India’s Proposed Maritime Development Fund

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.

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.