India’s Shipbuilding and Ship Recycling Sector: Policy Reforms, Growth Prospects, Key Challenges and the Road to a Global Maritime Hub

Recent Developments:

• The United Nations Conference on Trade and Development (UNCTAD) reported that India became the world's largest ship recycling nation in 2025, increasing its global share from 30.1% in 2024 to 35.4% in 2025.
• India recycled 2.99 million Gross Tonnage (GT) of ships during 2025, recording nearly 60% year-on-year growth.
• India achieved a key target of the Maritime India Vision (MIV) 2030 ahead of schedule, strengthening its ambition to emerge among the top 10 global shipbuilding nations by 2030 and the top five by 2047.
• The April 2026 state visit of South Korean President Lee Jae Myung further strengthened India–South Korea maritime cooperation through technology transfer, investment and shipbuilding collaboration.
• The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (HKC) entered into force globally in June 2025, providing a uniform international framework for environmentally sound ship recycling and benefiting compliant Indian ship recycling yards.

Overview:

• India is leveraging its global leadership in ship recycling to develop a competitive domestic shipbuilding ecosystem under Maritime India Vision 2030 and Maritime Amrit Kaal Vision 2047.
• The strategy combines policy reforms, financial incentives, infrastructure development, green technologies and international partnerships to expand indigenous manufacturing, strengthen maritime security, generate employment and integrate India into global maritime value chains.
• The long-term objective is to transform India from a major ship recycler into a globally competitive shipbuilding nation.

Current Status of India's Ship Recycling Sector:

• India has emerged as the world's leading ship recycling country, accounting for over one-third of global ship recycling activity.
• India recycled 2.99 million GT of ships during 2025, reflecting significant growth in recycling capacity and international confidence.
• The achievement fulfills a major milestone under Maritime India Vision 2030 well ahead of schedule.
• The Alang Ship Recycling Yard in Gujarat remains the world's largest ship recycling cluster and is undergoing expansion to nearly 9 million Light Displacement Tonnage (LDT).
• India is also pursuing inclusion of Alang facilities in the European Union's approved list of ship recycling yards, which would improve access to European vessels.

Policy Initiatives Supporting Ship Recycling and Shipbuilding:

Recycling of Ships Act, 2019:

• The Act aligns India's ship recycling industry with the Hong Kong Convention, ensuring safe, environmentally sound and internationally accepted recycling practices.
• Government financial assistance has modernized ship recycling yards, enabling more than 115 facilities to comply with international standards.

Ship-breaking Credit Note Scheme:

• Ship owners receive a credit equivalent to 40% of the scrap value of recycled ships.
• The credit can be used for constructing new ships in Indian shipyards, thereby creating a direct linkage between recycling and domestic shipbuilding.

Shipbuilding Financial Assistance Scheme (SBFAS):

• The scheme provides financial assistance ranging from 15% to 25% of vessel cost, reducing India's cost disadvantage against subsidized foreign competitors.
• The scheme supports the establishment of the National Shipbuilding Mission and is expected to facilitate shipbuilding projects worth approximately ₹96,000 crore.
• The scheme will remain operational until 31 March 2036, with an in-principle extension up to 2047.

Shipbuilding Development Scheme (SbDS):

• The scheme promotes greenfield shipbuilding clusters, modernization of existing shipyards and establishment of the India Ship Technology Centre at the Indian Maritime University.
• It provides 100% capital support for common infrastructure in new clusters and 25% capital assistance for expansion of existing facilities.
• A Credit Risk Coverage Framework has also been introduced to improve access to project financing.

Maritime Development Fund (MDF):

• A dedicated ₹25,000 crore fund has been created to provide long-term and affordable financing for maritime infrastructure.
• The Maritime Investment Fund (MIF) will function as a ₹20,000 crore equity-based investment vehicle, while the Interest Incentivization Fund (IIF) will provide ₹5,000 crore to reduce borrowing costs.

Sagarmala Finance Corporation Limited (SMFCL):

• India's first dedicated Non-Banking Financial Company (NBFC) for financing maritime and shipbuilding projects.
• The institution aims to improve financial accessibility for shipyards and maritime infrastructure developers.

Green Tug Transition Programme (GTTP) and Harit Nauka Guidelines:

• The programmes encourage adoption of cleaner marine fuels, including Liquefied Natural Gas (LNG), battery-electric propulsion, hydrogen and methanol.
• The initiatives are expected to position India as an early leader in green shipbuilding technologies.

