India’s ₹70,000 Cr Shipbuilding Gamble: Can We Compete with China and South Korea?

On 22 June, India approved a ₹70,000 crore package to reinvigorate and develop its maritime ecosystem and shipbuilding sector. This funding is expected to move India from being at the margins of shipbuilding to being able to compete with large players, such as China and South Korea, in both the commercial and naval sectors. This will entail not just shipbuilding for Indian owners, but also infrastructure, attracting both private investment and foreign investors, increasing efficiencies in shipbuilding yards, increasing capacity, and reducing dependency on foreign shipbuilding.

India’s Current Position in Shipbuilding

India’s commercial shipbuilding market accounts for less than 1% of the global shipbuilding output, valued at approximately $1.1 billion in 2024. In comparison, China has between 60–75% of global newbuilding orders, by tonnage, while South Korea and Japan have most of the remainder. The global shipbuilding market is estimated at around $150 billion annually.

Capacity-wise, India’s shipyards have a capacity of only 0.072 million gross tonnes (GT) as of 2024. The government aims for a capacity of 0.33 million GT by 2030, representing an almost 360% increase. In comparison, the leading shipyards in China exceed an individual capacity of 10 million GT, and the leading shipyards in South Korea routinely have a capacity of 7–9 million GT each year.

This capacity gap directly contributes to India’s challenge in securing large commercial orders for container ships, Liquefied Natural Gas (LNG) carriers, Very Large Crude Carriers (VLCCs), and other vessels, which require high-volume, high-throughput yards. Potential of India’s ₹70,000 Cr Shipbuilding Scheme

Here is how the ₹70,000 crore shipbuilding gamble can position

India among the top players in the maritime industry.

• Cluster Development

India plans to establish 2–3 mega shipbuilding clusters under the Shipbuilding Development Scheme worth ₹19,989 crore. These clusters will include dry docks, fabrication units, logistics hubs, and testing facilities. China’s success is partly attributed to its integrated clusters in Jiangsu and Shandong, which offer economies of scale and rapid turnaround. India’s cluster strategy aims to replicate this model, reduce fragmentation, and attract global orders. The scheme has already received interest from shipbuilders in the US, UK, Greece, Japan, and South Korea.

• Subsidy Structure

India’s shipbuilding cost disadvantage ranges from 15% to 20% compared to foreign shipyards. To offset this, the new scheme offers graded subsidies: 15% for vessels under ₹100 crore, 20% for larger vessels, and 25% for green or hybrid ships. This financial assistance is designed to neutralise cost gaps and make domestic yards viable for commercial orders. By comparison, China and South Korea have long-standing subsidy regimes, including tax breaks, export incentives, and direct capital infusion. India’s scheme is its first comprehensive attempt to match such support mechanisms.

• Domestic Cargo Dependency

As of 2025, 95% of India’s cargo is transported on foreign ships. This reliance exposes India to freight volatility, geopolitical risks, and strategic vulnerabilities. In contrast, China and South Korea maintain robust domestic fleets that handle a significant portion of their trade. India’s shipbuilding initiative aims to reverse this trend by incentivising domestic fleet expansion and reducing dependence on foreign vessels. The plan includes infrastructure status for large ships built or registered in India, facilitating easier financing and insurance.

• Shipbreaking Credit Note

A unique feature of India’s plan is the “shipbreaking credit note,” which allows shipowners to claim 40% of a vessel’s scrap value when it is dismantled at an Indian yard toward the construction of a new vessel. This incentivises end-of-life recycling within India and promotes circularity in shipbuilding. Neither China nor South Korea offers a comparable credit-linked recycling incentive.

• Skill and Training Capabilities

The ₹70,000 crore package includes a dedicated skilling component aimed at upgrading technical capabilities across shipyards. India’s current workforce lacks specialised training in modular shipbuilding, digital design, and automation—areas where South Korea and China excel. The initiative will fund training centres, certification programmes, and industry-academia partnerships. This is critical for achieving quality parity and reducing rework rates, which currently exceed 20% in Indian yards compared to under 5% in Korean yards.

Strengths India Brings & Opportunities

Here are the key strengths and opportunities associated with shipbuilding in India:

• India uses many foreign ships for its import-export (EXIM) trade. Reports suggest that about 95% of EXIM cargo is carried on foreign vessels.

• India’s geography (coastline, ports) is favourable for building and operating shipping, ship-repair, shipbreaking, etc.

• Indian labour is cheaper compared to many peer shipbuilding countries. If combined with productivity improvements, this becomes a strength.

• Partnerships are already forming. One example: Cochin Shipyard Ltd has signed an MoU with South Korea’s HD KSOE to collaborate on large shipbuilding projects, green-field yards, etc.

• Shipbuilding is a labour-intensive industry and has numerous ancillary industries, including steel, engineering, electronics, and coatings. Growth here could help many sectors. The announced package is expected to drive significant employment growth.

Conclusion

Divided into three major schemes—₹24,736 crore for Shipbuilding Assistance, ₹25,000 crore for the Maritime Development Fund, and ₹20,000 crore for the Shipbuilding Development Scheme—the ₹70,000 crore package is expected to generate ₹4.5 lakh crore in investment and produce over 2,500 vessels. The Maritime Development Fund alone is projected to attract ₹1.45 lakh crore through private equity, sovereign funds, and pension funds.

From the traders’ and investors’ perspective, the scheme’s focus area is likely to benefit listed players such as Cochin Shipyard Ltd., Mazagon Dock, and ancillary firms in the steel, logistics, and engineering sectors. Traders should monitor capital expenditure (capex) announcements, foreign partnerships, and order inflows, especially from global clients attracted by subsidy-backed pricing.

However, investors should track execution risks, global freight trends, and geopolitical shifts that may impact demand.

Sources

Business Standard
CNBC TV18
The Times of India