Large Ships Granted Infrastructure Status

Will Infrastructure Status for Large Ships Bridge India’s Shipping Deficit?

On September 22, 2025, the Ministry of Finance accorded infrastructure status to large ships, finally fulfilling a persistent demand by the shipping industry. The decision comes at a time when Indian-flagged vessels account for only about 30% of the country’s seaborne trade, leaving 70% of cargo dependent on foreign shipping—a vulnerability that costs India nearly $75 billion annually in freight bills. The move aims to address structural inefficiencies in the sector, but whether it will deliver transformative outcomes remains fraught with uncertainty.

What Does "Infrastructure Status" Actually Change?

The classification is not merely symbolic. Under the harmonized master list of infrastructure sectors, large ships—those exceeding 10,000 gross tonnage or Indian-built ships above 1,500 gross tonnage—will now reap the critical benefits of infrastructure recognition:

• Easier lending norms: Loans for such ships can now be taken at higher limits and reduced interest rates under priority sector lending.
• External commercial borrowing: Access to foreign currency-denominated loans will become viable, offering shipowners cheaper credit options.
• Viability Gap Funding (VGF): Government support for private investments in unviable but essential projects will become available.
• Tax incentives: Significant fiscal relaxations will apply, improving overall profitability margins for Indian vessels.

This ties directly into the targets set by tools like the Maritime India Vision (MIV) 2030, which eyes Indian tonnage growth to 23 million gross tons. However, the gap between policy intentions and structural capacity continues to undermine these ambitions.

Debilitating Gaps in India’s Shipping Industry

India’s coastline stretches for 11,099 km, serviced by 13 major ports and over 200 minor ports. Despite handling 95% of trade by volume, India contributes a mere 1.3% of global fleet tonnage. Compare this to China, which controls over 15% of the global commercial fleet. The numbers starkly highlight India’s inability to leverage its status as a major maritime economy.

The reasons are multifaceted. First, shipping infrastructure has long struggled with inefficiencies at ports. While Sagarmala has cut average turnaround time from 4.6 days in 2016 to 2.3 days in 2024, this still falls short of the Singapore and Shanghai benchmarks of less than 1 day. Second, shipbuilding remains a heavily lopsided sector. Indian yards grapple with competitive pricing and scale—a crippling gap when juxtaposed against cost-efficient East Asian counterparts.

Even more glaring is India’s overwhelming reliance on foreign ships to carry its trade. When the bulk of India’s maritime activity relies on non-flagged vessels, the strategic and economic utility of the “infrastructure” tag for domestic ships feels comparable to treating a symptom rather than the root pathology.

The Question of Green Shipping and Global Comparisons

India’s recent participation in the IMO Green Voyage 2050 programme signals a pivot toward sustainable maritime practices, and the infrastructure status could facilitate compliance by easing financing for modern, fuel-efficient vessels. However, comparisons to Norway, which leads in green shipping, reveal a stark contrast. Norway’s Green Shipping Programme collaborates directly with private firms to subsidize ships using alternative fuels, offering grants covering up to 50% of additional investment costs. India’s approach, which remains confined to fiscal measures like tax breaks, lacks the same proactive financial handholding.

The irony here is that India sells itself as a low-carbon champion while failing to incentivize the transition in its domestic fleet. Without a green funding apparatus akin to Norway’s, the claim of delivering sustainable shipping leadership could remain hollow.

Structural Constraints Beyond Policy Announcements

The government’s optimism surrounding the policy appears blind to fundamental constraints. Shipowners, for instance, won’t suddenly invest in domestic tonnage when global economic conditions favor flagging ships elsewhere to save on insurance or compliance. The inclusion of “large ships” in the infrastructure list also does nothing to address the monopolistic control foreign lines hold over specific trade routes. A significant portion of container freight remains locked into price practices set by carriers based in markets like Europe and East Asia—not Indian ports.

Likewise, there are glaring disconnects in inter-ministerial coordination. While the Ministry of Finance now recognizes ships as infrastructure, the Ministry of Ports, Shipping and Waterways has faced criticism for its snail-paced implementation of Sagarmala’s “port-linked-industrialization” component. Land acquisition hurdles and stakeholder politics have restricted industrialized clusters around India’s ports, a crucial factor for shipping demand to grow domestically.

What Would Success Actually Look Like?

Policy coherence will remain key to translating this infrastructure status into visible gains. Success could be measured by specific metrics:

• Increase in share of India’s flagged ships, targeting at least 50% of seaborne cargo by 2030.
• Shipping logistics costs as a percentage of GDP dropping below the current 14%, closer to OECD averages of 8–10%.
• Completion of Sagarmala-linked industrial hubs to boost shipping demand focused on exports.
• Doubling of shipbuilding orders in Indian yards by 2027, with robust financing avenues.

However, much depends on execution. The Ministry of Finance’s role in facilitating loans under infrastructure lending must align with port modernization efforts under Sagarmala and climate goals under the IMO programmes. These are fragmented pieces that require cooperative orchestration.

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