On Strengthening India’s Ship Building Infrastructure

Recently, the Union Cabinet approved a ₹69,725-crore package to boost India’s shipbuilding and maritime sector, aiming to raise shipbuilding capacity to 4.5 million Gross Tonnage, create around 30 lakh jobs, and attract investments of ₹4.5 lakh crore.

Maritime Sector- Importance, Gaps & Global Position

• Significance of Maritime Sector: The maritime sector remains a backbone of the Indian economy, supporting nearly 95 per cent of the nation’s trade by volume and 70 per cent by value.
• Previous Efforts: A similar package was announced in 2015 proved ineffective and is set to lapse in March 2026.
• Production Gap: Excluding defense orders, India has built only about half a dozen small merchant ships in the last 10 years.
• Global Dominance: The industry is currently dominated by Japan, South Korea, and China.

Structural Problems Hindering Effective Shipbuilding

• Inefficient Construction Method: Unlike the highly efficient assembly line method used for car manufacturing (where the product moves and parts are fitted continuously), Indian shipyards “construct” ships in one fixed place, building them “brick by brick”.
  • This slow process adds two to three extra years to the construction time. 
• Lack of Technology: Indian yards lack the necessary technology for assembly line production and do not have large cranes required to move and settle heavy ship parts.
• Absence of Ancillary Ecosystem: A ship needs many supporting components (ancillaries) like engines, propellers, and navigation systems. 
  • India lacks a cluster-based ecosystem where these parts are manufactured close to the shipyards. 
  • If a shipyard needs a specific part, it often must be imported, leading to cost increases and delays.
• Vicious Cycle of Demand: Due to poor technology and long construction times, demand for Indian ships is low.
  • Because demand is low, shipyard owners are unwilling to invest in necessary technology and cranes, which keeps the technology poor, thus maintaining low demand.

Key Components of the Package

• Shipbuilding Financial Assistance Scheme (SBFAS): The scheme provides a Shipbreaking Credit Note worth ₹4,001 crore and establishes a National Shipbuilding Mission for better coordination.
• The Maritime Development Fund (MDF): MDF has been created with a corpus of ₹25,000 crore. 
• The Shipbuilding Development Scheme (SbDS): It aims to support mega shipbuilding clusters, set up the India Ship Technology Centre at the Indian Maritime University, and provide risk as well as insurance coverage for shipbuilding projects.
• Three Core Challenges and Government Response: The government intends to use the package to address the three core problems:
  • Upgrading Shipyards: Investment in cutting-edge technology.
  • Developing Clusters: Developing ancillary industries close to shipyards.
  • Supporting Ship Owners: Granting “infrastructure status” to ships, which will enable ship owners to access loans at easy interest rates for purchasing vessels.

Way Forward

• Need for Demand Generation: Mere upgradation of shipyard facilities is insufficient without creating market demand.
• Mandating Green Exports: Boost “Made in India” ships by requiring exports of Green Hydrogen and Ammonia via Indian-built vessels.
• Domestic Shipping Requirement: Require domestic oil companies to import crude using Indian-made ships to stimulate demand.

Conclusion

Effective Implementation of the Scheme will reinforce India’s geopolitical resilience and strategic self-reliance, advancing the vision of Aatmanirbhar Bharat and positioning India as a competitive force in global shipping and shipbuilding.