India’s Proposed Maritime Development Fund
- March 8, 2024
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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India’s Proposed Maritime Development Fund
Subject: Economy
Section: Msc
- Objective:
- The proposed fund aims to provide long-term, low-cost financial support to promote indigenous ship-building in India.
- Expected Timeline:
- The fund is likely to be ready by the end of this year.
- Participation:
- It will involve participation from industry stakeholders, financial institutions, and Ministries.
- Structural Options:
- Two options are under discussion:
- Setting up a dedicated maritime vertical under a proposed development finance institution.
- Establishing a standalone company with multi-agency equity.
- Reducing Ship Leasing Costs:
- India currently spends about $75 billion annually on leasing ships from outside.
- The aim is to boost India’s ship-building industry to reduce dependence on leasing.
- India’s Current Tonnage and Goals:
- India owns about 2% of the world’s total tonnage with approximately 1,500 ships under its flag.
- The fund aims to increase India’s share to up to 5% of the world’s tonnage.
- Focus Areas of the Fund:
- The Maritime Development Fund will focus on the entire value chain, including ship-building, flagging, ownership financing, and leasing.
- It will also promote cruise tourism and activities such as mechanization and capacity expansion of existing ports through Public-Private Partnerships (PPPs).
- Proposed Corpus and Funding Mechanisms:
- The fund is proposed to start with a corpus of ₹25,000 crore over a seven-year period.
- It will utilize multiple funding mechanisms such as debt, equity, Viability Gap Funding (VGF), and buyer credit support.
- Challenges in Accessing Finance:
- Indian shipping companies face challenges in growing tonnage due to difficulties in accessing required finance.
- Seeking ‘Infrastructure’ Status:
- The Ministry is working with the Finance Ministry to provide ‘infrastructure’ status to vessel operators and shipping companies.
- This status will enable them to raise long-term, low-cost finance for the shipping sector.
- Government Initiatives:
- The Ministry is taking steps to make the shipping sector more attractive by providing infrastructure status and facilitating access to long-term funds.
- The fund will play a crucial role in boosting India’s maritime sector, enhancing indigenous ship-building capabilities, and reducing leasing costs.
- Two options are under discussion:
Current Status of Maritime Transport in India:
- Global Ranking:
- India is the 16th largest maritime country in the world.
- Trade Volume and Value:
- Maritime transport in India handles 95% of trade by volume and 68% by value.
- Ship Recycling:
- India is among the top 5 ship recycling countries
- Holds 30% share in the global ship recycling market.
- Ship-Breaking Industry:
- India owns over 30% global market share in the ship-breaking industry.
- The largest ship-breaking facility is located in Alang, Gujarat.
- Sagar Mala Program:
- Launched in 2017 for port-led development and growth of logistics-intensive industries.
- Port Infrastructure:
- India has 12 major and 200 non-major/intermediate ports under state government administration.
- Jawaharlal Nehru Port Trust is the largest major port, while Mundra is the largest private port.
- Maritime India Vision 2030 (MIV 2030):
- A ten-year blueprint for the maritime sector.
- Focuses on boosting waterways, shipbuilding industry, and cruise tourism.
- Aims to develop world-class Mega Ports, transshipment hubs, and modernize port infrastructure.
- Estimated investments of ₹1,00,000-1,25,000 crore for capacity augmentation and infrastructure development.
Policy Initiatives and Development Projects:
- Maritime Development Fund:
- A ₹25,000-crore fund to provide low-cost, long-term financing for the sector.
- Centre contributing ₹2,500 crore over seven years.
- Port Regulatory Authority:
- Establishment of a pan-India port authority under the new Indian Ports Act.
- Aimed at enhancing oversight, institutional coverage, and structured growth.
- Eastern Waterways Connectivity Transport Grid project:
- Aims to develop regional connectivity with Bangladesh, Nepal, Bhutan, and Myanmar.
- Riverine Development Fund:
- Provides financing for inland vessels through the Riverine Development Fund (RDF).
- Extending the tonnage tax scheme to inland vessels for long-term, low-cost finance.
- Rationalization of Port Charges:
- Making port charges more competitive and transparent.
- Promotion of Water Transport:
- Developing waterways as an alternative means of urban transport.