India’s Shipbuilding Revolution: Inside The Maritime Development Fund (MDF)

Policy Update
Ashutosh Gupta

Background

The Government of India launched the Maritime Development Fund (MDF), a strategic initiative to support the country’s maritime sector, with a special emphasis on the shipbuilding and repair sectors. The MDF, unveiled during the Union Budget 2025–26, plans to raise 25,000 crore, or roughly $3 billion, to offer long-term, affordable financial support for domestic shipbuilding and other infrastructure projects.
By modernising and growing India’s shipbuilding and repair capabilities, the MDF hopes to lessen dependency on foreign-built ships and encourage marine infrastructure self-sufficiency.

Inception and Need

One of the key objectives of the Maritime Development Fund (MDF) is to increase India’s participation in international maritime trade by increasing its percentage of the world’s shipping tonnage from the current 2% to 5%. India has always held a negligible 0.06% stake in the global shipbuilding business. Indians paid over $109 billion in sea freight to foreign operators in the fiscal year 2021–2022, as a result of their restricted involvement, which has led to a significant dependency on international shipping services.
The MDF is poised to benefit a wide array of stakeholders within the maritime industry, including Shipbuilders, Shipping Companies, Port Authorities, and Ancillary Industries.
India hopes to improve its domestic shipbuilding capabilities, fortify its maritime infrastructure, and establish itself as a major player in the world shipping market by creating the Maritime Development Fund, to attract significant investments and achieve substantial growth by the year 2030.

Objectives

The primary objectives of the Maritime Development Fund include:
• Enhancing Domestic Shipbuilding: Providing affordable and long-term financing to Indian shipyards to increase their competitiveness in the global market.
• Modernizing Port Infrastructure: Investing in the development and modernization of port facilities to handle larger volumes and diverse categories of ships.
• Promoting Green Shipping: Encouraging the construction and operation of energy-efficient and environmentally friendly vessels to reduce the maritime carbon footprint.
• Reducing Foreign Dependence: Expanding the national shipping fleet to decrease reliance on foreign carriers, thereby retaining freight payments within the country.

Corpus and Funding Structure

Up to 49% of the MDF’s funding will come from the Indian government, with the remainder of the funds anticipated to come from private sector investments and ports. In addition to ensuring the fund’s sustainability, this cooperative fundraising strategy seeks to attract a total investment of up to ₹1.5 lakh crore (approximately $18.6 billion) in the maritime sector by 2030.

Complementary Initiatives:

In addition to the MDF, the government plans to establish a new shipping company in collaboration with oil refiners and the Shipping Corporation of India. This venture aims to expand the national shipping fleet, further supporting the maritime industry’s growth. Moreover, efforts are underway to promote shipbuilding clusters, enhance infrastructure, and incentivise the scrapping and building of vessels. This is evident in the new Revamped Shipbuilding Financial Assistance Policy (SBFAP 2.0), under which an allocation of ₹18,090 crore to provide direct financial subsidies to Indian shipyards could offset operational cost disadvantages.
Also, an import tax exemption on inputs for shipbuilding and ship breaking activities has been extended by 10 years to support these sectors. Additionally, under the new Shipbreaking Credit Note Scheme, the issuance of credit notes worth 40% of the scrap value for ships recycled in Indian yards, will promote a circular economy and incentivise the purchase of new, domestically built vessels.

Evaluation of the MDF: Functioning and Operational Framework

1. Addressing Financing Challenges
Prior to the establishment of the MDF, the maritime sector faced significant hurdles in securing long-term financing. Domestic financial institutions often lacked the domain expertise required for maritime projects, leading to stringent loan terms and higher collateral requirements. These factors collectively restricted the growth potential of the sector.
2. Enhancing Global Competitiveness
The MDF is anticipated to bolster the competitiveness of Indian shipyards and shipping companies by providing access to affordable capital. This financial support is crucial for modernizing facilities, adopting advanced technologies, and expanding fleets, thereby enabling Indian entities to compete more effectively on the global stage.
3. Alignment with Sagarmala Programme:
The MDF complements other governmental efforts aimed at revitalizing the maritime sector. For instance, the Sagarmala Programme is the government’s flagship initiative aimed at promoting port-led development in India. The Sagarmala Programme focuses on modernizing ports, enhancing connectivity, and fostering coastal community development, thereby creating a synergistic environment for the MDF’s initiatives.

