Expenditure finance committee clears ₹25,000 crore Maritime Development Fund announced in budget
The government's expenditure finance committee (EFC) has cleared the
₹
25,000 crore Maritime Development Fund (MDF) for FY26, two persons aware of the matter said, a project to lend long-term, low-cost financial support for indigenous ship-building and other blue water infrastructure projects.
Funding of maritime projects are expected to flow in by the second quarter of the current financial year, after approval by the Union cabinet, which is expected to take up the proposal soon, the first of the person quoted above said.
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The MDF plan was announced in Budget 2025-26.
Cabinet approval has been sought for the Centre to provide 49% of the money, with the rest to be raised from the major ports, other government entities, central public sector enterprises, financial institutions and global funds.
With EFC approval, the Centre will put in about
₹
12,250 crore while the 13 major ports of the country are expected to provide up to 15-20% of the fund, the second person said.
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The balance will be raised from other government entities, Central PSEs, financial institutions and global equity, pension and sovereign
wealth
funds as well as the private sector. The ministry of ports, shipping and waterways has already held some roadshows to attract global funds to invest into MDF, the first person quoted above said.
The fund is being set up to provide various forms of financial support, including debt, equity, viability gap funding (VGF) and buyer credit. MDF may be set up on the lines of country's youngest development financial institution—the National Bank for Financing Infrastructure and Development (NaBFID) that was set up in 2021.
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In fact, an earlier proposal was to set up the MDF as a vertical under NaBFID but given the specialized nature of funding and need to provide large scale focused funding to the sector, a dedicated fund or entity has been considered the best option.
Queries mailed to the ministry of finance and MoPSW remained unanswered till press time.
"There is a large business opportunity for India in the ship building (and ship breaking) space due to its labour-intensive nature. The industry has been dominated by China and to some extent by Japan and South Korea. The ship building opportunity has also got a major boost due to the ongoing trade issues between US and China, which have also focused on Chinese-owned or -built ships. The maritime fund can be used to enable Indian shipyards to capture a larger part of the market hitherto dominated by China, by reducing the cost of capital for Indian shipyards," Kuljit Singh, partner and infrastructure leader, EY India said.
'Although steps like the MDF and the initiatives at GIFT City have been introduced by the Indian government to bridge the financing gap and promote the maritime sector, the establishment of a dedicated financing institution is still needed. In countries with strong maritime industries, such as the United States, programs like the Federal Ship Financing Program (Title XI) under MARAD have been created to provide focused financial support. A similar institution in India would strengthen the maritime sector, boost global competitiveness, reduce dependence on foreign financing, and help achieve national maritime ambitions," said Pushpank Kaushik, chief executive officer and head of Business Development (Subcontinent, Middle East and Southeast Asia) at Jassper Shipping, a Hyderabad-based shipping and logistics firm.
The main focus of MDF would be to promote manufacturing of ships of all make and sizes within the country and make India a global hub for manufacturing. Right now the country spends close to $75 billion annually on leasing ships from outside. Also, India owns just about 2% of the world's total tonnage and has some 1500-odd ships under its flag. With regard to shipbuilding, India currently has less than 1% share of the global market, which is dominated by China, South Korea and Japan.
The fund is expected to meet the long-term funding required for putting up ship building infrastructure in the country. Cheaper funds available through the proposed new entity with support of long-term funds available multilateral agencies and global funds would help in setting up a competitive industry in the country.
Apart from promoting domestic manufacturing, the MDF would also promote development of cruise tourism in the country with creation of requisite infrastructure and also support activities like mechanization and capacity expansion of existing ports through PPP (public private partnership), dredging activities, development of inland waterway systems and coastal shipping. The initial plan for the fund is to have a corpus of
₹
25,000 crore spread over a seven-year-period.
It is proposed that the fund would explore giving out long term loans extending beyond 10 years to 15 to 25 years to enable the credit period to be in line with the life of a vessel that is around 30 years. It would also consider tax sops that similar funds in countries such as Norway, Korea, Japan extend for lending to domestic ship-lessors and ship management companies.
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