The policy is aimed at increasing the market share of Indian-owned ships in the global fleet.
The Union Cabinet on July 14 approved a scheme for the promotion of Indian-flagged merchant ships by providing subsidy support to Indian shipping companies.
The scheme was first announced by Finance Minister Nirmala Sitharaman in the Budget for 2021-22, and as part of the scheme, a subsidy of more than Rs 1,600 crore will be provided to shipping companies that participate in global tenders floated by Indian ministries and central public-sector enterprises.
The scheme is aimed at encouraging ship owners to acquire vessels to participate in these tenders, which will also help increase jobs in the sector, the government said in a press release.
As part of the scheme, a ship that is flagged in India after February 1, 2021, and is aged less than 10 years will be provided support at 15 percent of the quote offered by the lowest bid by a foreign shipping company, the government said.
Similarly, for a ship that is flagged in India and is between 10 to 20 years old at the time of flagging, the subsidy support would be extended at the rate of 10 percent.
The rate at which the above subsidy support is extended would be reduced by 1 percent every year, till it falls to 10 percent and 5 percent, respectively, for the two categories of ships mentioned above.
The government has already given Indian fleet owners the right of first refusal by matching the lowest rate offered by a foreign flagship in global tenders that have been released by state-owned companies.
The new subsidy along with the right to first refusal is expected to promote the use of Indian shipping vessels as domestic fleet owners have to come within 20 percent of the lowest foreign bidder to get the right of first refusal.
The policy is aimed at increasing the market share of Indian-owned ships in the global fleet. Currently, they are estimated to carry only about 8 percent of India's export-import trade.
The policy is also expected to attract foreign players to set up manufacturing bases in India.