POLICY CHANGES TO EXPAND INDIGENOUS FLEET

1. At a Glance

• A reform package by the Ministry of Ports, Shipping and Waterways (MoPSW) to cut India's dependence on foreign shipping (which carries the bulk of India's EXIM trade) and grow the Indian-flagged merchant fleet and domestic shipbuilding base [1].
• Combines a new statutory base (Merchant Shipping Act, 2025), preferential procurement (Right of First Refusal — RoFR), infrastructure-asset classification for large vessels, and four financing instruments (SBFAS, Ship Breaking Credit Note, Shipbuilding Development Scheme, Maritime Development Fund) [1][2][3].
• Examinable as a GS-III maritime/infrastructure topic and a GS-II legislation/governance topic.

2. Why in the News

• PIB release dated 12 Feb 2026 by MoPSW consolidating the policy basket to expand the indigenous fleet [1].
• Parliament passed the Merchant Shipping Bill, 2025 (Rajya Sabha adoption notified by PIB) replacing the Merchant Shipping Act, 1958 [3].
• Guidelines notified for shipbuilding assistance and development schemes with a ₹44,700 crore outlay [2].

3. Background & Evolution

• Merchant Shipping Act, 1958 governed Indian shipping for decades; modernisation pending for years [3].
• 2015–16: First Shipbuilding Financial Assistance Policy (SBFAP) for contracts signed 2016–2026, giving Indian yards a level field vs foreign yards [2].
• 2021: Cabinet scheme for subsidy support to Indian shipping companies in global tenders by Ministries/CPSEs to promote Indian flagging [3].
• 2023: RoFR hierarchy revised to favour Indian-built, Indian-flagged, Indian-owned vessels [3].
• Union Budget 2025-26: Announced Maritime Development Fund, revival of SBFAS, shipbuilding clusters, and inclusion of large ships as infrastructure [2].
• 2025: Merchant Shipping Act, 2025 and Coastal Shipping Act, 2025 enacted [3].

4. Core Static Facts

• Implementing ministry: Ministry of Ports, Shipping and Waterways (MoPSW) [1].
• Enabling statute: Merchant Shipping Act, 2025 — modernises 1958 framework, eases ship registration, promotes Indian flagging [1][3].
• Right of First Refusal (RoFR): Indian-flagged vessels (preference hierarchy favouring Indian-built/owned/flagged) in tenders by govt departments/CPSEs [1][3].
• Infrastructure classification: Shipping vessels above a threshold size classified as infrastructure assets → access to harmonised infrastructure financing [1].
• Shipbuilding Financial Assistance Scheme (SBFAS): Extended till 31 March 2036, corpus ₹24,736 crore; expected to support shipbuilding projects worth ~₹96,000 crore over a decade [2].
• Maritime Development Fund (MDF): Corpus ₹25,000 crore = Maritime Investment Fund ₹20,000 cr (49% GoI participation) + Interest Incentivisation Fund ₹5,000 cr; target of mobilising up to ₹1.5 lakh crore investment by 2030 [2].
• Total notified outlay: ₹44,700 crore for shipbuilding assistance + development schemes [2].
• Other instruments: Ship Breaking Credit Note and Shipbuilding Development Scheme (financing instruments for the shipbuilding/recycling value chain) [1].

5. Multi-Dimensional Analysis

• Economic: Reduces foreign-exchange outgo on freight; SBFAS expected to catalyse ₹96,000 cr of orders; MDF targets ₹1.5 lakh cr by 2030 — employment across yards, ancillaries, ports [2].
• Strategic: Indigenous fleet = sealift capability, energy-security cushion (oil/LNG carriers), reduced reliance on foreign-flag tonnage carrying ~95% of India's EXIM trade [1].
• Legal / Constitutional: Merchant Shipping Act, 2025 replaces 1958 Act; ship registration, flagging, seafarer welfare, maritime liability codified; entry under Union List (Entry 25 — Maritime shipping & navigation) [1][3].
• Administrative: RoFR is operationalised through tender guidelines by MoPSW; infrastructure classification is via Department of Economic Affairs' harmonised list — enables longer-tenor bank/IIFCL finance [1].
• Scientific/Technological: Shipbuilding Development Scheme supports cluster infrastructure (e.g., mega clusters announced in Budget 2025-26) for green/specialised vessels [2].

