India’s Shipbuilding Efforts Yet To Take Off Despite Budget Promise
Five months after Budget 2025 promised a Rs 25,000 crore shipbuilding fund, industry insiders say there's been zero progress or consultation.
When Finance Minister Nirmala Sitharaman presented the Budget in 2025, her speech promised a bold new course for India’s maritime sector.
The ambition was the launch of a Rs 25,000 crore Maritime Development Fund (MDF) — a financing lifeline aimed at revitalising India’s stagnant shipbuilding industry and boosting the country’s strategic presence on global waters.
Five months later, that vision has yet to leave the harbour.
Industry insiders, who had high hopes for the fund, are growing impatient.
“On the Maritime Development Fund, unfortunately, nothing has happened,” Anil Devli, a maritime industry veteran, told The Core.
“It's also rather unfortunate that the ministry is not even sharing any information on this. There have been no consultations… and we thought we could contribute meaningfully to the thought process because we are the users.”
What Is MDF?
The MDF has been in the works since early 2024, when the Ministry of Ports, Shipping & Waterways, under Secretary TK Ramachandran, began exploring its creation — either as a dedicated development finance institution (DFI) or a corporate entity backed by multilateral agencies.
Initially envisioned to support a wide range of maritime activities, including shipbuilding, towage, dredging, and vessel leasing, the fund aimed to catalyse Rs 75–80 lakh crore in Blue Economy investments by 2047. By September 2024, reports indicated Cabinet approval was imminent, with plans to model the MDF on the National Bank for Financing Infrastructure and Development (NaBFID) and provide long-term loans, equity support, viability gap funding (VGF), and buyer credit.
In December 2024, further details emerged suggesting the government would hold a minority stake (26–50%), with the remaining capital sourced from sovereign and pension funds, and the scope expanded to include cruise infrastructure, inland waterways, and green shipping.
Finally, in the Union Budget on February 1, 2025, the MDF was officially announced with a Rs 25,000 crore corpus — 49% of which will come from the government and the rest from ports, PSUs, and private investors — to finance equity, debt, and critical maritime infrastructure.
During the Budget this year, it was pitched as a comprehensive funding vehicle to support India’s maritime ambitions through equity and debt financing. The government pledged to chip in up to 49% of the fund, while the remaining capital was to be raised from major port authorities, Central PSUs, financial institutions and private players.
Its stated objectives were equally ambitious: attract Rs 1.5 lakh crore in investment by 2030, increase the share of Indian-flagged vessels in global cargo traffic to 20% by 2047, and reduce India’s dependency on foreign-owned ships for carrying its cargo.
What made the MDF particularly significant was its focus on ship acquisition, fleet expansion, and aligning with India’s strategic and economic security — a necessary push, considering India currently owns less than 1% of global shipbuilding capacity despite making nearly $109 billion in ocean freight payments as of FY22.
The fund was to work in tandem with a revised Shipbuilding Financial Assistance Policy (SBFAP 2.0), which had an additional Rs 18,090 crore earmarked for vessel manufacturing subsidies, and the inclusion of “large ships” under infrastructure status to open up new streams of priority lending.
“This fund should work like a 'Make in India' initiative for the shipping industry. Right now, many Indian shipowners are setting up offices in foreign countries because India’s current policies aren’t exactly user- or business-friendly for them. If the MDF is implemented the right way and genuinely supports Indian shipowners, it could change that. They’d be encouraged to base their operations here, bringing revenue, business activity, and jobs back to India,” Captain Shivraj Mane, Founder and CEO of Visionfinity Shipping told The Core.
Big Budget, Bigger Promises
The MDF scheme is stuck somewhere in bureaucratic waters. While the Expenditure Finance Committee (EFC) reportedly gave its nod in April, the Cabinet is yet to approve the final framework. No guidelines have been published, no stakeholder meetings held, and no funds have been disbursed.
This lack of clarity has left stakeholders confused about the fund’s scope — whether it will truly benefit shipbuilders, shipowners, or port infrastructure companies.
For the shipping industry, this isn’t new. Grand announcements often struggle to find implementation on the ground. The lack of an empowered, central authority to steer these maritime initiatives has historically diluted their impact.
“In the past also, we’ve seen government policies, though well-meaning, fail in execution,” Xerrxes Master, managing director of end-to-end logistics solution provider Master Group, told The Core.
“There has to be a central authority which directs this concept, directs the flow of money into the correct channels and verticals. Too many such concepts have died a natural death due to inactivity or poor planning.”
There’s also confusion about what qualifies as "infrastructure." In her Budget speech, Sitharaman had announced that large ships would be classified as infrastructure. But that definition, too, is facing bureaucratic meddling.
“Infrastructure is another joke. The Maritime Administration—including DG Shipping, shipbuilders and shipowners—all agreed on defining large ships as those 24 metres and above. But a bureaucrat in the Department of Expenditure now says an asset must be above Rs 100 crore to qualify as infrastructure. That makes no sense. Infrastructure should be defined by the purpose it serves — not by its cost,” Devli said.
India’s ambitions are huge: to be among the top five shipbuilding nations by 2047, to expand its merchant fleet, and to become a global leader in ship recycling by 2030. But for that, the MDF must move from PowerPoint to port.
Without clarity on fund disbursement, eligibility norms, and infrastructure status, the MDF risks joining a long list of policy initiatives that looked promising but never delivered.
Regulatory Bottlenecks: The Harmonised List Problem
One reason the infrastructure status hasn’t materialised yet is procedural. According to Shitesh Ranjan, Ship Surveyor and deputy director general from the Directorate General of Shipping, two key changes are required before the MDF can be fully effective.
