Shipping policy revamp: How Centre plans to promote domestically-flagged ships; 200 ships worth Rs 1.3 lakh crore in demand
The Indian government is drafting a fresh strategy to promote domestically-flagged ships, after its current Rs 1,624 crore scheme launched in FY22 has fallen short of its objectives.
The scheme, which aimed to raise India's share of EXIM cargo carried by Indian ships, has not had the desired impact, with only Rs 330 crore disbursed so far and the share of Indian-flagged vessels still hovering around 8%, reported ET.
To address this, the ministry of ports, shipping, and waterways (MoPSW) is holding inter-ministerial consultations with the petroleum, steel, and fertiliser ministries to assess sector-specific shipping needs.
"This has resulted in demand for around 200 ships of 8.6 million Gross Tonnage (GT) worth around Rs 1.3 lakh crore which would be jointly owned by public sector companies and built in Indian shipyards over the next few years," MoPSW was quoted by ET.
The new initiative aims to cater to the rising import needs of critical sectors like petroleum, steel and fertilisers. The effort comes as the share of Indian vessels in carrying India's EXIM trade has sharply dropped to 7.8% in FY19 from 40.7% in 1987-88.
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This has translated into an annual foreign exchange outgo of nearly $70 billion to overseas shipping lines.
Under the existing subsidy scheme, Indian shipping companies were offered up to 15% incentive when bidding for global tenders floated by the government and its agencies. These tenders typically involved imports of crude oil, LPG, coal and fertilisers. However, experts say the scheme has failed to achieve scale or impact.
Anil Devli, CEO of the Indian National Shipowners Association, pointed to structural disadvantages faced by Indian-flagged ships and said, 'Nothing has happened to reduce this burden of duties and taxes on Indian ships that impairs their competitiveness,' he was quoted as saying by ET.
Operating costs for Indian vessels are estimated to be 20% higher than their foreign counterparts due to multiple factors, including higher debt costs, shorter loan terms, and taxation on wages of Indian seafarers.
Additionally, Indian shipping firms face GST on vessel imports, lack of input tax credits, and differential GST for services within Indian ports, taxes that are not levied on foreign-flagged ships offering the same services.
As per the shipping ministry, Indian ports handled 1,540.34 million metric tonnes (MMT) of cargo in 2023-24, a 7.5% increase year-on-year.
However, the absence of a competitive Indian fleet continues to undermine the government's ambition of transforming the country into a maritime powerhouse.
With the existing scheme unlikely to meet its FY26 goals, a review is expected soon, and the government may now shift its focus to long-term public-private fleet creation involving Indian-built ships to capture a larger share of global shipping.
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