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The Central government is currently focusing on harnessing the potential of the shipbuilding industry after it witnessed a supply chain shock due to a lack of domestic ships and shipping lines during the pandemic and geopolitical upheavals.
Since the Union Budget is set to be presented in the Parliament by Finance Minister Nirmala Sitharaman on February 1, the industry is expecting major announcements. The government likely announce major projects and investments in the shipping sector. India’s government is making efforts to reduce the logistics cost and bring it to single digit. This can only become possible if the potential of ports, which are currently handling 1,200 tonnes of cargo, is augmented and harnessed properly.
The government’s Sagarmala project integrates ports with industrial clusters, optimising logistic networks, and fostering comprehensive coastal development. Besides, the Rs 57,000 crore investment at Kandla Port, the announcement of shipbuilding clusters in five states – Kerala, Odisha, Gujarat, Andhra Pradesh and Maharashtra – are other major steps that the government has taken.
Last year, the government introduced the Coastal Shipping Bill, 2024, which strives to streamline regulatory frameworks and enhance multi-modal trade connectivity.
What are some major announcements sought by industry?
Infrastructure status to shipping: The Ministry of Ports, Shipping and Waterways in April 2016 granted infrastructure status to shipyards, and shipbuilding which enabled them to access cheaper and long-term capital reduce cost disadvantages, and invest in capacity expansion, thereby boosting the Indian shipbuilding industry.
However, the industry is expecting the inclusion of ships into infrastructure as it would enable similar benefits to the shipping entities. The easier flow of funds would augment India’s shipping capabilities.
Maritime Development Fund: Reportedly, Minister Sarbanand Sonowal last year announced that the government will set up the MDF of Rs 30,000 crore. As the budget nears, it is expected that the fund could be allocated. The fund would be crucial for providing long-term and low-cost financial support for indigenous shipbuilding and other maritime projects.
Custom duty exemption: India’s shipbuilding faces the biggest issue of importing raw materials, machinery and equipment. As of now, the Central government has exempted customs duty on shipbuilding and ship repair. For construction, the exemption is till March 31, 2025, while for repair it was April 1, 2023.
However, in last year’s Union Budget, the exemption for imports of parts used in repairs was extended for the next three years. For shipbuilding, the deadline is still March 31, 202,5 and so it is expected that the exemption may get an extension.
