India imports around 220-250 million tons of crude oil, about 25 million tons of coal, and six to seven million tons of fertilizer annually. The Economic Times reports that shipping costs range between $75 and $80 billion each year, most of which is paid in foreign currency. Currently, the majority of cargo is transported on foreign-owned ships because the growth of India's fleet has not kept pace with trade expansion. Estimates suggest that up to 93 percent of exports and nearly 40 percent of all Indian cargoes are carried on foreign ships.
Reuters, citing unnamed government sources, stated that the plan is to establish a new shipping company jointly owned by state-run oil, gas, and fertilizer industries, supported by long-term 15-year contracts. The Shipping Corporation of India (SCI) would manage the ships and invest in the new fleet. The plan envisions building a fleet of over 1,000 vessels in the next decade to prevent shipping costs from soaring to $400 billion as India industrializes. The aim is to cut these costs by at least a third.
India currently has a fleet of over 1,500 vessels, many of which are older and smaller. Last year, India began implementing regulations to prevent the acquisition and registration of older ships to modernize the fleet. However, SCI faces challenges as a state-owned entity, and its privatization plan has been stalled. Rumors suggest that the Modi government now prioritizes privatization, intending to launch the delayed offering within the first 100 days of the new term.
The Economic Times notes that similar plans for a new shipping company have been considered and abandoned before due to unclear strategies and significant challenges. Besides the enormous capital needed, they highlight that the commodity seller typically arranges transportation at the buyer’s expense. They also emphasize the need for ships to carry cargo in both directions to be economical, questioning where the Indian fleet would find export cargoes for return trips.
Critics argue that instead of investing in a new shipping company, rumored to be based in Modi’s home district, funds should be directed to SCI. Reuters reports that the new operation's financing would come from a $3.6 billion government development fund.
