MC Exclusive: Centre may revive PLI scheme for manufacture of shipping containers in budget ‘24

In the next few years global demand is expected to see a boost mainly driven by replacement needs.

The Ministry of Ports, Shipping, and Waterways has proposed a revised production-linked incentive (PLI) scheme to boost the manufacturing of shipping-grade containers, after a previous plan for the same was shelved post cabinet discussions, government officials have told Moneycontrol.

"The MoPSW has reduced the length  and quantum of the PLI scheme to manufacture shipping-grade containers, and has requested the finance ministry to consider the new scheme in the budget for 2024-25," a senior government official said.

The quantum of the new PLI scheme has been halved to Rs 5,000 crore from Rs 11,000 crore earlier, and the tenure of the scheme has also been cut to three years from nine years earlier, government officials involved in drawing up the new proposal have said.

A Ministry of Ports official said that in the revised proposal, the ministry has incorporated feedback and addressed issues flagged by the Cabinet Committee on Economic Affairs (CCEA). The government is also believed to have set up a high-level committee to promote domestic shipping container manufacturing with the aim of boosting production of export-grade containers by 2026.

"The economies of Europe and America are reporting growth and exports from India have picked up in the first quarter of 2024-25. Global trade is also projected to grow in the current financial year and pick up going forward, which is likely to lead to higher demand for shipping containers," the official said.

With the Chinese market slowing down, India has an opportunity to boost domestic container manufacturing through the PLI scheme. As Chinese  container manufacturing companies seek bailouts or mull closure, it is likely that new capacity would be needed by the end of next year, an opportunity that Indian manufacturers can tap.

"Statistics on the production of containers show that a few years ago, more than 6.6 million dry freight containers were produced in China, which will drop to 3.45 million TEUs (20-foot equivalent unit) in two years," one of the officials said, adding that in the next few years global demand is expected to grow, driven mainly by replacement needs.

Queries emailed to the Ministry of Ports and the Ministry of Commerce had not elicited an answer at the time of publishing this article.

Past PLI attempts

Last year, the shipping ministry had suggested distributing Rs 11,000 crore  for the scheme, over a nine-year period, to boost the manufacture of containers.

However, the scheme was shelved after the CCEA had highlighted three major issues: an oversupply of containers in the shipping industry, falling global exports, and the slow recovery of global supply chains, which may inhibit the demand for shipping containers over the next two years.

The scheme was envisioned to push India as a shipping container manufacturing hub, competing with the likes of China, and garnering at least 10 percent demand from global liners by 2030.

Feasibility studies for the PLI scheme were carried out by the Kolkata campus of the Indian Institute of Foreign Trade.

As part of the PLI, multiple schemes were proposed. One was based on the differential price between Indian and international manufacturers, and another on incremental production.

According to the earlier scheme, there was a huge shortage of shipping-grade containers globally during Covid. This had resulted in shipping lines substantially hiking container freight rates across the world, which badly impacted India’s export-import supply chain.

The earlier scheme also mentioned that international container manufacturing is dominated by China and nearly 90 percent of global demand is met by that country.

China’s dominance

India also depends on China for shipping containers, with the Container Corporation of India (CONCOR) importing its entire 37,000-container stockpile from China.

CONCOR also has a requirement of around 50,000 containers in the next three years.

To increase domestic container manufacturing, the government has identified Bhavnagar in Gujarat as a hub, and a few companies have already started operations there.

According to the Centre, India requires 3,50,000 containers every year and demand will only increase, with the government having set an ambitious export target of $2 trillion by 2030.

Containers handled by all ports grew 13.04 percent, from 16.50 million TEU  in 2020-21, to 18.66 million TEU in 2021-22. The total traffic handled in the domestic segment stood at 8,03,899 TEU in 2021-22, as against 6,07,536 TEU in 2020-21, an increase of 32.32 percent.

Domestic containerised loading of Indian Railways increased by 40.03 percent to 17.35 mt in 2021-22, from 12.39 million tonnes in 2020-21.