Fig 1: India’s leap in in Logistics Performance Index (LPI) for FY- 2023Source: World Bank, LPI 2023

Fig: India’s cargo throughput at major ports in million metric tons (MMT).

Performance Evaluation

Evaluating the MDF’s performance over the past two to three years involves analyzing various metrics such as cargo throughput, port efficiency, and the growth of the shipping industry.
1. Cargo Throughput at Major Ports
The major ports in India have witnessed significant growth in cargo handling. In the fiscal year 2023-24, major ports achieved a record cargo throughput of 819 million metric tons (MMT). This upward trend continued in the subsequent years, with major ports experiencing double-digit annual growth.
2. Improvement in Global Rankings
India’s performance in global logistics has improved notably. According to the World Bank’s Logistics Performance Index, India moved up from the 44th rank in the International Shipment Category in 2019 to the 22nd rank in 2023. Additionally, the country’s ranking in the timeliness of shipment delivery improved from 52nd in 2018 to 35th in 2023.
3. Shipbuilding and Ship Recycling Initiatives
The MDF has played a pivotal role in supporting the shipbuilding industry. The government launched a ₹30,000 crore maritime development fund to bolster shipbuilding and aims to lead the world in ship recycling by 2030. Plans include establishing three mega shipbuilding clusters and extending financial assistance programs to support the industry’s growth.
4. Disaggregated Analysis by States
A state-wise analysis of cargo traffic reveals that Gujarat leads in cargo handling, followed by Maharashtra and Andhra Pradesh. This distribution underscores the strategic importance of these states in India’s maritime landscape.

Impact

1. Port Modernization and Development
Under the Sagarmala Programme, which aligns with the objectives of the MDF, significant strides have been made in port modernization. As of 2023, a total of 234 projects valued at ₹2.17 lakh crore were identified for implementation by 2035, with 94 projects worth ₹23,000 crore already completed. These initiatives have enhanced port capacity and operational efficiency, contributing to reduced turnaround times and improved cargo handling capabilities.
2. Enhancement of Port Connectivity
Improving connectivity between ports and hinterland regions is crucial for seamless logistics. The MDF has supported 279 projects under the port connectivity enhancement pillar, with an estimated investment of ₹3.77 lakh crore. By 2023, 83 projects worth ₹59,000 crore were completed, facilitating better integration of ports with rail and road networks, thereby reducing transportation costs and time.
3. Promotion of Port-Led Industrialization
The MDF has played a pivotal role in promoting port-led industrialization by supporting the development of industrial clusters and special economic zones (SEZs) near ports. Fourteen projects worth ₹1.20 lakh crore were identified, with nine projects worth ₹32,000 crore completed by 2023. These developments have attracted investments in manufacturing and processing industries, leveraging proximity to ports for efficient export-import operations.
4. Development of Coastal Communities
In addition to infrastructure, the MDF has contributed to the socio-economic development of coastal communities. Eighty-one projects focusing on skill development, fisheries, and tourism were identified, with several initiatives completed to enhance livelihoods and promote sustainable development in coastal regions.

Fig 3: MDF’s Key Goals Image Credit: The Economic Times

Concerns, Challenges and Areas for Improvement

• Funding Allocation and Utilization: While the government has committed to contributing 49% to the ₹250 billion ($3 billion) MDF, the mobilization of the remaining 51% from ports and private sectors has faced challenges, leading to delays in fund disbursement and project initiation.
• Project Implementation Delays: Several infrastructure projects under the MDF have experienced delays due to bureaucratic hurdles, land acquisition issues, and environmental clearances.
• Ship Ownership Decline: India’s global ranking in ship ownership declined from 17th to 19th, indicating that investments in port infrastructure have not fully translated into a stronger domestic shipping sector.
• Port Depth Limitations: A performance audit revealed that the depths available at major ports were insufficient to cater to all types of vessels, highlighting the need for effective dredging and infrastructure upgrades.
• Technological Advancements and Modernization: The Indian shipbuilding industry has faced challenges in adopting advanced technologies, impacting competitiveness.
• Environmental and Social Concerns: Rapid development of maritime infrastructure has raised environmental and social concerns, including habitat disruption and displacement of local communities.
• Global Economic Fluctuations: The maritime sector is susceptible to global economic downturns, affecting trade volumes and profitability.

