The Indian shipping industry accounts for about 95 per cent of India’s trade by volume with its neighbouring countries. However, the number of ships registered under the Indian flag is lower, as the country’s cargo is mostly carried by foreign flag vessels. The variability of charter rates, limited investment and ageing vessels are some of the key challenges being faced by the Indian shipping industry. Numerous steps are being taken to overcome these issues and encourage Indian-flag vessels in the fleets of domestic and global shipping lines. The aim is to create a level playing field for domestic and foreign players.
Current fleet size
The fleet size of the Indian shipping industry grew at a compound annual growth rate of 1.74 per cent during 2018-23. As of December 31, 2023, the Indian shipping industry has a fleet of 1,526 vessels comprising 13.74 million gross tonnage (GT) and 20.83 million deadweight tonnage (DWT). Of these, 1,039 are coastal vessels comprising 1.72 million GT and 2.03 million DWT, and 487 are overseas vessels comprising 12.02 million GT and 18.8 million DWT. In December 2023, one coastal vessel of 1,930 GT was added to the overall fleet, while two overseas vessels of 30,598 GT (51,606 DWT) were added and four overseas vessels of 98,999 GT (172,863 DWT) were deleted from the overseas fleet. As per industry reports, India’s shipping fleet is primarily dominated by crude and product tankers at 57 per cent, followed by dry bulk carriers (16 per cent) and containers (5 per cent).
Government initiatives
A plethora of initiatives are being undertaken by the government to boost the shipping industry. The Ministry of Ports, Shipping and Waterways (MoPSW), under the Amrit Kaal vision, has identified a total potential of 1,300 million tonnes per annum (mtpa) of cargo movement through coastal shipping by 2047. Moreover, for the promotion of coastal shipping under the National Logistics Policy, the MoPSW has introduced first- and last-mile road and rail connectivity, and sectoral plans for efficient logistics. Further, the MoPSW has introduced a priority berthing policy and green channel clearance for faster evacuation of coastal cargo at ports, to facilitate cargo vessels. As of December 2023, five dedicated coastal berths have been developed, with a total capacity of 6.34 mtpa. Moreover, so far, 10 projects comprising roll-on-roll-off (ro-ro)/ro-ro passenger jetties, passenger jetties, etc., worth Rs 5.27 billion, have been completed. Further, 88 vessel orders (domestic and export), worth Rs 68 billion, have been procured by 31 shipyards during the past four years.
Furthermore, in December 2023, the MoPSW amended the Shipbuilding Financial Assistance Policy (SBFAP) scheme enabling Indian shipyards to procure orders from domestic and international markets. The SBFAP scheme provides financial support to Indian shipyards for shipbuilding contracts signed between April 1, 2016 and March 31, 2026, with a decreasing rate of financial assistance from 20 per cent in 2016 to 11 per cent in 2026. The SBFAP guidelines have been amended to include wind farm installation vessels and the construction of sophisticated dredgers as specialised vessels, eligible for greater financial assistance. The amended guidelines also include financial assistance of 30 per cent for vessels whose main propulsion is achieved using green fuels such as methanol/ammonia/hydrogen fuel cells, and financial assistance of 20 per cent for vessels with electric or hybrid propulsion systems.
In another development, the Directorate General of Shipping has amended its order on the guidelines for exercising the right of first refusal before grant of licence to foreign flag vessels, dated January 14, 2021. This has been done to provide priority to the International Financial Services Centres Authority (IFSCA)-owned ships for chartering through a tender process. The addendum, dated October 5, 2023, specifies the following order of priority: Indian-built, Indian-flag and Indian-owned (first); Indian-built, Indian-flag and Indian IFSCA-owned (second); foreign-built, Indian-flag and Indian-owned (third); Indian-built, Indian-flag and Indian IFSCA-owned (fourth); and Indian-built, foreign-flag and foreign-owned (fifth).
Moreover, in September 2023, the Indian Register of Shipping’s (IRS) “Rules for Construction and Classification of Indian Naval Ships – 2023” were released. They incorporate the latest International Maritime Organization/International Association of Classification Societies requirements, as well as rule requirements for military design features. Further, rule-related requirements for technological advancements are being incorporated in the design of naval ships, covering materials, structures, propulsion and other engineering systems, integrated electronics, safety systems, etc. Currently, 39 major vessels under construction for the Indian Navy are being classified by the IRS.
Expansion plans
With the shipping industry gaining traction, various shipping firms are coming up with expansion plans. For instance, steps are being taken by the Shipping Corporation of India (SCI) to acquire five second-hand ships, at an approximate investment of Rs 20 billion. The board of SCI has granted in-principle approval for the purchase of these ships by March 31, 2024. These ships include a very large gas carrier; a medium-range tanker; a container ship with a capacity exceeding 9,000 twenty-foot equivalent units; a platform supply vessel; and an anchor handling, towing and supply vessel. SCI, along with Great Eastern Shipping Company Limited, contributes more than 40 per cent of total industry tonnage.
ArcelorMittal Nippon Steel India Limited is also expanding its Indian-flag fleet as it seeks to secure the supply chain because of a shortage of Indian-registered ships in the market. The company is looking to expand from 9 mt of capacity to 40 mt by 2035. Apeejay Shipping Limited is also planning to acquire at least four more ships to reach a combined fleet capacity of 1 mt DWT, thus increasing its capacity by about 50 per cent. The vessel acquisitions will cost the shipping line about Rs 4.1 billion-Rs 6.2 billion over the next three to five years, funded through a debt–equity ratio of 1:3. Further, in an attempt to promote indigenisation, the Ministry of Defence signed a contract with Hindustan Shipyard Limited, Visakhapatnam in August 2023 for the acquisition of five fleet support ships for the Indian Navy, worth about Rs 190 billion.
Shipbuilding and repair
Shipbuilding is one of the top priority areas for the MoPSW. In a notable development, three major infrastructure projects worth more than Rs 40 billion were inaugurated in Kochi, Kerala on January 17, 2024. The projects include the setting up of an international ship repair facility on Willingdon Island in Kerala, at an investment of Rs 9.7 billion. For the project, Cochin Shipyard Limited (CSL) and Cochin Port Trust (CPT) had entered into a contract whereby 42 acres of land were leased by CPT to CSL. Besides, plans have also been announced to set up shipbuilding and repair clusters in Mumbai, Chennai, Gujarat, Goa, Visakhapatnam, Andaman and Nicobar, and Odisha.
The Indian shipbuilding industry is expected to develop further. Significant potential lies untapped for the ship repair industry, and this is expected to be true for other segments, including Indian flag vessels sailing in international waters, coastal vessels, offshore and special purpose vessels, and vessels plying on inland waterways.
The way ahead
Going forward, the Indian shipping industry is projected to sustain its performance in the current fiscal year, albeit with some moderation in operating margins. The outlook for the shipping industry seems to be stable. However, the shipping industry has immense potential for expansion upon addressing the issues it faces. Moving ahead, the government needs to provide attractive tax incentives and other benefits to encourage private companies to buy more ships and ply on Indian shores to facilitate cargo movement. This would, in turn, reduce the demand-supply gap in the Indian shipping industry by boosting both manufacturing and employment.
Sidra Siddiquie
