The Economic Survey of 2024, in its 12th chapter on the Infrastructure of Indian ports, highlights the rapid expansion of Indian ports to meet growing trade demands. India’s global maritime competitiveness has improved, with its ranking in the International Shipments category of the World Bank Logistics Performance Index rising to 22nd in 2023 from 44th in 2014. Major port capacity has nearly doubled since 2014, and container turnaround time has decreased by 50% between 2014 and 2023-24. Union capital expenditure on the ports, shipping, and waterways sector grew by 27% between FY23 and FY24.
The budget speech mentioned reforms to improve the Indian shipping industry’s share and generate employment, including ownership, leasing, and flagging reforms. It also highlighted the potential for cruise tourism in India, proposing a simpler tax regime for foreign shipping companies operating domestic cruises. The minister recommended a presumptive taxation regime for non-resident cruise ship operations and exemptions on income from lease rentals of cruise ships. Customs duty on components and consumables for vessel manufacturing, as well as duties on technical documentation and spare parts, will be removed.
India is emerging as a cruise destination, with expected passenger volume increasing from 470,000 to 2 million by 2030. Coastal and inland cruise tourism is growing, and the budget provisions will encourage entrepreneurs and tour operators. The application of a presumptive tax and removal of customs duties on vessel manufacturing components are seen as incentives for the shipbuilding and repair industry.
India’s shipbuilding industry faces challenges such as low demand, lack of access to low-interest capital, outdated manufacturing technology, and a shortage of skilled labor. Many shipyards have shut down or operate at low capacity. The budget’s focus on ownership, leasing, and flagging reforms aims to spur demand for shipbuilding. However, the absence of a maritime development fund remains a concern.
The Shipbuilding Financial Assistance Policy Scheme, launched to support shipyards with contracts signed between April 1, 2016, and March 31, 2026, has seen 39 shipyards register, with 18 utilizing the benefits. The Recycling of Ships Act, 2019, aims to set international standards for ship recycling and ensure safe practices, with the Directorate General of Shipping designated as the National Authority for Recycling of Ships.
The government intends to make India one of the top 10 shipbuilding nations, with a shipbuilding policy in development. The hope is that these initiatives will revive the ship manufacturing and repair sector, despite concerns about capital formation.
Source: India Shipping News