Way Forward

The Maritime Development Fund (MDF) is a crucial initiative in shaping India’s maritime sector to align with the nation’s broader economic and infrastructural goals. To ensure that it achieves its objectives effectively, a strategic roadmap must focus on the following key areas:

• Enhancing Financial Mechanisms: Ensure efficient fund utilization, attract private investment through PPPs, and introduce maritime bonds.
• Modernizing Ports & Infrastructure: Improve cargo handling, develop deep-draft ports, and integrate smart logistics systems.
• Promoting Technological Innovation: Invest in R&D, encourage shipbuilding advancements, and adopt AI-driven port management.
• Sustainability Focus: Develop green ports, promote clean fuels like LNG and hydrogen, and strengthen marine waste management.
• Skill Development & Community Engagement: Train maritime professionals, support local economies, and ensure inclusive growth.
A strategic, collaborative approach will help MDF drive India’s maritime transformation, aligning with Maritime India Vision 2030 and Amrit Kaal Vision 2047 for sustainable economic growth.

Conclusion

The MDF has made significant strides in boosting India’s maritime capacity, but its long-term success depends on addressing challenges related to financing, execution, technology adoption, and sustainability. A coordinated effort between the government, private sector, and global stakeholders is essential to ensure that the policy contributes effectively to India’s vision of becoming a global maritime powerhouse.
By improving governance, ensuring efficient implementation, and focusing on sustainable growth, the Maritime Development Fund can play a transformative role in strengthening India’s position in the global shipping and trade ecosystem, thereby contributing to the nation’s economic progress under the Maritime India Vision 2030 and Amrit Kaal Vision 2047.

References

• Comptroller and Auditor General (CAG) of India. (2023). Performance Audit of Major Ports in India. Retrieved from https://cag.gov.in/en/audit-report/details/1476

• Economic Times. (2024). Rs 30,000 crore Maritime Development Fund to help shipbuilding. Retrieved from https://m.economictimes.com/industry/transportation/shipping-/-transport/rs-30000-crore-maritime-development-fund-to-help-shipbuilding/articleshow/115427347.cms

• Ministry of Ports, Shipping and Waterways (MoPSW), Government of India. (2024). Monthly Summary Report – April 2024. Retrieved from https://www.shipmin.gov.in/sites/default/files/MoPSW%20Monthly%20Summary%20April%2C%202024.pdf

• Ministry of Ports, Shipping and Waterways, Government of India (2025). SagarMala – Port Modernization & New Port Development, Government of India- March 2025. Retrieved from https://sagarmala.gov.in/project/port-modernization

• Ministry of Ports, Shipping and Waterways, Government of India (2025). SagarMala – Port Connectivity Enhancement, Government of India – March 2025. Retrieved from https://sagarmala.gov.in/project/port-connectivity

• Ministry of Ports, Shipping and Waterways, Government of India (2025). SagarMala – Introduction Ministry of Shipping, GOI, Government of India. Retrieved from https://sagarmala.gov.in/about-sagarmala/introduction

• Ministry of Ports, Shipping and Waterways, Government of India (2021). MARITIME INDIA VISION 2030 Report – February 2021. Retrieved from https://sagarmala.gov.in/sites/default/files/MIV%202030%20Report.pdf

• Ministry of Ports, Shipping and Waterways, Government of India (2025). LOGISTICS PERFORMANCE INDEX- February 2025. Retrieved from https://pib.gov.in/pib.gov.in/Pressreleaseshare.aspx?PRID=2101760

• Ministry of Ports, Shipping and Waterways, Government of India, PIB (2024). Sagarmanthan 2024: India’s Maritime Vision – 819 MT of cargo processed, with green and smart port initiatives at the forefront – November 2024. Retrieved from http://pib.gov.in/PressNoteDetails.aspx?NoteId=153432

• Press Information Bureau (PIB), Government of India. (2024). India’s ranking in Logistics Performance Index improves significantly. Retrieved from https://pib.gov.in/PressReleasePage.aspx?PRID=2089049

• Reuters. (2025). India to set up $3 billion Maritime Development Fund for the shipping industry. Retrieved from https://www.reuters.com/world/india/india-budget-india-set-up-3-bln-maritime-development-fund-shipping-industry-2025-02-01