India Sets Sail Towards Maritime Supremacy

In a monumental stride towards maritime excellence, India has unveiled the Maritime Development Fund (MDF), a Rs25,000 crore ($2.9 billion) initiative poised to revolutionize the nation’s shipping and shipbuilding landscape. This visionary fund, announced in the Union Budget 2025, aims to provide longterm, affordable financing to invigorate the shipping, shipbuilding, and port infrastructure sectors, with an ambitious target of attracting investments up to Rs1.5 lakh crore by 2030. The government’s commitment to contribute 49% of the corpus, complemented by private sector participation, underscores a collaborative endeavour to fortify India’s maritime prowess. Coupled with a revamped Shipbuilding Financial Assistance Policy and extended customs duty exemptions, the MDF is set to propel India towards self-reliance, fostering innovation, and positioning the nation as a formidable force in global trade. This Special Report presents exclusive first-hand insights from leading subject-matter experts on the topic.

The Union Budget 2025-26 proposes a Rs25,000 crore Maritime Development Fund with 49% government contribution. How do you envision this fund impacting India's maritime infrastructure and shipbuilding capabilities? How can the Maritime Development Fund be utilized to promote competition within the maritime industry?

Rajesh Menon, Associate Director – Maritime, PM Gati Shakti: The Maritime Development Fund is a financial support model adopted to help the shipping and maritime industry gain easy access to capital. It is a pool of money pooled from central government resources, ports, and the private sector, managed by a fund manager as a sectoral funding mechanism. The objective is to facilitate easy access to capital for various activities such as shipbuilding, purchasing ships, and commercial maritime activities. The need for such a funding mechanism arose from the lack of financing options available through established capital finance institutions like banks, which have traditionally viewed the shipping sector as a high risk category. Data also indicates that only a small percentage of infrastructure financing has been allocated to the maritime and shipping sectors.

In this context, this fund will empower the industry to pursue its entrepreneurial goals proactively. Sustaining our growth momentum and achieving developed nation status by 2047 is possible if our shipping sector, in terms of floating and non-floating assets, grows to become competitive in performance and productivity. This means we should increase the number of Indian-flagged ships, enhance port infrastructure, and invest in sustainable, fuel-efficient modern vessels. Since over 90% of our merchandise EXIM trade, in volume, and nearly 70%, in value, is conducted via the seas—alongside our rich 7,500 km coastline—we must cultivate a competitive maritime ecosystem for trade. The availability of accessible financing will facilitate investments in the sector, enabling the construction of new port infrastructure, the building and acquisition of additional ships, and ultimately reducing our shipping costs to enhance the competitiveness of our products in the international market. It will also encourage more participants to enter competitive trade and ultimately create competition and reduce our logistic costs.

Arun Kumar, President, AMTOI (Association of Multimodal Transport Operators of India): The proposed Rs 25,000 crore Maritime Development Fund (MDF) with 49% government contribution is a significant step toward strengthening India’s maritime infrastructure and shipbuilding capabilities. Here’s how it could impact the sector:

• Strengthening Port Infrastructure
• Boosting Shipbuilding & Repair Capabilities
• Promoting Coastal Shipping & Inland Waterways
• Enhancing Maritime Security & Digitalization

If executed well, the MDF can help India become a global maritime hub, improve logistics competitiveness, and reduce dependency on foreign shipping services. This would also require the government to streamline its regulatory framework to create an environment for growth of the sector.

Ashish Tripathi, General Manager – Global Sourcing, Logistics & Agency, TORM: Let’s try understanding the global shipbuilding countries & their market share globally. The global shipbuilding industry is dominated by China (65%), South Korea (20%), and Japan (11%), while India's share remains below 1% of the total market.

• China (65%) is the undisputed leader, backed by strong government support, subsidies, and economies of scale. Major yards: CSSC, CSIC, COSCO
• South Korea (20%) specializes in high-tech, fuel-efficient vessels (LNG carriers, tankers). Key players: Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding
• Japan (11%) focuses on high-quality, energy-efficient vessels. Major yards: Imabari Shipbuilding, Mitsubishi Heavy Industries

With 49% equity investment from the Centre and the remainder 51% will be from Major Ports, financial institutions, private investors, sovereign funds, among others. Subsidized financing will boost domestic shipbuilding, technology adoption, and repair facilities, positioning India as a global player as currently India ranks 22nd globally. MDF will also help in upgrade major and minor ports with green port initiatives, improving efficiency and trade capacity. Apart from shipbuilding MDF will support vessel financing, attract FDI, and strengthen India's role in global supply chains. 

How will the proposed shipbuilding clusters enhance the competitiveness quotient of the sector in the overall infrastructural development of the country and more so the Gati Shakti mission?

