In a renewed push to reduce its reliance on foreign carriers and strengthen its maritime presence, the Indian government is drawing up a fresh plan to promote Indian-flagged ships. This comes as the current subsidy scheme launched in 2021 struggles to meet its targets, raising concerns about the country’s role in global maritime trade.
The Ministry of Ports, Shipping, and Waterways (MoPSW) confirmed that discussions with other ministries have helped identify a demand for around 200 new Indian-flagged vessels, with a total capacity of 8.6 million Gross Tonnage (GT). These ships, valued at nearly ₹1.3 lakh crore, are intended to serve the import needs of critical sectors like petroleum, steel, and fertilizers.
“These ships will be jointly owned by public sector undertakings and built at Indian shipyards in the coming years,” the ministry said in a response.
Current Incentive Scheme Falling Short
The upcoming plan is being shaped amid signs that the ongoing ₹1,624 crore subsidy scheme to support Indian ships may fall short of its goals. Launched with high hopes in the FY22 Budget and approved by the Union Cabinet in July 2021, the initiative aimed to give Indian shipping companies an edge in global tenders by offering a subsidy of up to 15% for transporting government cargo like crude oil, LPG, coal, and fertilizers.
So far, however, only ₹330 crore has been disbursed, and the share of Indian-flagged ships in import cargo has remained stuck at around 8%, showing no real improvement since the scheme’s inception.
Foreign Dependence Costing Billions
India’s dependency on foreign shipping has deepened over the decades. In 1987-88, Indian ships carried over 40% of the country’s export-import cargo. That figure has now dropped to less than 8%. As a result, foreign shipping lines are earning an estimated $70 billion annually from Indian trade, draining significant foreign exchange.
While cargo volumes at Indian ports are growing steadily, reaching 1,540 million metric tons (MMT) in 2023-24, up 7.5% from the previous year, the bulk of the benefit is going to foreign-flagged vessels.
Indian Operators at a Disadvantage
Indian shipping companies say they’re fighting an uphill battle. Government estimates suggest their operating costs are roughly 20% higher than those of their foreign competitors.
This is largely because Indian-flagged vessels must hire Indian seafarers and comply with local tax and corporate laws. They also face higher borrowing costs, shorter loan tenures, and taxation on crew wages. On top of that, Indian companies importing ships are subject to GST without input tax credits and face uneven GST rates when operating between two domestic ports, taxes that don’t apply to foreign vessels offering similar services.
“These regulatory and financial burdens make it difficult for Indian shipping firms to compete,” said Anil Devli, CEO of the Indian National Shipowners’ Association. “We’ve been urging the government to ease these taxes and duties, but so far, little has changed.”
A New Course Ahead
In light of these challenges, the ministry is now working with key departments to rethink the current approach. The focus is on encouraging public-private investment in Indian-built, Indian-flagged ships and reviving shipbuilding capacity across the country.
The government hopes that this new strategy will help boost India’s role in global shipping, support domestic industry, and reduce the billions spent on foreign carriers each year.
