The newly launched Chennai-Vladivostok maritime corridor is set to play a pivotal role in strengthening trade between India and Russia, marking a significant milestone in maritime connectivity. As global trade routes evolve, the corridor is expected to facilitate smoother and more efficient exchanges, especially in sectors like energy, agriculture, and technology. This initiative highlights the growing importance of maritime logistics for both countries, fostering economic ties and supporting India’s broader geopolitical goals.
However, the corridor’s development brings to the forefront an ongoing debate within India’s maritime industry—should the country focus on growing its own fleet of Indian-flagged ships or rely on foreign ships to meet its growing trade needs? This debate is increasingly relevant as India looks to build and diversify its shipping infrastructure amidst both internal challenges and international opportunities. For years, policymakers have struggled with whether it’s in India’s best interest to prioritize the growth of its domestic shipping industry. Key figures, like Sanjeev Sanyal from the Prime Minister’s Advisory Council, emphasize the need to rethink India’s approach to shipping infrastructure, while others, like K. Rajaraman from IFSCA, argue that foreign-flagged ships should also be considered a viable option. This debate stems from the inherent challenges facing Indian shipping, including high capital costs, unfavourable taxation laws, and regulatory burdens that make Indian-flag ships less competitive than those of other countries.
The shipping industry’s struggles are compounded by issues such as limited access to capital, high loan costs, and burdensome loan terms that discourage investment in Indian-owned ships. Furthermore, the tax regime and regulatory discrepancies favor foreign ships, making it even harder for Indian vessels to compete on both domestic and international routes. These obstacles have resulted in Indian shipping taking one step forward and two steps back, despite ongoing efforts by the government to address the issue. India’s shipping policy dilemma is not new. Historically, the country’s dependence on foreign shipping has led to missed opportunities in building a resilient economy. This lesson echoes the colonial era when the British controlled Indian trade by destroying the local manufacturing and shipping sectors. Today, countries like China, Japan, and Korea have successfully used their shipping industries as a strategic asset, not only for economic growth but also for geopolitical influence. China’s ability to rapidly build both commercial and military ships has raised concerns in global security circles, especially as the country dominates commercial shipbuilding.
For India, as it aims to become a global manufacturing hub by 2047, a robust domestic shipping industry is vital. Without control over shipping, India risks losing control over critical supply chains, especially as the world looks for alternatives to China through initiatives like the International North South Transport Corridor (INSTC) and the India-Middle East-Europe Economic Corridor. India’s maritime strategy also needs to focus on tapping into its vast blue economy potential, which includes sectors like offshore energy, fishing, and coastal tourism. In response to the growing importance of shipping, the Indian government has voiced its commitment to developing the sector. Recent budget announcements and subsidies for shipbuilding and government cargo transportation highlight the government’s intent. However, critics argue that these initiatives do not fully address the industry’s structural challenges. For example, the subsidy scheme is limited to government cargo, neglecting the broader needs of private shipping, coastal, and offshore vessels.
A comprehensive policy overhaul is necessary to address issues like capital access, loan terms, and discriminatory taxation. Proposals like the Maritime Development Fund under the Maritime India Vision 2030 are seen as steps in the right direction. Yet, much more needs to be done to create a level playing field for Indian shipping, particularly in terms of tax advantages and better loan conditions. The high tax burden on Indian shipowners, such as the 30% tax on seafarers’ salaries, coupled with a 5% import duty on Indian vessels, puts them at a significant disadvantage compared to foreign-flagged ships operating on Indian waters. Looking ahead, India cannot afford to take a passive approach to its shipping sector. The challenges are complex, but the solution lies in addressing the financial, regulatory, and operational hurdles that hinder the growth of Indian-flagged ships. The goal for 2030 and 2047 should be to achieve a competitive, self-reliant shipping industry that can serve both domestic and international needs. Ultimately, India must take bold steps to address its maritime policy dilemmas and strengthen its position in the global maritime landscape. By fostering a vibrant and competitive shipping industry, India can secure its economic future and ensure that its trade routes remain under its control. The Chennai-Vladivostok maritime corridor is just one piece of the puzzle—how India develops its own fleet will determine its long-term success in the global economy.
