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India: New shipbuilding scheme likely after 2026, with higher incentives

The Ship Building Financial Assistance Policy that lapses in 2026 is expected to be replaced with a new scheme with expanded incentives for 10 years, two people aware of the matter said.

The move aligns with the Union government’s plans to develop India’s blue economy, or the sustainable use of ocean resources, and positioning the country as a ship manufacturing hub.

The SBFAP, which lapses 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,” one of them said, speaking on condition of anonymity.

“The ministry of ports, shipping and waterways, and the ministry of commerce (Department for Promotion of Industry and Internal Trade) are working on schemes to incentivise ship manufacturing in the country, including raising the extent of financial support extended under the Ship Building Financial Assistance Policy,” this person added.

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

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

According to the ministry of ports, shipping and waterways, under SBFAP, a total of 313 domestic and export vessel orders were procured by 39 shipyards since the inception of the scheme, with the total value standing at about ₹10,500 crore.

These shipyards have received financial assistance amounting to ₹337 crore for delivering 135 vessels to domestic and international ship owners.
A ₹5,000 crore package is also being worked through a new viability gap funding scheme to incentivise the construction of inland vessels, with a plan to extend the support to entities manufacturing sea-bound vessels, including cruise ships, later.

Spokespersons of the ministry of commerce and the ministry of ports didn’t immediately respond to emailed queries.
Propelling India’s maritime sector

Promoting domestic shipbuilding will help the government achieve its target of reaching 5% of the global market share in shipbuilding, said experts.

“Presently, we have less than 1% of global tonnage, and it is not enough to achieve the targeted economic growth and development of the nation,” said Pushpank Kaushik, chief executive of Jassper Shipping.

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

“Recognising the need to fast-forward the growth agenda for shipbuilding and ship repair industry in India, government of India plans to come up with a new shipbuilding and ship repair policy,” said Mihir Shah, partner, transport and logistics, EY India.
“Lessons learnt from implementation of SBFAP and other related initiatives should be analysed while formulating measures under the new policy to drive demand and capacity augmentation.”

Shah added that the proposed maritime development fund should help address financing-related challenges and spur availability of long term and cost-efficient 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 construction of sophisticated dredgers as specialised vessels eligible for higher financial assistance.

It has also made eligible financial assistance of 30% for vessels using green fuels for their main propulsion, and a financial assistance of 20% for vessels with electric propulsion or hybrid propulsion systems.
Source: Livemint

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