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.