Syllabus: GS-III & V: Growth & Development

Why in the News

The Union Cabinet has approved a ₹69,725 crore package to revitalise India’s shipbuilding and maritime ecosystem. This replaces the 2015 shipbuilding package, which expires in March 2026. The move is part of India’s larger ambition under the Maritime India Vision 2030 and the Sagarmala programme, seeking to enhance indigenous shipbuilding capacity, reduce dependence on foreign yards, and strengthen strategic maritime self-reliance.

The New Shipbuilding Package: Key Features

• Total Outlay: ₹69,725 crore over 10 years.
• Components:
  • ₹24,736 crore Shipbuilding Finance Assistance Scheme (SBFAP) – revamped financing support.
  • ₹25,000 crore Maritime Development Fund (MDF) – long-term financing, including:
    • ₹20,000 crore Maritime Investment Fund (49% govt share).
    • ₹5,000 crore Interest Incentivisation Fund to lower borrowing costs.
  • ₹19,989 crore Shipbuilding Cluster Development Programme – promoting ancillary industries.
    
• Targets:
  • Build 2,500 vessels in a decade.
  • Unlock 4.5 million gross tonnes of capacity.
  • Generate 3 million jobs.
• Institutional Mechanism: Launch of a National Shipbuilding Mission to oversee implementation.
  

Current State of India’s Shipbuilding Sector

• In the last decade, India built only half a dozen small merchant ships, while defence contracts sustained public shipyards such as Mazagon Dock, GRSE, and Cochin Shipyard.
• Large merchant ship capacity is negligible. The new package hopes to change this.
• Bottlenecks include long turnaround times (2–3 years), lack of prefabrication facilities, large cranes, and ancillary industries, making Indian ships costlier and delayed compared to global standards.
  

Global Comparison: Lessons for India

• China: Accounts for over 50% of global shipbuilding and produced more than half of the world’s commercial ships in 2024. Its capacity is 200 times that of the US, backed by heavy state subsidies, cheap skilled labour, and an integrated supply chain (steel, aluminium, components, assembly).
  
• Japan and South Korea: Mastered block construction and assembly-line shipyards with 1,000-tonne cranes, enabling 3–4 months from keel-laying to launch and 1 year to sea trials for large merchant ships.
• India: Lacks such integrated ecosystems; construction takes much longer, deterring shipowners despite subsidies.
  

Strategic Significance of the Initiative

1. Economic Boost – Job creation for 3 million people, strengthening MSMEs in ancillary sectors.
2. Self-Reliance – Reduces dependence on foreign shipyards, aligning with Atmanirbhar Bharat.
3. Geopolitical Leverage – Enhances India’s ability to counter China in maritime commerce and naval presence.
4. Supply Chain Security – Strengthens resilience in food, energy, and critical imports by boosting indigenous shipping capacity.
5. Green Transition Potential – Opportunity to link shipbuilding with green hydrogen and ammonia hubs (Kakinada, Kochi) for constructing green ships.
   

Challenges Ahead

• Infrastructure Gaps – Indian yards lack long dry docks, high-capacity cranes, and prefabrication facilities.
• Finance Constraints – Current benefits apply mostly to large vessels; smaller ships remain neglected.
• Uncertain Demand – Indian shipowners avoid domestic builds due to cost overruns and delays.
• Skills Deficit – No dedicated large-scale manpower training institutes like those in China or South Korea.
• Global Competition – Competing against China’s heavily subsidised ecosystem remains daunting.
  

Way Forward

• Start Small – Focus on building vessels above 500 GT before scaling up to large merchant ships.
• Green Integration – Tie India’s green hydrogen and ammonia policies with domestic green shipbuilding and exports.
  
• Long-term Offtake Contracts – Use coal imports, crude oil imports, and fertiliser shipping contracts of PSUs to provide demand visibility for Indian-built ships.
• Cluster-Based Growth – Develop shipbuilding clusters with ancillaries for engines, electronics, and propellers to cut costs.
• Skill Development – Establish maritime engineering institutes for training manpower in modern shipbuilding.
• Public-Private Partnerships (PPP) – Encourage private shipyards with government-backed risk-sharing mechanisms.
  

Conclusion

The ₹69,725 crore shipbuilding package is one of the largest-ever maritime infrastructure pushes in India. It has the potential to generate millions of jobs, build a robust indigenous shipping capacity, and give India leverage in its maritime contest with China. However, success will depend on addressing structural bottlenecks—yard infrastructure, skilled manpower, financing mechanisms, and guaranteed demand. If integrated with green shipping, cluster-based growth, and long-term offtake contracts, India can emerge as a serious global shipbuilding power.

UPSC Mains Question

1. “India’s maritime future depends not just on port-led growth but on strong indigenous shipbuilding capacity.” Discuss the significance of the ₹69,725 crore shipbuilding package, challenges in implementation, and measures needed to make India globally competitive. (250 words)

THE HINDU