India plans 100 new ships to cut $75 billion foreign freight bill
The Ministry of Ports, Shipping and Waterways announced plans to add 100 new vessels to India's merchant fleet over the next five years, aiming to cut India's roughly $75 billion annual foreign freight bill.
The announcement was made at "Sagar Samvad," the first such dialogue convened by the National Shipping Board, by the Union Minister for Ports, Shipping and Waterways.
India currently operates around 1,600 merchant vessels with a combined gross tonnage of about 14 million tonnes, giving it only about 2% share of global fleet capacity, despite being a major importer of crude oil, gas, coal and urea shipped mostly on foreign-flagged vessels.
The plan forms part of a broader five-pillar roadmap to make Indian-flagged shipping cost-competitive, with the ambition of ranking among the world's top five ship-owning nations by 2047 (up from around 16th currently).
Cost Disadvantage of the Indian Flag and Tonnage Tax Scheme
Operating a vessel under the Indian flag currently costs 16-20% more than operating an equivalent vessel under a foreign flag, a gap attributed to import duties and maintenance taxes on ships, tax deducted at source on seafarers' wages, taxes on freight earnings, and higher domestic capital costs. To offset such disadvantages, India uses a "tonnage tax" regime for shipping companies.
Key Details
- Under the tonnage tax scheme (introduced via the Finance Act, 2004, as an amendment to the Income Tax Act, 1961), qualifying Indian shipping companies can opt to be taxed on a notional income based on ship tonnage rather than actual profits — a globally common practice to keep national-flag shipping competitive.
- Conditions typically include training requirements for Indian seafarers and reinvestment provisions for new vessel acquisition.
- On 19 September 2025, the government notified "infrastructure status" to Indian-flagged commercial vessels of Gross Tonnage (GT) 10,000 or above (1,500 GT or above if built in India), easing access to long-term, lower-cost infrastructure financing.
The 16-20% cost disadvantage cited alongside the 100-ship plan is precisely the gap that tonnage tax relief and infrastructure-status financing are designed to close, making Indian-flagged ownership commercially viable enough to support fleet expansion.
Cabotage Law and the Merchant Shipping Act
Cabotage refers to the right to operate cargo/passenger transport services within a country's territorial waters; historically, Indian cabotage law (under the Merchant Shipping Act, 1958) reserved coastal shipping for Indian-flagged vessels. Recent reforms have relaxed cabotage restrictions to boost coastal trade volumes while separately incentivising Indian flag registration.
Key Details
- The Merchant Shipping Act, 1958 was India's principal shipping legislation for over six decades; it has been substantively updated/replaced by the Merchant Shipping Act, 2025, aligning India's legal framework with global cabotage and safety norms.
- Cabotage relaxation has been extended to foreign vessels in specific segments (e.g., cabotage waived for foreign cruise vessels) even as the government simultaneously seeks to expand the Indian-flagged fleet — reflecting a dual strategy of easing bottlenecks while building domestic capacity.
- A related target under the government's re-flagging drive is to bring around 300 foreign-owned, Indian-linked vessels onto the Indian flag registry by 2030.
The 100-new-ship plan sits alongside this re-flagging and cabotage-reform push as complementary strategies — one adding new tonnage, the other converting existing foreign-flagged capacity — both aimed at raising India's share of global shipping tonnage.
Maritime India Vision 2030 and India's Global Fleet Ranking
Maritime India Vision (MIV) 2030, released by the Ministry of Ports, Shipping and Waterways, is India's blueprint for overhauling ports, shipping and inland waterways, targeting a top-10 global maritime nation ranking by 2030 and top-5 by 2047.
Key Details
- India's maritime sector currently contributes roughly 4% of GDP; MIV 2030 envisions raising this share while lifting India from its present global tonnage ranking (around 16th) toward the top 5 by 2047.
- Key MIV 2030 elements include port capacity augmentation, coastal shipping and inland waterways promotion, shipbuilding and repair cluster development, and financial-assistance policies for domestic shipbuilding.
- The 100-ship, five-year fleet-addition plan announced at Sagar Samvad operationalises MIV 2030's fleet-expansion pillar.
The freight-bill reduction goal announced through the 100-ship plan is a direct, near-term instrument for achieving MIV 2030's longer-horizon target of a top-tier global maritime ranking for India.
- India's annual foreign freight bill is approximately $75 billion, driven mainly by crude oil, gas, coal and urea shipped on foreign-flagged vessels.
- India's current merchant fleet: around 1,600 vessels, ~14 million gross tonnes, roughly 2% of global fleet capacity.
- Operating under the Indian flag is 16-20% costlier than under a foreign flag, due to import/maintenance taxes, seafarer wage TDS, freight tax, and higher domestic capital costs.
- Target: top-10 global maritime nation by 2030, top-5 by 2047 (India is currently ranked around 16th); separate target to re-flag ~300 foreign-owned vessels under the Indian flag by 2030.