India–South Korea Maritime Cooperation:

• India and South Korea are collaborating under the VOYAGES framework, focusing on development of India's first mega greenfield shipyard at Thoothukudi.
• The proposed shipyard will have an annual capacity of approximately 2.5 million GT and is expected to generate nearly 15,000 direct jobs.
• South Korean companies are facilitating technology transfer in advanced ship design, automation, green propulsion systems and construction of high-value vessels.
• The Korea Marine Equipment Association (KOMEA) has established operations in Mumbai to promote localization of marine equipment manufacturing.
• Collaboration in defence shipbuilding will strengthen indigenous naval manufacturing under the Make in India initiative.
• Academic partnerships involving IMU, KMOU, KOICA and the Ministry of Ports, Shipping and Waterways aim to strengthen research, skill development and marine engineering capabilities.

Major Challenges in India's Shipbuilding Sector:

• India currently possesses commercial shipbuilding capacity of only around 0.072 million GT, accounting for less than 1% of global shipbuilding output.
• China, South Korea and Japan collectively account for nearly 95% of global shipbuilding orders, making international competition extremely intense.
• Indian shipbuilders face significantly higher borrowing costs, with domestic interest rates remaining substantially above those of major competing countries.
• The absence of sovereign refund guarantees reduces the competitiveness of Indian shipyards in international bidding.
• India remains heavily dependent on imports for critical marine equipment, including propulsion systems, shipbuilding-grade steel and navigation technologies.
• Limited availability of mega dry docks restricts India's ability to construct ultra-large commercial vessels, preventing participation in high-value shipping segments.
• Domestic shipping companies frequently purchase second-hand foreign vessels, reducing demand for newly built Indian ships.
• India holds less than 1% of the global Maintenance, Repair and Overhaul (MRO) market, with many Indian vessels relying on foreign repair facilities.
• A shortage of specialized marine engineers, naval architects and green propulsion experts limits rapid technological advancement.
• Land acquisition challenges, regulatory delays and procedural complexities continue to affect investment and project implementation.

Measures Needed to Strengthen India's Shipbuilding Sector:

• India should adopt the South Korean "Ulsan Model", integrating shipyards, ancillary industries, logistics infrastructure and training institutions within dedicated industrial clusters.
• Recovered steel and materials from ship recycling should be integrated into domestic shipbuilding supply chains, promoting a circular maritime economy.
• Foreign collaborations should emphasize mandatory technology transfer, domestic value addition and workforce development, ensuring long-term technological self-reliance.
• Localization of marine equipment manufacturing should be accelerated to reduce import dependence and improve supply-chain resilience.
• India should capitalize on emerging green shipping technologies, including hydrogen, methanol and ammonia-based propulsion systems, in line with International Maritime Organization (IMO) decarbonization targets.
• The Right of First Refusal (RoFR) policy should be implemented effectively to ensure preference for Indian-built and Indian-flagged vessels in government and PSU procurement.
• Stable financing mechanisms, faster regulatory approvals and stronger public-private partnerships are essential for sustained sectoral growth.

Significance for India:

• Shipbuilding acts as the "mother industry" of heavy engineering, generating strong multiplier effects across steel, electronics, machinery, logistics and defence manufacturing.
• Expansion of the sector can generate up to 30 lakh employment opportunities across skilled, semi-skilled and ancillary industries.
• A robust domestic shipbuilding industry enhances maritime security, strategic autonomy and supply chain resilience.
• The sector supports the objectives of Aatmanirbhar Bharat, Blue Economy, Make in India and the Maritime India Vision.

Way Forward:

• India should simultaneously strengthen ship recycling, shipbuilding, ship repair and maritime financing to develop an integrated maritime industrial ecosystem.
• Policy certainty, competitive financing, technological modernization and global partnerships will remain essential for achieving the targets under Maritime India Vision 2030 and Maritime Amrit Kaal Vision 2047.
• A combination of indigenous capability development and strategic international collaboration can position India among the world's leading maritime manufacturing nations.

Value Addition for UPSC:

Important Terms:

• Gross Tonnage (GT): International measure representing the overall internal volume of a ship.
• Light Displacement Tonnage (LDT): Weight of a ship excluding cargo, fuel, passengers and consumables; widely used in ship recycling.
• Hong Kong Convention (HKC): International convention establishing safe and environmentally sound standards for ship recycling.
• Blue Economy: Sustainable use of ocean resources for economic growth, livelihoods and ecosystem conservation.
• Right of First Refusal (RoFR): A policy granting Indian-built or Indian-flagged vessels preferential opportunity before foreign vessels in specified procurement.

UPSC Prelims Facts:

• India aims to become one of the top 10 global shipbuilding nations by 2030 and among the top five by 2047.
• Alang (Gujarat) is the world's largest ship recycling yard.
• The Recycling of Ships Act, 2019 aligns India with the Hong Kong Convention.
• The International Maritime Organization (IMO) is the United Nations specialized agency responsible for global shipping safety, security and prevention of marine pollution.

Maritime India Vision 2030 serves as India's long-term roadmap for developing ports, shipping, shipbuilding and maritime logistics.