The Indian government is set to approve a Rs 25,000 crore Maritime Development Fund (MDF) later this month, designed to provide long-term, low-cost financial support for domestic shipbuilding and blue water infrastructure projects, according to Mint. This initiative aligns with the Make-in-India campaign, aiming to position India as a global manufacturing hub.
The MDF is expected to operate as a corporate entity, with the government retaining at least a 26% minority stake. Multilateral financial institutions and global funds will hold the majority share. The fund will offer various financial supports, including debt, equity, viability gap funding (VGF), and buyer credit. It will resemble the National Bank for Financing Infrastructure and Development (NaBFID), but with a specific focus on the maritime sector.
With a corpus of Rs 25,000 crore spread over seven years, the MDF will provide long-term loans of up to 25 years to match the typical 30-year lifespan of vessels.
Current Fleet Status
As of December 2023, India’s fleet comprises 1,526 vessels with a gross tonnage (GT) of 14 million. However, about 44% of these vessels are over 20 years old, indicating a need for modernization.
Objectives of the MDF
- Boost Domestic Shipbuilding: The fund aims to enhance domestic shipbuilding across all types and sizes, reducing India’s reliance on foreign vessels. India currently spends approximately $75 billion annually on leasing ships and controls only 2% of the global tonnage.
- Increase Market Share: India holds less than 1% of the global shipbuilding market, which is currently dominated by China, South Korea, and Japan. The MDF aims to increase India’s share to 5% in the coming years.
- Support Maritime Development: The fund will also focus on cruise tourism, expanding port capacity, promoting coastal shipping, and developing inland waterways through public-private partnerships (PPP). Tax incentives similar to those in Norway, Korea, and Japan will be considered to attract both domestic and international players to the Indian ship leasing and management sector.
The approval process is underway, with a final cabinet note expected by the end of September.