India to Greenlight Rs 250 Bn for Shipbuilding and Infrastructure

12 Sep 2024 CW Team

The Indian government is expected to approve a Maritime Development Fund (MDF) worth Rs 250 billion later this month. The fund is designed to provide long-term, low-cost financial support for indigenous shipbuilding and blue water infrastructure projects. This initiative aligns with the Make-in-India campaign, which seeks to establish India as a global manufacturing hub.

The MDF is anticipated to be structured as a corporate entity with the government holding a minority stake of at least 26 per cent. The majority shareholding will be allocated to multilateral financial institutions and global funds. It will offer various forms of financial support, including debt, equity, viability gap funding (VGF), and buyer credit. Although similar to the National Bank for Financing Infrastructure and Development (NaBFID), the MDF will focus specifically on the maritime sector.

The fund will have a corpus of Rs 250 billion over seven years and will provide long-term loans of up to 25 years, matching the 30-year lifespan of vessels.

As of December 2023, India's fleet comprises 1,526 vessels with a gross tonnage (GT) of 14 million. Approximately 44 per cent of these vessels are over 20 years old, indicating a need for replacement in the near future.

This development follows inter-ministerial consultations, with a final cabinet note expected to be submitted for approval by the end of September.

The MDF aims to achieve several key objectives:

Promote domestic shipbuilding of all types and sizes to reduce dependence on foreign ships. Currently, India spends nearly $75 billion annually on leasing ships and controls only 2 per cent of the world's total tonnage.
Increase India's share of the global shipbuilding market from less than 1 per cent to 5 per cent, which is currently dominated by China, South Korea, and Japan.

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