Answer

India’s shipbuilding industry is a critical component of transportation and supply chains but holds only 0.07% of the global market, far behind leaders like China, South Korea, and Japan. The sector’s challenges demand targeted policy interventions to tap into its untapped potential and align with India’s economic ambitions.

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Major Challenges Faced by India’s Shipbuilding Industry

• Limited Financing Options: Shipbuilding is capital-intensive, but Indian shipbuilders face restricted access to long-term financing. The exclusion of ships from the infrastructure list limits access to affordable loans, impacting growth and global competitiveness.
  For example: The Ministry of Finance reports that limited credit options have slowed down shipbuilding projects, affecting the industry’s expansion potential.
• Exclusion from SARFAESI Act: Under Section 31(d) of the SARFAESI Act, ships are not classified as assets for mortgages, making them ineligible for collateral loans. Continental Development Focus: India’s development priorities have historically been land-based, neglecting maritime investments. This continental mindset has led to limited attention and resources allocated to the shipbuilding sector, impeding its strategic and economic potential.
• Reliance on Foreign Shipping for Trade: India depends on foreign-owned and foreign-flagged ships for nearly 95% of its international trade, leading to high foreign exchange outflow and geostrategic risks during trade disruptions.
  For example: India had spent $75 billion on sea freight in 2022-23, an expense that could be reduced with a stronger domestic fleet.
• Lack of Skilled Labour and Advanced Technology: Although India has a large workforce, the shipbuilding industry faces a shortage of skilled labour and access to advanced technologies, limiting its competitive edge in global markets.
  For instance: The need for specialised training programs to support the shipbuilding sector’s technological requirements.

Benefits of Granting Infrastructure Status to Shipping Industry

• Increased Access to Long-Term Financing: Granting infrastructure status would open avenues for long-term, providing shipbuilders with the necessary capital to scale up operations and compete globally.
  For example: The Rangarajan Commission(2001) recommended infrastructure status for ships to improve access to National Infrastructure Investment Fund (NIIF) financing.
• Lower Interest Rates for Shipbuilding Projects: Infrastructure status can lead to reduced interest rates on loans, making capital-intensive projects more viable and allowing shipbuilders to invest in state-of-the-art technology and expand production capacity.
• Attracting Foreign Investment: Infrastructure status makes the shipbuilding sector more attractive to foreign investors, who are more likely to invest in industries recognized within a nation’s infrastructure framework. This can boost capital inflow and technical expertise.
• Enhanced Support for Skill Development and Technology Upgrades: Infrastructure status can facilitate government support in the form of subsidies for skill training and technology adoption, strengthening the workforce and modernising shipbuilding facilities.
  For example: India ranks third among seafarer-supplying nations, contributing approximately 10-12% to the global workforce.

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India’s shipbuilding industry holds immense potential, yet significant obstacles hinder its growth. Granting infrastructure status as also envisioned in Maritime India Vision,2030 aims to propel India into top 10 shipbuilding nations. This policy shift would align with broader efforts to enhance India’s maritime infrastructure, attracting investment and solidifying India’s position in global maritime trade.

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