The Centre is set to introduce the Ship Building Financial Assistance Policy 2.0, linking disbursement of funds to the use of at least 40 per cent local content in the total value of ships constructed at Indian yards, according to officials familiar with the matter.
“The planned Ship Building Financial Assistance Policy will stipulate a minimum local content of 40 per cent for shipyards to avail the full extent of assistance,” a government official said. The benchmark has been fixed keeping in mind the existing ecosystem for raw materials and components, while also aiming to spur investments in domestic manufacturing of shipbuilding equipment.
Under the revamped scheme, financial support will be structured across three categories for a 10-year period:
15% for normal ships valued up to ₹100 crore,
20% for advanced and specialised vessels above ₹100 crore, and
25% for green ships.
The policy overhaul was announced by Finance Minister Nirmala Sitharaman in her Budget speech on February 1, with an emphasis on addressing India’s cost disadvantages in the global shipbuilding market. The scheme will also extend to credit notes for shipbreaking in Indian yards, promoting a circular economy.
Despite India’s competitive edge in labour costs, the advantage is offset by reliance on imported raw materials and higher financing costs. Local shipyards face a 25–35 per cent cost disadvantage compared with peers in South Korea, Japan, Vietnam, Indonesia, Malaysia, and the Philippines.
Meanwhile, in a parallel reform, the Ministry of Ports, Shipping and Waterways has convinced the Finance Ministry to adopt a tonnage and length-based criterion for granting infrastructure status to ships. Vessels measuring 24 metres and above in length or 500 gross tonnage (GT) and above in capacity will now qualify, enabling fleet owners to access long-term, low-cost financing.
The Finance Ministry had initially proposed a value-based threshold of ₹100 crore, which would have excluded about 80 per cent of India’s fleet owners. The revised norms ensure broader coverage, especially for smaller vessels, including those under the government’s green tug transition programme, where most ships are valued at less than ₹100 crore.
