IGST on ship purchases and TDS on seafarer salaries, making them less competitive than foreign-flagged ships.
- Aging Fleet – Despite recent improvements, many Indian vessels remain outdated, affecting efficiency and global competitiveness.
- Shipbuilding Challenges – Limited infrastructure for large vessel construction, high input costs, and weak ancillary industries increase dependency on imports.
- Regulatory Hurdles – Stringent regulatory requirements and delays in fund repatriation for ship acquisitions hinder sectoral growth.
- Competition from Foreign Ships – Foreign-flagged vessels benefit from easier access to capital, lower costs, and lenient regulations, reducing the market share of Indian shipping.
- Lack of Domestic Cargo Preference – Indian shipping struggles to compete with rail and road transport for domestic cargo movement.
- Slow Implementation of Reforms – While policies like the Maritime Development Fund (MDF) and infrastructure status for large vessels have been introduced, their effectiveness depends on proper execution and funding clarity.
Government Initiatives for Maritime Growth
- The Union Budget 2025 announced several measures to support the industry:
- ₹25,000 crore Maritime Development Fund (MDF) (49% from the government, rest from major ports).
- Infrastructure status for large vessels.
- Facilitation of shipbuilding clusters and a 10-year extension of customs duty exemption on shipbuilding spares.
- Revamped financial assistance policy for shipbuilding and credit incentives for shipbreaking.
- Tonnage tax scheme extended to inland vessels.
- However, the industry remains concerned:
- The ₹25,000 crore MDF funding mechanism remains unclear—whether it will be allocated in one year or multiple years.
- The aging fleet requires urgent replacement to meet green technology goals and emission reduction targets.
- Long-term financing with lower interest rates and 7-10 year repayment tenures is crucial.
Need for Further Reforms
- The Maritime Development Fund (MDF) should be strategically used to attract low-cost external commercial borrowings (ECBs).
- Additional investments are needed for modernization of shipyards and building large vessels.
- The tax disparities affecting Indian shipping competitiveness remain unaddressed.
- The government’s efforts are a positive step, but more decisive action is needed to ensure real growth in the shipping industry.