EXPLAINED | Centre rolls out Rs 44,700 crore package to boost domestic shipbuilding sector

The Ministry of Ports, Shipping & Waterways (MoPSW) on Saturday released the operational guidelines for two major shipbuilding initiatives aimed at boosting domestic power in this sector.

As per the MoPSW, the Shipbuilding Financial Assistance Scheme (SBFAS) and the Shipbuilding Development Scheme (SbDS) will be valid until March 31, 2036, with an in-principle extension planned until 2047.

Shipping minister Sarbananda Sonowal declared that these guidelines have created a "stable and transparent framework" that can boost "forward and backward linkage" in domestic shipbuilding.

Shipbuilding Financial Assistance Scheme (SBFAS)

Under the SBFAS, which has a total corpus of Rs 24,736 crore, the Centre will provide financial assistance ranging from 15-25 per cent per vessel, depending on its category.

This new corpus extends the 2015 scheme—originally valid till March 31, 2026—in line with the FY26 Budget.

The SBFAS also features incentives for series orders and graded support for small normal, large normal, and specialised vessels, with secure, stage-wise disbursements tied to set milestones.

This scheme will also establish a National Shipbuilding Mission to better plan and execute shipbuilding initiatives in the future, as well as a Shipbreaking Credit Note with an allocation of Rs 4,001 crore, under which those scrapping their vessels at Indian yards will get a credit equivalent to 40 per cent of the scrap value.

Over the next ten years, it is expected to support shipbuilding projects worth about Rs 96,000 crore.

Shipbuilding Development Scheme (SbDS)

The SbDS, which has a total corpus of Rs 19,989 crore, aims to develop greenfield shipbuilding clusters, expand and modernise existing brownfield shipyards, and establish an India Ship Technology Centre under the Indian Maritime University.

With a view to build long-term capacity and capability, under the SbDS, greenfield shipbuilding clusters will receive 100 per cent capital support for common maritime and internal infrastructure via a 50:50 Centre–State special purpose vehicle.

Existing shipyards will be eligible for 25 per cent capital assistance for brownfield expansions, such as in dry docks, shiplifts, fabrication facilities, and automation systems.

Like with the SBFAS, disbursements will be milestone-based and monitored by independent evaluation agencies.

The SbDS also includes a Credit Risk Coverage Framework, offering government-backed insurance for pre-shipment, post-shipment, and vendor-default risks.

The Centre's maritime push in September

Both the SBFAS and the SbDS are part of a comprehensive maritime package of Rs 69,725 crore, approved by the Centre in September this year.

"The package introduces a four-pillar approach designed to strengthen domestic capacity, improve long-term financing, promote greenfield and brownfield shipyard development, enhance technical capabilities and skilling, and implement legal, taxation, and policy reforms to create a robust maritime infrastructure," the Centre had said in a statement.

The September package also included a Maritime Development Fund (MDF) with a corpus of Rs 25,000 to provide long-term financing for the shipping sector.

The MDF includes a Maritime Investment Fund of Rs 20,000 crore—which gets 49 per cent participation from the Centre—and an Interest Incentivization Fund of Rs 5,000 crore to reduce the effective cost of debt and improve project bankability.