India to allocate ₹9,800 crore to Maritime Development Fund in budget push

The fund aims to lower capital costs and attract long-term, low-cost investment into shipyards, coastal infrastructure, and inland waterways. The Maritime Development Fund aims to mobilise investment worth ₹1.5 trillion in the shipping sector by 2030, which will play a key role in making India one of the top five shipbuilding and ship-owning nations in the world by 2047, from its current position as the sixteenth.

The ₹25,000 crore MDF was announced by finance minister Nirmala Sitharaman while presenting the budget proposals for 2025-26. The cabinet approved it in September, along with a ₹70,000 crore package for the shipbuilding and maritime sectors. The fund will take off now, with funds actually allocated through the budget.

Queries mailed to the ministries of finance and ports, shipping and waterways (MoPSW) remained unanswered till press time.

“The long-term financing through MDF will allow Indian shipowners access to long-term capital to purchase ships, modernise fleets, and build port-ready logistics infrastructure," said Pushpank Kaushik, chief executive officer (CEO) and head of business development (Subcontinent, Middle East and Southeast Asia) at Jassper Shipping, a Hyderabad-based global shipping and logistics firm. This is especially important for Indian shipping companies, which often struggle with higher financing costs than their global peers.

Kaushik was clear that MDF had the potential to catalyse investments in green shipping, coastal and inland waterways, and technology-led efficiency across ports and last-mile connectivity. While the fund would support India’s ambition to emerge as a regional maritime hub, it would also help align growth with national priorities, build future-ready fleets, and create a more self-reliant maritime ecosystem for the next decade, he added.

Structural changes

With recent changes to MDF's structure, the fund will now have a corpus of ₹20,000 crore (Maritime Investment Fund or MIF), while an additional ₹5,000 crore will be used to subsidise the interest rates. Of the ₹20,000 crore MIF, the government’s share will be 49% or ₹9,800 crore. The balance will be mobilised from ports, public sector undertakings (PSUs), private financiers, private equity funds and pension and sovereign wealth funds.

MDF will offer financing instruments, including concessional debt, equity participation, guarantees, viability support, ship acquisition, yard modernisation and cluster projects. It will be linked to other fiscal incentives, such as customs duty waivers and tonnage tax/tax incentives for inland vessels, to make domestic builds commercially viable. Eligibility, tenor, interest concessions and governance will be set out in scheme guidelines once the fund is formalised.

From a policy perspective, the indication that the government may fully provide its share of support to MDF in fiscal year 2027 (FY27) reflects an intent to move from framework creation to actual execution, said Bhavik Vora, partner and Transport & Logistics Industry leader, Grant Thornton Bharat.

Vora said that though MDF has been envisaged with a larger overall corpus, a ₹10,000 crore budgetary allocation can be seen as a practical first step to operationalise the fund and demonstrate fiscal commitment. “Early government capital is critical to establish credibility, de-risk projects, and crowd in participation from ports, financial institutions, and private investors."

Once active, the initial funding will address liquidity hurdles for shipbuilding and port projects, he said, adding that, beyond the capital, it serves as a crucial signal of government commitment, building the necessary momentum to attract private and institutional investors over the long term. “Improved availability of long-term capital could also support consolidation in the sector, where M&A activity has remained limited due to capital intensity and balance-sheet constraints," Vora added.

Building in India, saving forex

MoPSW has designated Sagarmala Finance Corporation Ltd (SMFCL), the country’s first state-owned NBFC for the maritime sector, as the nodal agency for the setting-up and operational coordination for MDF that has two components—the ₹20,000 crore Maritime Investment Fund (MIF) and ₹5,000 crore Interest Incentivisation Fund (IIF).

SMFCL will hold and manage the Union government’s contribution to the alternate investment fund (AIF) established for MIF against the government’s contribution. Further, SMFCL is the nodal agency for channelling the ₹5,000 crore IIF, which will also expand its funding scope in the maritime sector.

Once this gets operational, this will support investment into infrastructure for shipbuilding, shipbuilding clusters, ship repair, funding for ship ownership to boost Indian tonnage for export and import, as well as coastal and inland shipping, and port expansion, Nilachal Mishra, partner and head of the government and public Services, KPMG in India, said. “MDF, in conjunction with other support measures, is expected to boost the maritime industry and will help India become a major shipbuilding and maritime nation, reaching the top 5 by 2047."

MDF has been developed through consultations with over 100 stakeholders, including global investors, shipowners, insurance companies and financial institutions. The shipping and shipbuilding sectors are capital-intensive, with Indian ship-owners often facing high borrowing costs, short loan tenures, strict collateral requirements, and limited ability to mobilise finance. The fund is meant to ease that by providing affordable and long-term financing.

Interest subvention

The financial support via MDF would take multiple forms, such as debt, equity, viability gap funding (VGF), and buyer credit. A sum of ₹5,000 crore from the proposed MDF corpus has also been set aside to provide a 3% interest subvention to projects that build shipyards and boost domestic shipbuilding, thereby reducing the country’s dependence on ship leases from abroad while also becoming a major global ship supplier. Right now, the country spends close to $75 billion annually on leasing ships from abroad due to a lack of domestic manufacturing.

MDF is also aimed at raising the share of Indian-flagged tonnage to 20% by 2047 and increasing domestic value addition.

Beyond finance, the announcement on MDF is coupled with other measures, including a revamp of the shipbuilding financial assistance policy (SBFAP 2.0), a credit note scheme for shipbreaking, infrastructure status for large vessels, tonnage tax benefits extended to inland vessels, and customs duty exemptions, among others.