The global shipbuilding market is dominated by China, which holds nearly 70% of the market share. | Photo Credit: VIJAY SONEJI

On September 25, the Union Cabinet approved a comprehensive package of ₹69,725 crore to revitalise India’s shipbuilding and maritime ecosystem. Here’s the lowdown on why this package is required and how it will build self-reliance in the shipping sector

Why is this a critical move for India’s shipping sector?

The global shipbuilding market is valued at nearly ₹15,500 crore, with the Asia-Pacific region accounting for nearly 85 per cent of all shipbuilding activities. China is the dominant player with nearly 70 per cent market share, followed by South Korea and Japan. Chinese shipyards are fully booked for the next 3 to 4 years, and no slots are available until the end of 2028. India’s fleet comprises about 1,600 vessels, with a gross tonnage (GT) of 14 million tonnes. The package aims to increase India’s shipping fleet, as the country plays a crucial role in global trade. More importantly, India annually spends $75 billion on leasing global ships while owning about 2 per cent of the world’s total tonnage. This reflects the grim state of the shipbuilding sector, with the need to do lots more in the future. India needs its own ‘desi’ fleet to ensure that the trade does not spend too much on sending its goods on board foreign ships. The ₹69,725 crore was the total sum of all assistance as declared in the Union Budget to revitalise the shipbuilding industry.

Is the US plan to penalise Chinese shipping a trigger for moving towards Aatmanirbharta  in shipbuilding?

The United States Trade Representative (USTR) in stated February that the US administration would charge Chinese-owned cargo ships as well as third-country-flagged vessels built in China, $1 million or more per port of call in the US. Over half of all ships delivered globally in 2024 were built in China. This is a significant  trigger for India to build its own ships, as most of the cargo from and for India is currently on board ships made in China. Consequently, Indian trade will have to pay the penalty as part of the freight.

What are the main areas where these funds will be spent?

The funds will be allocated to shipbuilding financial assistance schemes, the creation of  a Maritime Development Fund, and for shipbuilding development schemes. The package introduces a four-pillar approach designed to strengthen domestic capacity, improve long-term financing, promote greenfield and brownfield shipyard development, enhance technical capabilities and skilling, and implement legal, taxation, and policy reforms to create a robust maritime infrastructure.

Why has the share of Indian ships declined over the years to less than 5 per cent?

Until two years ago, India’s global trade was relatively  small, and the need for building our own fleet of large ships was not present. It was cheaper to buy or lease ships from abroad than to build ships. However, things have changed dramatically in the last few years, with the country making significant progress on all fronts and trade with other countries flourishing at a rapid pace. However, India has  not kept pace with China in shipbuilding and is heavily dependent on foreign ships. The lack of technology to build large ships was also a notable absence in India.

Today, the maritime sector remains a backbone of the Indian economy, supporting nearly 95 per cent of the country’s trade by volume and 70 per cent by value. At its core lies shipbuilding, often described as the “mother of heavy engineering,” which not only contributes significantly to employment and investment but also enhances national security, strategic independence, and the resilience of trade and energy supply chains.

Ships from which countries are being used predominantly in India’s merchandise trade?

While most ships are built in China, South Korea, and Japan, the majority of  owners are based in  Switzerland, Denmark, Germany, and France in the container shipping industry. Bulk ships and oil tankers are owned by other countries, including India.

How will financing for shipbuilding activity be improved?

Under the package, the Shipbuilding Financial Assistance Scheme will be extended until March 31, 2036, with a total corpus of ₹24,736 crore. The scheme aims to incentivise shipbuilding in India and includes a Shipbreaking Credit Note with an allocation of ₹4,001 crore. A National Shipbuilding Mission will also be established to oversee the implementation of all initiatives. The Maritime Development Fund, with a corpus of ₹25,000 crore, will provide long-term financing for the sector. This includes a Maritime Investment Fund of ₹20,000 crore with 49 per cent participation from the Government of India and an Interest Incentivization Fund of ₹5,000 crore to reduce the effective cost of debt and improve project bankability. The Shipbuilding Development Scheme, with a budgetary outlay of ₹19,989 crore will expand domestic shipbuilding capacity to 4.5 million Gross Tonnage annually, support mega shipbuilding clusters, infrastructure expansion, establish the India Ship Technology Centre under the Indian Maritime University, and provide risk coverage, including insurance support for shipbuilding projects.

What’s the government’s plan to improve the tonnage?

The overall package is expected to unlock 4.5 million Gross Tonnage of shipbuilding capacity, generate nearly 30 lakh jobs, and attract investments of approximately ₹4.5 lakh crore into India’s maritime sector. Beyond its economic impact, the initiative will strengthen national, energy, and food security by bringing resilience to critical supply chains and maritime routes.

Who will build ships?

India’s own ship builders - Cochin Shipyard Limited (CSL) and Mazagon Dock Shipbuilders - will be the two major beneficiaries. CSL will invest ₹15,000 crore to build a commercial shipbuilding yard. The project is expected to generate over 10,000 jobs (4,000 direct and 6,000 indirect). Mazagon Dock Shipbuilders, the premier war-shipbuilding yard in India, will also invest ₹15,000 crore, creating employment for more than 45,000 people (5,000 direct and 40,000 indirect). These are just the start. Many more large deals will come in future, said a shipping expert. Companies from China, South Korea, and Japan, as well as those from Europe, are expected to invest  in the ship building industry in India, either directly or through joint ventures.

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Published on October 9, 2025