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To improve India’s presence in the global shipbuilding market, Union Budget 2025-26 offers a slew of incentives, which includes facilitating shipbuilding clusters to increase the range, categories and capacity of ships. “This will include additional infrastructure facilities, skilling and technology to develop the entire ecosystem,” said Finance Minister Nirmala Sitharaman, as she presented her eighth consecutive Budget on February 1, 2025.
To address cost disadvantages, Sitharaman said the Shipbuilding Financial Assistance Policy will be revamped. Under the policy, the Union government since 2016 has been providing financial assistance to the shipbuilding industry to enable its revival and improve its competitiveness in the global shipbuilding market.
According to Sitharaman, the policy revamp will include “Credit Notes” for shipbreaking in Indian yards to promote the circular economy. (Under the proposed ship recycling credit note scheme, a credit note equivalent to 40 per cent of the scrap value of a ship being dismantled in an Indian ship breaking yard would be given to a fleet owner—both Indian and global—which can then be reimbursed against the cost of construction of a new vessel at an Indian yard.) “Considering that shipbuilding has a long gestation period, I propose to continue the exemption of BCD [basic custom duty] on raw materials, components, consumables or parts for the manufacture of ships for another ten years. I also propose the same dispensation for ship breaking to make it more competitive,” she said during her Union Budget 2025-26 speech.
For this year, the budget allocation for ship building and research and development has been increased to Rs 365 crore in 2025-26 from Rs 99.12 crore in 2023-24.
Nivit Yadav, programme director at the Centre for Science and Environment (CSE), has welcomed the government’s effort to promote ship-breaking industry in India as recycling ships provides a large amount of steel and nonferrous metal resources, thus reducing the demand for mining. Yadav, however, cautions about the highly hazardous nature of the shipbreaking industry. Many harmful wastes are produced during shipbreaking activities. For instance, workers are exposed to significant amounts of toxic substances like asbestos and heavy metals during ship-cutting process. Large amounts of oil and wastewater also leak during emptying and cleaning oil tanks and contaminate coastal areas. Though India has laws and regulations in place to protect the environment and ensure safe working conditions for shipbreaking workers, the methods used by the industry are still polluting and inefficient.
To promote an efficient circular economy, Yadav says, the government should integrate the ship-breaking and recycling regime with the scrappage policy so that the ship scrap can be used in the steel industries. This will not only result in the better utilisation of the scrap but can also pave the way for decarbonisation of the steel industry in India.