“There’s a harmonised list of items under infrastructure status. That list needs to be amended by the Department of Economic Affairs (DEA). Then there’s the Master Circular on Loans and Advances, which is issued by the Reserve Bank of India (RBI). Until both are updated, banks won’t finance shipbuilding projects at concessional terms,” Ranjan explained.
The ‘harmonised list of items under infrastructure status’ is a government-approved list maintained by the DEA that identifies sectors eligible for benefits like concessional financing and easier access to credit.
Since shipbuilding isn’t currently included, banks can’t treat it as infrastructure and offer soft loans. Unless this list is amended and the RBI updates its lending guidelines, shipbuilding projects won’t qualify for preferential funding terms.
Without this alignment, banks can’t extend low-interest, long-term loans to shipbuilders, making India’s products uncompetitive globally, especially when South Korea and China offer interest subvention, subsidies, and even state-backed export guarantees.
“Once shipbuilding is included in the harmonised list, it will be officially treated as infrastructure. But there’s a disagreement right now on how it should be described. Until that’s resolved, we are stuck,” Ranjan added.
Why the Harmonised List Matters
Getting into the harmonised list would be the gateway for banks to classify lending to shipbuilders as infrastructure loans, making them eligible for better terms, refinancing options, and regulatory relaxations under RBI norms.
As of now, the harmonised list includes ports and inland waterways — but not ships or shipyards, creating an artificial policy barrier.
Several rounds of internal deliberation within the DEA have taken place, but no formal update has been released yet. The lack of clarity on both the infrastructure definition and the role of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) has created a vacuum of accountability, where everyone believes something is stuck, but no one knows where or how.
The SARFAESI, enacted in 2002, allows banks and financial institutions in India to recover non-performing assets (NPAs) without court intervention. If a sector like shipbuilding isn’t clearly defined as infrastructure, it may not get the protection or benefits under SARFAESI, making lenders hesitant to finance such projects. The uncertainty adds to the financing bottleneck.
Loans: The Missing Piece in the Financing Puzzle
Even if India manages to fix its infrastructure definition and secure a spot for shipbuilding in the harmonised infrastructure list, access to affordable capital remains a critical stumbling block.
Industry players have long pointed to difficulties in securing loans, but the exact source of the problem remains fuzzy.
“Now, as far as getting loans are concerned, that is referring to the fact that there is some talk saying that the SARFAESI Act is a problem. But this is all in the air. Whenever we ask anybody to clarify — can you talk to your bank and tell us where the issue lies — nobody is able to define the problem,” Devli said.
“In my mind, it is a mirage. It’s just some rumour that’s going around. Nobody has been able to elucidate what the actual hindrance is in banks providing loans.”
According to Shitesh Ranjan, the underlying issue lies not with SARFAESI but with the RBI’s own circulars that govern bank lending norms.
“The RBI is supposed to revise or amend its Master Circulars on Loans and Advances. Once they do it, financing at easier rates and longer tenures would become available for Indian ships,” Ranjan explained.
“The moment RBI does it, funds from the infrastructure channel would be available for ship acquisition and the shipping sector.”
Currently, Indian shipping companies often borrow at high interest rates of 10–13%, compared to sub-5% financing rates enjoyed by Chinese or South Korean counterparts, who benefit from government-backed credit lines and export incentives. The disparity puts Indian firms at a severe disadvantage.
RBI’s Master Circular on Infrastructure Lending, last updated in 2016, lays down guidelines that allow banks to offer long-term loans with flexible structuring—but only to sectors formally recognised as infrastructure. Without shipbuilding making it to that list, Indian shipowners remain locked out of these preferential terms.
A Golden Opportunity at Risk
Despite the lofty ambitions around the MDF, India’s shipbuilding sector remains marooned, caught between legacy inefficiencies, regulatory confusion, and missed opportunities. Yet, there’s growing consensus in the industry that the country sits on the cusp of a transformation—if only the right policies were in place.
“I think it is a golden opportunity for India to become a major shipbuilding player. The world needs an alternative to Far East partners,” said maritime expert Xerrxes Master, referring to the dominance of countries like South Korea, China, and Japan, which together control over 90% of global shipbuilding output.
He pointed out that there have been discussions about Hyundai’s interest in investing in Indian yards.
“There were talks that Hyundai is planning to buy a stake in Mazagon Dock Shipbuilders and utilise it to invest in a major shipbuilding setup. I don’t think Indian shipyards are too expensive. What we need is a tax regime to entice investors and special sops from the government. If our policies are aligned accordingly, India can easily become the second or third-largest shipbuilding nation in the next 5 to 10 years,” Master said.
This isn’t just speculation. Over the past year, India has witnessed growing international interest in its shipbuilding ecosystem, especially for green vessels and smaller cargo ships.
Indian shipyards like Cochin Shipyard, L&T Shipbuilding, and Goa Shipyard have bagged export orders for specialised vessels, but the scale is far from what’s needed to compete globally.
Why hasn’t shipbuilding taken off yet?
Master attributes much of the problem to India’s outdated shipbuilding model, heavily dominated by government ownership and ageing infrastructure.
“Most of the shipyards are government-owned, and that’s one of the reasons we haven’t been able to bring the workforce to task or align them with future needs. Over the past 40–50 years, government-run shipyards have functioned with low productivity and substandard technology,” he said.
Private players haven’t had it easy either. The collapse of private shipbuilders like Bharati Shipyard and ABG Shipyard — once seen as promising bets — left the sector bruised. Both companies were pushed into insolvency due to high capital intensity, unsustainable debt, and a lack of timely policy support.
“It’s a very capital-intensive business. But I refuse to believe it’s not a good business. It is — if planned and executed well,” Master added.
