India’s New Plan to Strengthen Domestic Shipping

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Current Plan Needs Improvement

The Indian government is creating a new plan to support ships that fly the Indian flag. The current plan started in FY22 with a budget of Rs 1,624 crore. However, it hasn’t met its goals. Only Rs 330 crore has been given out so far. The share of Indian-flagged ships in carrying India’s import-export cargo is still low, around 8%.

Developing a New Strategy

The Ministry of Ports, Shipping, and Waterways is talking to other ministries. They want to understand the shipping needs of different sectors like petroleum, steel, and fertilizers. These talks have shown a need for about 200 ships. These ships will be worth around Rs 1.3 lakh crore. Public sector companies will own them. They will be built in Indian shipyards over the next few years.

Why Do We Need a New Plan?

The new plan aims to meet the growing import needs of key sectors. The share of Indian ships in carrying India’s import-export trade has dropped significantly. It was 40.7% in 1987-88, but now it’s only 7.8%. This means India spends nearly $70 billion every year on foreign shipping lines.

Issues with the Current Scheme

The current scheme offers Indian shipping companies up to 15% incentive when they bid for global tenders. But experts say this scheme hasn’t worked well. Anil Devli, CEO of the Indian National Shipowners Association, points out that Indian-flagged ships face many structural disadvantages. These include higher duties and taxes, which make them less competitive.

Challenges for Indian Shipping Firms

• Operating costs for Indian ships are about 20% higher than for foreign ships.
• Indian shipping firms face higher debt costs and shorter loan terms.
• There is taxation on the wages of Indian seafarers.
• Indian firms also face GST on vessel imports and lack of input tax credits.
• There are differential GST for services within Indian ports, which are not levied on foreign-flagged ships.

Looking to the Future

Indian ports handled 1,540.34 million metric tonnes of cargo in 2023-24. This is a 7.5% increase from the previous year. But the lack of a competitive Indian fleet is still a big challenge. The government wants to make India a maritime powerhouse. However, this goal is hard to reach without a strong domestic shipping industry.

The current scheme is unlikely to meet its goals by FY26. So, the government is expected to review it soon. The focus may shift to a long-term plan. This plan could involve public-private partnerships to build Indian ships and capture a larger share of global shipping.