Shipbuilding in India: Challenges and Opportunities

The history and current state of shipbuilding in India reveal a paradoxical scenario. Despite India's historical maritime achievements and its large labor force, the country has minimal presence in global shipbuilding.

Background

• India has approximately 61 shipyards, but only about 8 are significant.
• The shipbuilding industry has historically received inadequate government support, despite being labor-intensive.
• In 1972, Indira Gandhi established the Cochin Shipyard, which was a significant move at the time.
• South Korea, a future leader in shipbuilding, once sought to learn from the Cochin Shipyard.

Current Challenges

• India’s participation in its foreign trade shipping has dropped from 41% in 1987 to 5% in 2023.
• India pays ₹6 trillion annually to foreign shipowners for freight, comparable to its defense budget.
• The national fleet is insufficiently large considering the country's economic size.

Government Initiatives

• The Union Cabinet has approved a ₹70,000 crore plan to boost the shipbuilding industry.
• Key components of the plan include: 
  • A ₹25,000 crore Shipbuilding Finance Scheme.
  • A ₹25,000 crore Maritime Development Fund for low-cost financing.
  • A ₹20,000 crore fund for shipbuilding development clusters.
• An apex body will be established for credit risk coverage and capability development.

Concerns and Recommendations

• A proposed requirement to use 40% local content in shipbuilding may hinder quality and competitiveness.
• Encouraging local entrepreneurs to join the value chain is crucial for sustainable development.
• There is a risk of rent-seeking if subsidies are linked to undefined local content metrics.
• Separation of subsidy disbursement from local content definitions is advised to avoid bureaucratic hurdles.

The shipbuilding sector in India requires strategic measures to overcome international competition and achieve self-reliance. The success of these initiatives will depend on balancing quality, local content, and streamlined subsidy processes.