India’s Shipping Ministry is moving closer to setting up a ₹25,000-crore Maritime Development Fund (MDF). The Ministry is also working on a parallel proposal of around ₹25,000 crore for shipbuilding clusters, with exact outlay being under considering. Final clearances for these two are likely in the next 3–6 months.

Cabinet note preparations are underway.

The move comes even as Parliament overhauled maritime laws recently, paving the way for modern legislation and ease of doing business in the sector. Five Bills were passed, all aimed at replacing British-era maritime legislation, in the just-concluded Monsoon Session.

“In another three months, or at the most in six, Cabinet approval will be sought for the MDF,” an official said.

Clearances have been received from the Expenditure Finance Committee (EFC), the source said.

In both cases, project financing is to be spread with a five-year time frame, as against the three or four-year limits proposed earlier.

“The idea would be to present a concerted policy ecosystem with fund support options to prospective investors. Basically, new legislation with detailed policy intervention,” the source said.

Blended Finance Model
The Maritime Development Fund, aimed at boosting long-term financing for the shipping and port ecosystem, will adopt a blended finance model with the government retaining majority ownership.

According to people aware of the deliberations, 49 per cent of the financing will come as concessional capital from the government, routed through the Ministry of Ports, Shipping and Waterways and public sector undertakings, while the remaining 51 per cent will be commercial capital.

The government, however, proposes to retain ownership and control of the fund despite the blended structure.

The MDF will target low-cost, long-term financing for maritime infrastructure projects, catering to both major ports and private sector stakeholders. It will also allow multiple classes of financial instruments, offering varying risk-return profiles to attract domestic as well as overseas investors.

The Sagarmala Development Finance Corporation, a recently set up NBFC, could possibly be at the forefront of disbursals made through MDF.

The fund was announced in the Budget, earlier this year.

Officials said the fund is expected to draw participation from multilateral and bilateral institutions, sovereign wealth funds and other global investors.

Ship-building clusters
The move comes as India seeks to expand port capacity, strengthen coastal shipping, and create a globally competitive shipbuilding and ship-repair cluster to reduce dependence on foreign yards.

A similar blended finance model could be explored with central and state government contribution in the fund being around 49-51 per cent, including contributions from anchoring shipyards or major ports.
Shipbuilding clusters will be facilitated to increase the range, categories and capacity of ships. This will include additional infrastructure facilities, skilling and technology to develop the entire ecosystem, the official in the know said.

Odisha and Gujarat are two possible locations which are being discussed internally, with State governments (mostly in Gujarat) working on specific incentive schemes, the official said. For a third cluster, the States could either be Andhra or Tamil Nadu.

Industry executives noted that India’s shipbuilding ambitions have lagged global leaders such as South Korea, China, and Japan, which dominate over 85 per cent of the world’s shipbuilding capacity, largely on the back of state-backed financing and cluster-driven strategies. By contrast, India accounts for less than 1 per cent of global output, a gap the MDF is expected to help narrow by easing access to capital.

An indicative project pipeline is also being worked out, which would be presented to potential investors once the two funds are formally approved.
Source: Business Line