Why is India setting up a ₹25,000-crore Maritime Development Fund?

The Maritime Development Fund (MDF), with a corpus of ₹25,000 crore, aims to ease financing constraints, promote domestic shipbuilding, enhance the competitiveness of Indian flagged vessels, and more broadly align the maritime sector with national goals such as Viksit Bharat 2047, blue-economy ambitions, improved trade logistics and strategic self‐reliance. The proposal is part of a larger package of reforms and incentives that include tax benefits, revised legislation and policies, infrastructure status for shipping and interest subvention schemes.

Mint takes a closer look at the MDF, why it has been proposed, how it will work, and what challenges it could face.

Why was the Maritime Development Fund set up?

The goal of the MDF is to provide long-term financing (via grants, equity, or debt) to the maritime sector for ship acquisition, domestic shipbuilding, ship repair, dredging, inland waterways and related infrastructure. The government will contribute up to 49% of the fund and the rest will come from ports, public sector enterprises, other government entities, financial institutions, private-sector players, global pension funds, venture capitalists, sovereign wealth funds and so on.

What are the specific policy objectives?

The main aim of MDF is to address the issue of capital constraints. The shipping and shipbuilding sectors are capital intensive. Indian ship-owners often face high borrowing costs, short loan tenures, strict collateral requirements and limited ability to mobilize finance. The MDF is meant to ease these problems by providing affordable, long-term financing.

The fund will extend financial support in multiple forms, including debt, equity, viability gap funding (VGF), and buyer credit. A sum of ₹5,000 crore from the proposed corpus will be set aside to provide 3% interest subvention for building shipyards and boosting domestic shipbuilding. India currently spends almost $75 billion a year to lease ships from abroad owing to a dearth of manufacturing in the country. A subvention is a type of financial aid in which the government pays the interest on a buyer’s loan for a period, effectively reducing their initial interest burden and compensating the lender for the loss of income.

The fund also aims to raise the share of Indian flagged tonnage to 20% by 2047, and enhance domestic value-addition.

The MDF is part of a slew of initiatives, 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. These are designed to create a more favourable policy and regulatory environment to help develop an ecosystem around shipping, improve the competitiveness of ports and shipping infrastructure, boost employment and support the blue economy.

When will it become operational and what are the time frames and targets?

The final draft of the MDF scheme is being finalized and it will be launched soon after receiving the Cabinet’s approval. It aims to generate investments worth ₹1.5 trillion for the shipping sector by 2030, and increase the share of Indian flagged ships in global cargo volume to 20% by 2047. It’s also expected to play a key role in making India a top-five shipbuilding and ship-owning nation, up from 16th at present.

How will the fund work?

After recent changes to its structure, the MDF will now have an effective corpus of ₹20,000 crore, with ₹5,000 from the original corpus of ₹25,000 set aside for an interest subvention scheme. Of this ₹20,000 crore, the government will contribute 49% or ₹9,800 crore. The remaining ₹10,200 crore will be mobilised from ports, public sector units, private financiers, private equity funds and pension and sovereign wealth funds.

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

What are the main risks and challenges to implementation?

One of the key challenges is mobilizing investments for the 51% non-government share. The government, however, is confident that mobilising investments for MDF won’t be a challenge. In an interview to Mint, shipping secretary T K Ramachandran said offers of support for the fund have come from funds stationed in the UK, Canada, Japan, Korea, Singapore and a few other European countries, with few investors offering the entire 51%.

Other challenges are ensuring low-cost, long-tenure financing so that Indian buyers prefer domestic yards, filling in capacity and productivity gaps at yards (technology, skilled labour), and ensuring timely, transparent governance of disbursements. If partner funding is slow or the terms are unfavourable, the MDF’s catalytic effect will be blunted. Industry observers have also flagged the need for rapid operational rules and stakeholder consultations.

How does the MDF compare with similar funds worldwide?

India’s MDF is modest in scale compared to state-led interventions in East Asia, but nonetheless significant for the Indian market.

Countries such as Singapore employ targeted cluster and grant funds to support skills, innovation and services rather than large ship-purchase financing. These funds are grant- or programme-driven and integrated into a services-heavy maritime strategy.

Japan and its public financial institutions have recently moved to provide large, targeted export/shipbuilding loans and guarantees to revive shipbuilding capacity. Similarly, South Korea has used aggressive state support and huge financing/guarantee packages to back its global shipyards.

India’s MDF meanwhile focuses primarily on catalysing long-term domestic financing and ship purchases from Indian yards. It is smaller and has a different instrument mix from the large state banking and guarantee programmes that underpin shipbuilding in Korea and Japan, and is more directly finance-oriented than Singapore’s cluster/grant approach.

What’s can it achieve?

The MDF is a policy lever designed to unlock long-term capital for India’s maritime ambitions. Its success will depend on speedy operational rules, credible non-government co-funding, affordable financing terms, and complementary industrial upgrades in shipyards and supply chains.

If properly implemented, it could help reduce India’s foreign dependence, increase the share of Indian vessels, modernise shipyards, create jobs, and enhance India’s competitiveness globally. Under the Vision 2047 plan, the government plans to attract ₹80 trillion of investments to the country’s maritime sector. These investments will only be possible with a robust financing ecosystem that MDF proposes to support.