New policy in pipeline to boost Indian ships’ share in cargo transport
Given the likelihood that the present ₹1,624 crore initiative to promote such vessels will fall short of its target, the Center has made its most recent endeavor to strengthen its lineup of merchant ships flying the Indian flag.
India is preparing a new strategy to support ships flying its own flag after an existing one seems to be failing to meet the sector’s goals, impeding the government’s ambition to become a major force in the world’s marine trade. According to interministerial discussions, the steel, fertilizer, and petroleum industries need to import 200 new Indian ships totaling ₹1.3 lakh crore.
In response to questions, the Ministry of Ports, Shipping, and Waterways (MoPSW) stated, “The Shipping Ministry is collaborating with the Ministries of Petroleum and Natural Gas, Steel, and Fertilizer to address the low imports on ships flying the Indian flag.” According to the government, this has led to a demand for about 200 ships with a gross tonnage (GT) of 8.6 million, valued at about ₹1.3 lakh crore. These ships will be jointly owned by the public sector firms (PSUs) and constructed in Indian shipyards over the next years.
Given the likelihood that the present ₹1,624 crore initiative to promote such vessels will fall short of its target, the Center has made its most recent endeavor to strengthen its lineup of merchant ships flying the Indian flag. Experts in maritime trade estimate that since the program’s inception in 2021, the proportion of cargo imported by ships flying the local flag has remained constant at about 8%.
“A review of the scheme is now anticipated, but only ₹330 crore has been paid out so far, and the percentage of ships flying the Indian flag is still in the single digits,” a senior official stated. The plan was approved by the Union cabinet in July 2021 after being announced in the FY22 budget. The funds were to be distributed till FY26, offering Indian maritime companies that participated in international tenders issued by the Center and its arms a 15% subsidy. Sops were provided for the importation of government goods such coal, fertilizers, crude oil, and liquefied petroleum gas (LPG).
The share of Indian vessels in the carriage of the country’s export import (EXIM) trade plunged to about 7.8% in FY19 from 40.7% in 1987-88. As per official estimates, this led to around $70 billion annual foreign exchange outgo to foreign shipping lines. Indian ports handled around 1540.34 million metric tonnes (MMT) cargo in 2023-24, 7.5% higher than a year ago.
Indian-flagged ships mandatorily employ Indian seafarers while also complying with domestic taxation and corporate laws, leading to 20% higher operating costs, according to official estimates. Sector watchers say the increased operating costs is due to higher costs of debt funds, shorter loan tenures, and taxation on wages of Indian seafarers engaged on Indian vessels. There is also an integrated Goods and Services Tax (GST) on Indian companies importing ships, blocked GST tax credits, discriminatory GST on Indian vessels providing services between two Indian ports; all of which are not applicable to foreign ships providing similar services. The domestic industry has been lobbying for lowering of these duties and taxes.