6. Recent Developments (last 12-18 months)

• Feb 2025: Union Budget 2025-26 announced MDF, SBFAS revival, infrastructure status, shipbuilding clusters [2].
• 2025: Merchant Shipping Act, 2025 and Coastal Shipping Act, 2025 passed by Parliament [3].
• 2025: Guidelines notified for SBFAS and Shipbuilding Development Scheme; total outlay ₹44,700 crore [2].
• 12 Feb 2026: PIB consolidated note on policy reforms to expand indigenous fleet [1].

7. Prelims Hooks

• Merchant Shipping Act, 2025 replaces Merchant Shipping Act, 1958 [1][3].
• Nodal ministry: Ministry of Ports, Shipping and Waterways (not Ministry of Commerce) [1].
• RoFR = preference to Indian-built, Indian-flagged, Indian-owned vessels in government tenders [3].
• SBFAS corpus: ₹24,736 crore; extended till 31 March 2036 [2].
• Maritime Development Fund corpus: ₹25,000 crore [2].
• MDF = ₹20,000 cr Maritime Investment Fund + ₹5,000 cr Interest Incentivisation Fund; 49% GoI share in MIF [2].
• MDF target: mobilise up to ₹1.5 lakh crore investment by 2030 [2].
• Combined notified outlay for shipbuilding schemes: ₹44,700 crore [2].
• Ships above a threshold size now classified as infrastructure assets (harmonised list) [1].
• Four financial instruments: SBFAS, Ship Breaking Credit Note, Shipbuilding Development Scheme, MDF [1].
• Coastal Shipping Bill, 2025 also cleared by Parliament [3].
• SBFAS originally covered contracts signed 2016–2026 [2].

8. Mains Relevance

• GS-III: Infrastructure (Ports/Shipping); Indian economy — mobilisation of resources; Investment models.
• GS-II: Government policies and interventions; legislations affecting sectors.
• Question stems:
• "Examine how the Merchant Shipping Act, 2025 and the Maritime Development Fund together address the structural weaknesses of India's indigenous shipping sector."
• "The Right of First Refusal policy is essential but insufficient to reduce India's dependence on foreign-flag tonnage. Discuss."
• "Classifying large vessels as infrastructure assets is a financing reform with strategic implications. Evaluate."

9. Related Topics to Study Next

• Sagarmala Programme — port-led development; complements fleet expansion.
• Maritime India Vision 2030 / Amrit Kaal Vision 2047 — long-term roadmap [2].
• Coastal Shipping Act, 2025 — sister legislation for coastal trade [3].
• Indian Ports Act, 2025 — port governance overhaul [3].
• PM Gati Shakti — multimodal logistics integration.
• National Logistics Policy 2022 — modal-mix shift toward water transport.
• IMO conventions (MARPOL, SOLAS, Hong Kong Convention on Ship Recycling) — ratifications relevant to ship breaking credit note.
• Recycling of Ships Act, 2019 — links with Ship Breaking Credit Note.

10. Common Errors / Trap Areas

• Confusing Merchant Shipping Act, 2025 (vessels/seafarers) with Coastal Shipping Act, 2025 (coastal cabotage) and Indian Ports Act, 2025 (port governance) — three distinct 2025 statutes [3].
• Attributing the scheme to Ministry of Commerce or Shipping Corporation of India — nodal is MoPSW [1].
• Mixing SBFAS corpus (₹24,736 cr) with MDF corpus (₹25,000 cr) and total outlay (₹44,700 cr) [2].
• Assuming RoFR means a guaranteed contract — it is only a right to match the lowest foreign bid [3].
• Forgetting that infrastructure-asset status applies only to vessels above a threshold size, not all ships [1].