Answer

India’s maritime sector has received significant attention with the launch of the Sagarmala Programme in 2015, aiming to modernize port infrastructure and Port led development. The Sagarmala Programme has identified 1,049 projects with an estimated cost of ₹3.62 lakh crore, to boost economic growth.

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Recent developments in maritime infrastructure through Sagarmala and GDP growth

• Massive Investment in Sagarmala: The Sagarmala program has outlined 839 projects requiring an investment of ₹5.8 lakh crore by 2035, with over ₹3 lakh crore already invested in port modernisation and connectivity.
  For example: ₹2.91 lakh crore is allocated for port modernisation, and ₹2.06 lakh crore for port connectivity to enhance cargo movement.
• Strong GDP Growth: India’s GDP rose from ₹153 trillion (2016-17) to ₹272 trillion (2022-23), growing at a CAGR of 7%, despite COVID-19 disruptions.
  For example: The Indian economy is projected to reach $5 trillion by 2027 and $7 trillion by 2030, strengthening trade prospects.
• Expansion of EXIM Trade: India’s export-import (EXIM) trade increased by 77%, from $66 billion (2016-17) to $116 billion (2022), with an aim to reach $2 trillion by 2030.
  For example: Government targets port-led industrialisation with ₹55,800 crore investment, boosting India’s position in global trade.
• Port Development and Modernisation: 241 projects (₹1.22 lakh crore) completed, and 234 projects (₹1.8 lakh crore) under implementation, focusing on modernising ports and increasing cargo capacity.
  For example: Major ports like JNPT and Paradip have undergone capacity expansion to handle higher cargo volumes efficiently.
• Infrastructure for Coastal & Inland Shipping: ₹55,800 crore allocated for port-led industrialisation, ₹2,900 crore for inland waterways, and new logistics hubs to integrate shipping with rail and road transport.
  For example: National Waterway-1 (Ganga) and National Waterway-2 (Brahmaputra) are being developed to promote inland water transport.

Despite significant investment, India’s shipping industry remains stagnant

• Slow Cargo Growth at Major Ports: Cargo handled at major ports increased only by 14.26% (2016-21), with an annual growth rate of just 2.85%, despite high investments.
  For example: Cargo volume grew from 1,071 million tons (2016-17) to 1,249 million tons (2020-21), far below expectations.
• Declining Number of Vessels: Despite increased EXIM trade, the number of vessels handled fell by 5.93%, from 21,655 (2016-17) to 20,371 (2020-21), showing inefficiency.
  For example: Indian ports continue to rely on foreign vessels for cargo movement, reducing domestic shipping opportunities.
• Minimal Growth in Indian Ship Ownership: Indian-registered ships increased from 1,313 (2016-17) to 1,526 (2024), with an average growth of only 2.4% per year.
  For example: India’s global ranking in ship ownership fell from 17th to 19th, losing market share to foreign players.
• Aging Fleet Reducing Competitiveness: The average ship age was 26 years (2022-23), now improved to 21 years, but still higher than global standards.
  For example: Recently added 34 younger vessels (average 14 years old) are insufficient to replace aging fleets.
• Foreign Ships Dominate Indian Trade: Foreign-flagged ships carry over 90% of India’s EXIM cargo, benefiting from lower taxation, cheaper capital, and regulatory advantages.
  For example: Foreign vessels operate tax-free in Indian waters, while Indian ships pay 5% IGST, making them uncompetitive.

Challenges faced by India’s shipping industry

• High Borrowing Costs and Limited Capital: Indian shipowners face high interest rates, short loan tenures, and rigid collateral requirements, restricting expansion.
  For example: Indian banks demand additional security instead of accepting ships as collateral, limiting access to finance.
• Unfavourable Taxation: Indian-flagged ships pay 5% IGST on ship acquisition, while foreign ships operate tax-free in Indian waters, making them more competitive.
  For example: Indian seafarers face TDS deductions, whereas foreign ships hiring Indian crew have no such tax burden.
• Infrastructure and Shipbuilding Gaps: Indian shipyards lack capacity to build large vessels, face high steel costs, and depend on imported machinery.
  For example: Customs duties on imported parts increase costs, forcing shipowners to prefer foreign-built vessels.
• Regulatory Burden & Delayed Reforms: The shipping sector suffers from rigid regulations, slow fund repatriation, and complex licensing procedures.
  For example: Obtaining approvals for new ship acquisitions takes longer in India than in tax haven-registered countries.
• Declining Competitiveness Against Foreign Ships: Foreign-flagged ships enjoy lower costs, relaxed rules, and easier financing, outcompeting Indian vessels.
  For example: Panama and Liberia-registered ships dominate the Indian trade route, due to their cost advantages.

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Measures to transform India into a global maritime power while ensuring sustainable development

• Financial Reforms & Cheaper Credit: Lower interest rates, longer loan repayment periods (7-10 years), and acceptance of ships as collateral to boost ship acquisition.
  For example: Maritime Development Fund (₹25,000 crore) should be expanded to provide low-cost financing for fleet expansion.
• Tax Rationalisation & Incentives: Remove 5% IGST on ship acquisition, provide TDS exemption for Indian seafarers, and offer tonnage tax benefits to boost competitiveness.
• Boost Domestic Shipbuilding & Green Technology: Expand shipbuilding clusters, modernise shipyards, and incentivise green shipping technology for sustainability.
  For example: The government should subsidise eco-friendly fuel adoption and promote low-emission vessel construction.
• Infrastructure & Port-Led Growth: Develop deep-draft ports, improve coastal shipping integration, and increase multi-modal transport connectivity to lower logistics costs.
  For example: Sagarmala must prioritise inland waterways, integrating rail-road-shipping for cost-efficient transport.
• Strategic Global Engagement & Competitiveness: Strengthen global shipping alliances, simplify flagging policies, and streamline regulatory approvals for Indian-registered ships.
  For example: India should negotiate favourable trade agreements with ASEAN, EU, and US for preferential shipping access.

To elevate India as a global maritime power, a multifaceted approach is required. This includes structural reforms, enhanced regulatory streamlining, and a pivot towards green technologies to future-proof the sector. Leveraging the Sagarmala Programme’s investment, India must focus on capacity augmentation, strategic port connectivity, and financing innovation to unlock its maritime potential and meet its growth targets.

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