India is planning to set up a new shipping company to expand its fleet by at least 1,000 ships in the next decade. This move is part of the country’s efforts to capture a bigger share of revenue from its surging trade as Asia’s third-largest economy seeks to become a world-class manufacturer.
The yet-to-be-named firm will be jointly owned by state-run companies in the oil, gas and fertilizer industries, which would provide it with business, along with the state-run Shipping Corp of India and foreign companies. The aim is to reduce freight outgoings to foreign firms by at least a third by 2047.
According to government officials, current estimates show freight costs will rise to $400 billion as India boosts its exports and imports by 2047. In the financial year 2019/20, Indian companies paid freight costs of $85 billion, with $75 billion paid for the use of foreign vessels.
The move comes as India’s shipping fleet has not kept pace with its surge in trade, including imports of energy and exports of refined oil products. India currently has a fleet of about 1,500 large vessels, including tankers, gas carriers, container ships and dry bulk carriers.
The new firm will be based at GIFT IFSC, a financial center in Prime Minister Narendra Modi’s western home state of Gujarat, and will draw seed capital from a maritime development fund of roughly 300 billion rupees ($3.6 billion) the government plans to set up in a tie-up with major port authorities.
To secure low-cost, long-term loans for financing ship-building, the government wants state-run companies to sign 15-year charter deals with the new firm, which would also allow them to become stakeholders in the new ship-owning and leasing entity.