In a first, India is pushing for major reforms in the shipping sector. The Centre plans to go ahead with implementing ship ownership, leasing, and flagging reforms to improve the share of the Indian shipping industry and generate more employment. There has already been a growing demand for expanding the national fleet and cutting dependence on foreign ships to haul export-import cargo.

A simpler tax regime on foreign cruise ships operating out of India has also been proposed with there being a concerted effort to boost cruise tourism in the country. “Ownership, leasing and flagging reforms will be implemented to improve the share of the Indian shipping industry and generate more employment,” Sitharaman said in her speech. India has close to 1500 own-flagged vessels. In 2022, India was ranked 18th globally in ship owning with around 1.4 per cent of the global tonnage.

Push for Ship-building

According to Sarbananda Sonowal, Union Minister for Ports, Shipping, and Waterways, there is a clear focus to push ship-building activities while contentious issues such as ship ownership and taxation are being worked on. The Ministry is already considering a review of the Merchantile Shipping Act, while work on developing a comprehensive maritime fund – that will support ship-building activities – is underway.

“The Budget lays down the groundwork for more Shipping sector reforms,” he told businessline. According to Sonowal, the Budget has laid the groundwork for “seek(ing) the required legislative approval for providing an efficient and flexible mode for financing for leasing of ships” and also pooled funds of private equity through a variable company structure. This is in line with the suggestion made by the Ministry of Ports, Shipping, and Waterways for creating a Ship Owning and Leasing Entity (SOLE) to be funded by the yet-to-be-set-up Maritime Development Fund. This fund will form special purpose vehicles with state-owned firms having cargo interests to jointly buy and run ships.

“The push would be take India amongst the top 10 countries, in terms of ship-ownership by 2030 and amongst the top 5 by 2047,” the Shipping Minister said adding that the Budget will significantly enhance India’s shipping, cruise, shipbuilding, and ship repair industry. New job opportunities will be created and the Ministry is already in talks with Maritime Universities and Centres of Excellence to carry out skilling activities.

Budgetary allocation for the Shipping Ministry saw a 35 per cent year-on-year rise to ₹6,228 crore with budget support of ₹1,010 crore and IEBR (Internal and Extra Budgetary Resources) being ₹5,218 crore. In comparison, BE was at ₹4,639 in FY24, which included budgetary support of ₹1,006 crore and IEBR of ₹3,633 crore. The IEBR for the Ministry includes loans to credit cooperatives of major ports.

Markets Unhappy

Incidentally, the market was expecting a more concerted push which included clarity on setting up the proposed Maritime Development Fund – which aims to fund ship-building; and re-start work on the Production Linked Incentive (PLI) – which currently is on hold, among other issues.

Shipping stocks like Shipping Corporation of India (SCI) closed at ₹294.70, down 7.53 per cent at close on the BSE. The SCI stock witnessed its highest fall around 12:30 PM – when most key budget announcements were made, with share prices hovering around the ₹280 mark. Even Great Eastern Shipping closed at ₹1,324.40, down about 3 per cent. The stock also witnessed its sharpest fall around 12:32 PM, and was then trading at the ₹1,264.35 mark.