A new shipbuilding plan is likely to be implemented after 2026, with greater incentives

New Delhi: The Shipbuilding Financial Assistance Policy that expires in 2026 is expected to be replaced by a new scheme with extended incentives for 10 years, two people familiar with the matter said.

The move is in line with the Union government’s plans to develop India’s blue economy, or sustainable use of ocean resources, and position the country as a ship-making hub.

“SBFAP, which expires in 2026, is expected to be replaced by SBFAP 2.0 after 2026, which will have expanded incentives and give impetus to the development of the sector,” said one of them, speaking on condition of anonymity.

“The Ministry of Ports, Shipping and Waterways and the Ministry of Commerce (Industry and Domestic Trade Promotion Department) are working on plans to incentivise shipbuilding in the country, including increasing the scope of financial support provided under the Financial Assistance Policy for Shipbuilding,” the person added.

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Currently, under the SBFAP, financial assistance is provided to Indian shipyards for shipbuilding contracts signed between April 1, 2016, and March 31, 2026. But the financial assistance has declined from 20% in 2016 to 11%.

“There is a proposal to increase financial aid, especially for green vessels,” the person cited above said.

According to the Ministry of Ports, Navigation and Waterways, within the framework of the SBFAP, 39 shipyards have acquired a total of 313 orders for domestic and export vessels since the start of the plan, for a total value of approximately ₹10.5 billion rupees.

These shipyards have received financial aid worth ₹337 crore for delivery of 135 vessels to national and international ship owners.

TO ₹A Rs 5,000 crore package is also in the works through a new viability gap financing plan to encourage the construction of inland waterway vessels, with a plan to extend support to entities that manufacture vessels intended for sea use, including cruise ships, later on.

Spokespeople for the Ministry of Commerce and the Ministry of Ports did not immediately respond to emailed queries.

Boosting India’s maritime sector

Promoting domestic shipbuilding will help the government achieve its goal of achieving 5 percent of the global market share in shipbuilding, experts said.

“Currently, we have less than 1% of the world’s tonnage and it is not enough to achieve the nation’s economic growth and development goals,” said Pushpank Kaushik, CEO of Jassper Shipping.

Domestic shipbuilding will not only support Indian ship owners but also become an alternative shipbuilding destination away from Vietnam, Korea, Japan and China, he added.

“Recognizing the need to accelerate the growth agenda of the shipbuilding and repair industry in India, the Government of India plans to come up with a new shipbuilding and repair policy,” said Mihir Shah, partner, transport and logistics, EY India.

“Lessons learned from the implementation of SBFAP and other related initiatives should be considered while formulating measures under the new policy to boost demand and increase capacity.”

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Shah added that the proposed maritime development fund should help address financing challenges and boost the availability of long-term and cost-effective capital to meet the emerging needs of India’s maritime sector.

The Ministry of Ports, Shipping and Waterways recently amended the SBFAP guidelines to include wind farm installation vessels and sophisticated dredger construction as specialized vessels eligible for increased financial assistance.

It has also provided for eligible financial aid of 30% for ships using green fuels for their main propulsion, and financial aid of 20% for ships with electric propulsion or hybrid propulsion systems.