Economy & BudgetPriority2025-09-24

Cabinet Clears ₹69,725 Crore Package for Maritime Sector

Why focus: ₹69k Cr Maritime package — GS3 Economy/Infrastructure, tests Maritime Development Fund targets via statement-based MCQs.

In News

What Happened

On September 24, 2025, the Union Cabinet approved a massive INR 69,725 crore package to boost India's maritime and shipbuilding sector. The intervention includes setting up an INR 25,000 crore Maritime Development Fund (MDF) and extending the Shipbuilding Financial Assistance Scheme (SBFAS) until March 2036.

Why It Matters

This policy aims to transform India from a marginal player into a top-five global shipbuilding nation by 2047. It strengthens the 'Blue Economy' by reducing reliance on foreign commercial vessels, securing maritime supply chains, creating local manufacturing jobs, and accelerating the green transition in the shipping industry.

Background

History & Context

India's share in global commercial shipbuilding has languished below 1 percent, with the market heavily dominated by China, South Korea, and Japan. To address this, the government initially launched the Shipbuilding Financial Assistance Scheme (SBFAS) in 2016 for a ten-year period ending in 2026. Despite policies like the Right of First Refusal (ROFR) favoring Indian-built and Indian-flagged vessels under the Make in India initiative, the sector suffered from a lack of long-term, low-cost financing. Recognizing this critical gap, the Maritime India Vision 2030 and the Amrit Kaal Vision 2047 blueprints emphasized the need for a dedicated maritime finance mechanism. The current package is a direct outcome of these strategic plans, aiming to eliminate the structural cost disadvantage of 15-20 percent faced by Indian shipyards.

What Changed

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BEFORE: No dedicated long-term financing institution existed specifically for the maritime sector. NOW: A dedicated INR 25,000 crore Maritime Development Fund (MDF) is established to function as a specialized Development Finance Institution (DFI) for shipping.
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BEFORE: The Shipbuilding Financial Assistance Scheme (SBFAS) was slated to expire in March 2026. NOW: SBFAS is extended by another 10 years until March 2036 with a significantly enhanced financial allocation.
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BEFORE: Financial assistance under SBFAS was generally flat across standard commercial vessel types. NOW: The extended SBFAS incorporates targeted, higher subsidies for green ships (using alternative fuels like methanol or ammonia) and highly specialized vessels.
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BEFORE: Maritime infrastructure projects relied heavily on standard commercial bank loans with high interest rates and short tenures. NOW: The MDF will provide long-tenure, low-cost debt, equity, and viability gap funding tailored for the long gestation periods of maritime assets.
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BEFORE: The overall budget allocation for shipbuilding interventions was limited to an INR 4,000 crore outlay under the original 2016 SBFAS. NOW: The total comprehensive maritime intervention package is vastly expanded to INR 69,725 crore.

What Did NOT Change

Despite the massive financial infusion, the core requirement for shipyards to secure actual commercial orders remains market-driven; the government did not mandate direct public procurement of commercial fleet requirements. Furthermore, Foreign Direct Investment (FDI) limits in shipbuilding, which are already at 100 percent under the automatic route, remained unchanged.

Prelims Angle

NCERT Connection

This development directly builds upon Class 10 Geography Chapter 7 (Lifelines of National Economy), which highlights the critical role of seaports and shipping routes in India's international trade, noting that 95 percent of the country's trade volume is moved by sea. The chapter establishes shipping as the backbone of globalization. The current INR 69,725 crore package applies this concept by recognizing that true self-reliance requires not just ports (the nodes), but indigenous shipbuilding capacity (the vehicles), thereby shifting the focus from merely utilizing the 'lifelines' to manufacturing them under the broader Blue Economy framework.

Common Misconceptions

✗ India is already a major player in global commercial shipbuilding due to its vast coastline and massive shipbreaking industry.

✓ While India leads globally in ship recycling (breaking) at hubs like Alang, its share in global commercial shipbuilding is less than 1 percent, heavily overshadowed by China, South Korea, and Japan.

People conflate India's maritime geographic advantages and dominance in ship dismantling (recycling) with its actual high-value manufacturing and shipbuilding capacity.

✗ The Maritime Development Fund (MDF) is a 100 percent government-owned commercial retail bank.

✓ MDF is designed as a specialized funding vehicle functioning like a Development Finance Institution (DFI), likely leveraging private, bilateral, and multilateral capital alongside government equity, tailored specifically for long-gestation maritime projects.

The massive INR 25,000 crore corpus and the term 'Fund' make it sound like a traditional public sector bank setup like SBI or PNB.

Practice Questions

Q1

How Many Correct

Consider the following statements regarding India's maritime sector and the recent INR 69,725 crore package: 1. India currently accounts for more than 10 percent of the global commercial shipbuilding market. 2. The newly established Maritime Development Fund (MDF) is designed to provide long-tenure, low-cost financing specifically for maritime assets. 3. The Shipbuilding Financial Assistance Scheme (SBFAS) provides financial subsidies exclusively for the construction of naval defense vessels. How many of the above statements are correct?

Q2

Match the Following

Match List I (Maritime Initiatives/Terms) with List II (Descriptions): List I: A. Shipbuilding Financial Assistance Scheme (SBFAS) B. Alang C. Right of First Refusal (ROFR) D. Maritime Development Fund (MDF) List II: 1. Specialized Development Finance Institution for shipping 2. Subsidy mechanism for building commercial vessels 3. Major global hub for ship recycling and dismantling 4. Chartering preference given to Indian-built and flagged vessels Select the correct answer using the code given below:

Q3

Assertion & Reason

Assertion (A): The Union Cabinet significantly expanded the Shipbuilding Financial Assistance Scheme (SBFAS) to eliminate the structural cost disadvantage faced by Indian shipyards. Reason (R): Indian commercial shipyards historically enjoy lower borrowing costs and shorter gestation periods compared to their counterparts in China and South Korea. Select the correct answer from the codes given below:

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