THE BREAKDOWN. Ship owners will get a credit note equivalent to 40 per cent of scrap value when the vessel is recycled in certified facilities

India’s ambitions for sustainable maritime growth received an impetus with the sector regulator issuing the first ship recycling credit note. On May 28, the Directorate General of Shipping issued the credit note to a Liberia-based shipping firm under a scheme to promote safe recycling and shipbuilding.

India is a global leader in ship recycling, handling about 30 per cent of dismantled vessels. The credit note scheme is expected to boost the competitiveness of Indian yards, attract fresh investments and strengthen the circular economy. Ship owners will get a credit note equivalent to 40 per cent of scrap value when they recycle the vessel in certified facilities. The note will be valid for three years and can be redeemed up to five per cent of the fair price of a new vessel built in an Indian shipyard.

“The ship recycling credit note scheme is a step in the right direction and demonstrates the government’s intent to position India as a hub for ship recycling and shipbuilding,” said Deepak Shetty, former Director General of Shipping. The scheme’s launch also aligns with the implementation of the Hong Kong International Convention for the safe and environmentally sound recycling of ships.

The binding global treaty, which came into force last June, mandates recycling practices that minimise health risks and other occupational hazards for yard workers and prevent pollution through the proper management of hazardous materials and waste. Recycling yards are also required to facilitate worker training programmes, emergency preparedness procedures and environmental monitoring mechanisms.

“India currently has 111 ship recycling yards compliant with the Hong Kong International Convention (HKC), at Alang, Gujarat. This represents one of the largest concentrations of HKC-compliant ship recycling facilities anywhere in the world,” said Director General of Shipping Shyam Jagannathan.

He said the Directorate, in coordination with the State authorities and recognised organisations, undertakes periodic inspections, audits and certification activities to ensure continued compliance.

A positive start

According to the Ship Recycling Industries Association (India), 119 ships were recycled in the country in FY2026, amounting to 1.08 million light displacement tonnes — an industry metric for measuring the quantity of recyclable material available for processing. This was marginally higher than the 113 ships recycled at Alang in FY25.

The recycling business has seen a slowdown with geopolitical conflicts pushing up freight rates. As such, fewer ships are coming to Alang for scrapping. The new scheme and the initiatives in digitalisation and ease of doing business will be an added support.

Jagannathan said the ship recycling credit note scheme has seen encouraging traction. Already 41 ship owners have registered, and six applications have been received under the scheme. The first credit note, valued at ₹29 crore, was issued for recycling a St Kitts and Nevis flagged capesized vessel, called Kosta. The ship, owned by Bella Shipping Inc, was recycled at the Inducto Steel Limited yard at Alang in April.

“All ships recycled at HKC-compliant yards in India are eligible for the credit note, subject to adherence to the scheme’s prescribed conditions and procedures,” Jagannathan said.

A unified ship recycling portal enables seamless applications, processing, tracking and issuance of digitally signed credit notes, bringing together the Directorate, State maritime boards and recycling yards on a single platform, he added. While the scheme creates a powerful incentive for shipowners to recycle and build in India, its execution will depend on practical considerations, including whether the credit note’s validity aligns with a shipping firm’s acquisition plans.

A crucial test would also be the ability of Indian shipyards to deliver vessels on time.

Global competition

While India is a leader in ship recycling, it is a laggard in shipbuilding. An S&P Global Commodity Insights report last year said the Indian shipbuilding industry accounts for less than one per cent of the global market while China holds 60 per cent share. Last year, the government unveiled a ₹70,000 crore package to boost the shipbuilding and maritime sector in the country. The credit note scheme was part of the package. There have been signs of success with HD Hyundai signing an MoU for a greenfield shipyard in Tamil Nadu.

Cochin Shipyard securing a contract from shipping line CMA CGM for manufacturing six LNG-powered vessels is also seen as a win.

Ship recycling specialist Dr Anand Hiremath suggests that the government should go further with incentives. “New building decisions take time. A three-year window for the credit note may be too short for serious global owners. A four- to six-year period could make the scheme more attractive,” he said. A pre-approval mechanism could also help owners find out in advance the eligibility and discounts available through the credit note scheme.

Skilling needs

“The government should support yard capability through completion guarantees, vendor clusters, training support and milestone-linked grants. The focus must be on execution,” Hiremath said. Over the years, the skilled Indian workforce has moved to shipyards overseas for better career prospects. The government should launch a targeted programme to attract this experienced workforce through incentives, relocation support, skill recognition and long-term employment opportunities, he added.

Published on June 15, 2026