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Budget 2025 proposes ₹25,000-crore Maritime Development Fund
- The fund will provide long-term and low-cost financial support for Indigenous shipbuilding and other blue water infrastructure projects, said finance minister Nirmala Sitharaman while presenting the Union Budget 2025-26.
Union finance minister Nirmala Sitharaman announced a ₹25,000-crore Martine Development Fund (MDF) in the Union Budget 2025-26.
The fund will provide long-term and low-cost financial support for Indigenous shipbuilding and other blue water infrastructure projects, said the finance minister while presenting her eighth consecutive budget in the Parliament on Saturday.
The government will contribute up to 49% to the fund and mobilize the rest from the private sector.
Mint first reported on 3 December 2024 about the Centre's plan to introduce the fund in Budget 2025.
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The Union ports, shipping, and waterways ministry will organize investor meets and roadshows in the US, Europe, and key Asian markets to attract pension and sovereign wealth funds to participate in the fund.
The fund aims to provide various forms of financial support, including debt, equity, viability gap funding (VGF), and buyer credit.
It will be similar to the country’s youngest development financial institution, the National Bank for Financing Infrastructure and Development (NaBFID), which was established in 2021, but it will focus exclusively on the maritime sector.
In fact, an earlier proposal was to set up the MDF as a dedicated vertical under the NaBFID, but given the specialized nature of funding and the need to provide large-scale funding to the sector, a dedicated fund or entity was considered the best option.
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The main focus of the new entity would be to promote the manufacturing of ships of all make and sizes and make the country a global hub for manufacturing.
India spends close to $75 billion annually on leasing ships from outside. Also, India owns just about 2% of the world’s total tonnage and has some 1,500 odd ships under its flag. With regard to shipbuilding, India currently has less than 1% share of the global market, which is dominated by China, South Korea and Japan.
The fund is expected to meet the long-term funding required for building shipbuilding infrastructure in the country. Cheaper funds available through the proposed new entity, supported by long-term funds available through multilateral agencies and global funds, would help establish a competitive industry in the country.
Apart from promoting domestic manufacturing, the MDF would also promote the development of cruise tourism in the country with the creation of requisite infrastructure and support activities like mechanization and capacity expansion of existing ports through public-private partnerships, dredging activities, development of inland waterway systems and coastal shipping.
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The initial plan for the fund is to have a corpus of ₹25,000 crore spread over a seven-year period.
It is proposed that the fund would explore giving out long-term loans extending beyond 10-year period to 15-25 years to enable the credit period to be in line with the life of a vessel that is around 30 years.
It would also consider tax sops that similar funds in countries such as Norway, Korea, Japan extend for ship leasing, to domestic ship lessors and ship management companies.
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First Published:1 Feb 2025, 12:30 PM IST
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