Rajesh Menon: India has currently a smaller number of commercial ships floating under its flag. This means we need more ships to be made. Moreover, modern ships should be able to be fuelled by nonconventional energy or low sulphur bunker fuels. Hence, expecting this demand for modern ships, we need to have enhanced capacities for ship manufacturing. Shipbuilding is a labour-intensive sector where we have an advantage, and by improving the skills and technology that go into the manufacture of modern ships through a clustered approach of manufacturing, we can build economies of scale, reduce the cost of manufacturing and improve the quality of the product. In a cluster, as in the case of automobiles, both suppliers, vendors, original equipment manufacturers, and service providers, all being in a single location, will enable cost competitiveness.

Arun Kumar: The proposed shipbuildingclusters have the potential to significantly enhance the competitiveness of India’s maritime sector and contribute to the broader Gati Shakti National Master Plan (NMP) in multiple ways:

STRENGTHENING INDIA’S SHIPBUILDING & REPAIR ECOSYSTEM

• Integrated Maritime Hubs: Shipbuilding clusters will integrate design, manufacturing, maintenance, and supply chain components, reducing dependency on foreign yards.
• Economies of Scale: By colocating shipbuilders, component manufacturers, and service providers, costs can be lowered, making Indian shipbuilding globally competitive.
• Attracting Investment: Strategic partnerships with global players can bring in advanced technologies, improving productivity and quality standards.

ENHANCING MULTIMODAL CONNECTIVITY UNDER GATI SHAKTI

• Port-Shipyard Integration: Improved connectivity between ports and shipyards will accelerate shipbuilding projects and reduce logistics bottlenecks. 
• Seamless Freight Movement: Efficient shipbuilding and a strong maritime fleet will enhance coastal shipping and inland waterways, reducing dependency on road and rail.
• Dedicated Freight Corridors (DFCs): Strengthening multimodal linkages will ensure seamless transport of shipbuilding materials (steel, machinery, etc.) to shipyards, reducing lead times and costs.

BOOSTING COASTAL & INLAND SHIPPING COMPETITIVENESS

• Fleet Modernization: Shipbuilding clusters will facilitate faster production of cost-effective, energy efficient vessels for domestic and international trade.
• Lower Logistics Costs: A robust domestic fleet will reduce reliance on foreign vessels, cutting shipping costs  for Indian exporters and importers.
• Support for Ro-Ro and Ro-Pax Services: Enhanced shipbuilding capacity can accelerate coastal passenger and freight transport initiatives, aligning with Gati Shakti’s multimodal vision.

JOB CREATION & SKILL DEVELOPMENT

• Employment Generation: Clusters will create jobs in shipbuilding, component manufacturing, design, and repair services.
• Skill Development Centers: Training institutes within clusters will develop a highly skilled maritime workforce, reducing dependence on foreign expertise.

PROMOTING SUSTAINABILITY & GREEN SHIPPING

• Indigenous Green Vessels: Incentives for research and development (R&D) in green shipbuilding (LNG/hydrogenpowered ships) will align with India’s decarbonization goals.
• Circular Economy: Efficient recycling and scrapping policies within clusters can position India as a global hub for eco-friendly ship disposal.

By integrating shipbuilding clusters with the Gati Shakti mission, India can transform its maritime sector, making logistics faster, more efficient, and cost effective while strengthening its position in the global supply chain.

Ashish Tripathi: PM Gati Shakti is a nationwide infrastructure blueprint designed to enhance multi-modal connectivity, streamline logistics, and drive economic growth. It brings together 16 ministries on a unified digital platform to improve coordination and accelerate project execution. So, the dream of Indian becoming a $30 trillion economy by 2047 is closely tied to the development of its maritime sector, particularly shipbuilding. The Union Budget has given a significant boost to domestic shipbuilding with the creation of mega shipbuilding clusters aimed at enhancing the country’s global competitiveness.

Why are shipbuilding Clusters important?

Capacity Expansion & Infrastructure Development: Helping in to establish new shipbuilding clusters with a capacity of 1.0 to 1.2 million Gross Tonnage (GT) each. This will also Provide government funded support for breakwater construction and capital dredging. And help to Develop critical infrastructure, including roads, utilities, and sewage treatment facilities, to facilitate large scale shipbuilding operations.

Public-Private Partnership (PPP) Model: To attract private sector investments to drive modernization and expansion of shipbuilding facilities. Also change instance of India as not just a normal ship builder but early adapter & to Promotion of eco-friendly and green shipbuilding technologies. In the process also foster global collaborations to enhance technical expertise and innovation in the sector.

IMPACT ON INDIA'S MARITIME & ECONOMIC GROWTH

• Strengthening India’s Position as a Global Maritime Hub: Increased shipbuilding capacity will reduce reliance on foreign built vessels. Also help in Expansion of repair and maintenance services to cater to global shipping fleets.
• Boost to Domestic & Global Trade: Growth in shipbuilding will enhance coastal hipping, inland waterways, and global export capabilities. This, in turn, will result in improved maritime infrastructure will align with and support India’s Sagarmala and PM Gati Shakti initiatives.

