Source: The post India’s efforts to develop its maritime sector has been created, based on the article “Some wind behind the sails of India’s shipping industry” published in “The Hindu” on 4th February 2025.
UPSC Syllabus Topic: GS Paper3- Infrastructures
Context: The article discusses India’s efforts to develop its maritime sector through the Sagarmala program. Despite investments in ports, Indian shipping remains weak due to financial, regulatory, and tax challenges. Recent budget measures help, but more reforms are needed for real progress.
For detailed information on India’s Maritime Atmnirbharta read this article here
How is the government developing the maritime sector?
- The government has focused on improving the maritime sector through the Sagarmala program.
- As of September 2024, the program included 839 projects requiring ₹5.8 lakh crore by 2035.
- 241 projects (₹1.22 lakh crore) are completed.
- 234 projects (₹1.8 lakh crore) are under implementation.
- 364 projects (₹2.78 lakh crore) are in development.
- The investment distribution is:
- ₹2.91 lakh crore (50%) for port modernization.
- ₹2.06 lakh crore (35%) for port connectivity.
- ₹55.8 thousand crore (10%) for port-led industrialization.
- 5% for coastal community development and inland water transport.
How has India’s economy and trade grown?
- India’s GDP increased from ₹1.53 trillion (2016-17) to ₹2.72 trillion (2022-23), with a 7% annual growth rate.
- It is projected to reach $5 trillion by 2027 and $7 trillion by 2030.
3. India’s EXIM trade rose from $66 billion (2016-17) to $116 billion (2022), growing 12.83% annually. - The goal is $2 trillion exports by 2030.
Why is the Indian shipping sector not growing?
- Despite high investments, the Indian shipping sector remains stagnant.
- Cargo handled at major ports increased only 14.26% (2016-2021), with 2.85% annual growth.
- Number of vessels handled decreased 5.93%, from 21,655 (2016-17) to 20,371 (2020-21).
- Indian-registered ships increased by 16.77%, from 1,313 (2016-17) to 1,526 (2024).
- Gross tonnage increased 17.44% in the same period.
- India’s global ranking in ship ownership fell from 17 to 19.
- The fleet is aging, with the average vessel age improving from 26 years (2022-23) to 21 years (2024) due to the addition of 34 younger vessels.
What challenges does Indian shipping face?
- Lack of capital and high borrowing costs.
- Short loan tenures and rigid collateral rules.
- Unfavorable taxation, making foreign ships more competitive.
- High costs for training seafarers and higher port charges.
- Limited shipbuilding capacity, high steel costs, and customs duties on spare parts.
- Foreign-flag vessels benefit from low taxes and lenient regulations, making Indian ships uncompetitive.
What reforms have been announced?
The Union Budget 2025 introduced several measures:
- ₹25,000 crore Maritime Development Fund (MDF) (government will contribute 49%).
- Infrastructure status for large vessels.
- Shipbuilding clusters and financial aid for shipbuilding.
- 10-year exemption on customs duty for shipbuilding spare parts.
- Credit incentives for shipbreaking.
- Tonnage tax extension to inland vessels.
What needs to be done?
- MDF funding is unclear (whether it will be available in one year or multiple years).
- More investment is needed for ship replacement and green shipping technologies.
- Fix Tax Disparities: 5% IGST on Indian-flagged ships should be removed. TDS on seafarers’ salaries should be eliminated.
- Enhance Competitiveness: Reduce borrowing costs, provide long-term financing (7-10 years), and ease loan collateral rules.
- Improve Infrastructure: Expand shipyards and modernize existing ports under Sagarmala.
Question for practice:
Examine the key challenges hindering the growth of the Indian shipping sector despite significant investments and policy reforms.
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