What are the challenges that the maritime sector is facing at the moment and how can they be ironed out?

Rajesh Menon: The major challenge that the maritime sector is facing is the geopolitical conflicts affecting internal trade and global supply chains. For a country like India, nearly 45% of our exports are done by the small and medium-term industries which gets easily affected by the rice in freight cost that results from geo-political uncertainties.

Secondly, we as a nation are getting year-on-year more containerized, which means our dependence on containers is increasing. However, we still don't have an ecosystem that will enable the production of cheaper containers and hence we are importing containers from China. So, with freight dependencies and container dependencies, we are having a major challenge. This needs to be addressed through Indigenous manufacturing of containers, and ships and also create a domestic container line for EXIM trade.

Arun Kumar: The Indian maritime sector, despite its growth potential, faces several challenges that hinder its competitiveness. Addressing these issues strategically can unlock its true potential. Listed below are some of the major challenges…

• High Port Handling Costs
• Inadequate Shipbuilding & Repair Infrastructure
• Over-Reliance on Foreign Shipping
• Weak Coastal & Inland Waterways Connectivity
• Regulatory Bottlenecks & Bureaucratic Hurdles
• Skilled Manpower Shortage
• Sustainability & Environmental Concerns

By addressing these challenges through targeted policies, infrastructure investments, and regulatory reforms, India can unlock its maritime potential, reduce logistics costs, and strengthen its position as a global maritime hub.

Ashish Tripathi: India’s maritime sector is a critical driver of trade and economic growth. However, inefficiencies in infrastructure, financing constraints, high logistics costs, and sustainability challenges hinder its global competitiveness. Addressing these issues through policy reforms, investment, and modernization is key to positioning India as a leading maritime hub.

PORT CONGESTION & BENCHMARKING AGAINST GLOBAL STANDARDS

• High Dwell Time: Cargo clearance at Indian ports takes 2-3 days, compared to less than a day in global hubs like Singapore, Rotterdam, and Shanghai.
• Inefficient Customs & Documentation: Delays in approvals and lack of end-to-end digitization slow down trade.
• Limited Deep-Draft Ports: India has few ports capable of handling ultralarge vessels, increasing reliance on transshipment hubs like Colombo and Singapore.

Solutions:

• Benchmarking Global Best Practices: Adopting fully automated cargo clearance and paperless customs processing (as seen in Singapore, where clearance takes a few hours).
• Port Modernization under Sagarmala: Investments in automation, AI-driven cargo tracking, and multimodal connectivity.
• Expansion of Deep-Draft Ports: Developing trans-shipment hubs (e.g., Vizhinjam, Enayam) to compete with global shipping routes.

CHALLENGES IN MARITIME FINANCING

• Limited Access to Low-Cost Capital: Indian shipowners and operators face higher borrowing costs compared to global counterparts.
• Lack of Dedicated Maritime Finance Institutions: Countries like China and South Korea have government backed shipbuilding funds, whereas Indian shipyards struggle with financing.
• High Insurance & Compliance Costs: Indian ship financing lacks riskmitigating incentives, making vessel procurement costly.

Solutions:

• Maritime Development Fund (MDF): A Rs6,100 crore allocation to modernize shipyards and encourage domestic shipbuilding.
• Public-Private Partnerships (PPP): Attracting private investors to finance port and logistics infrastructure.
• Tax Incentives & Subsidies: Similar to South Korea’s Shipbuilding Industry Promotion Act, which provides tax breaks and easy credit.

INDIA’S HIGH LOGISTICS COSTS VS GLOBAL COMPETITORS

Challenges:

• India’s Logistics Cost (13-14% of GDP) is higher than China (8%) and the US (9%), reducing export competitiveness.
• Expensive Road & Rail Freight: Over 60% of India’s cargo moves by road, which is costly compared to China’s high reliance on rail and waterways.
• Limited Coastal & Inland Waterways Usage: Despite a 7,500 km coastline, India underutilizes coastal shipping compared to Europe and China.

Solutions:

• Expanding Coastal Shipping & Inland Waterways: Boosting Ro-Ro services, multimodal logistics parks, and riverine ports to reduce costs.
• PM Gati Shakti for Freight Optimization: Integrating ports with rail and road corridors for efficient cargo movement.
• Digitization & Cargo Visibility: AI-driven logistics platforms for better freight tracking and cost reduction.

SUSTAINABILITY & INDIA’S 2070 NET ZERO TARGET

Challenges:

• Slow Adoption of Green Technologies: Lack of infrastructure for LNG bunkering, shore power, and low-emission vessels.
• Global Decarbonization Targets:
• EU: Net Zero by 2050
• China: Net Zero by 2060
• India: Net Zero by 2070 due to economic and developmental priorities.