India may lower shipbuilding subsidy localisation threshold to 20% to attract foreign investors

New Delhi: The government is likely to relax the domestic-content threshold for incentive disbursal under the Shipbuilding Financial Assistance Scheme, subject to a committed milestone timeline for an early decision on investment. The move comes in the backdrop of foreign shipbuilders seeking a relaxation on the use of locally sourced content before setting up facilities in India.

"An in-principle agreement is in place to revise the domestic content threshold to a 20-40% band," a senior official told ET. Under the terms being considered, 75% of the subsidy would be payable upon achieving 20% domestic content, increasing progressively to a full payout at 40% localisation, the official added. Existing guidelines require companies to meet a minimum 30% localisation to start getting incentives.

South Korea's HD Hyundai, which is planning to build a facility in Tamil Nadu, is expected to be one of the beneficiaries of this proposed change in the rule.


The relaxation would apply to the shipbuilding industry for up to five years from the start of commercial operations of the first greenfield anchor shipyard under the ₹19,989 crore Shipbuilding Development Scheme.

Under the existing guidelines, incentives are offered pro-rata between 30% and 40% of localisation. The full assistance is granted after a shipbuilder achieves the 40% mark of higher. The proposed revision lowers the entry point for payout to 20%, enabling earlier subsidy release to yards that import a larger share of components.

"These concessions are conditional and hinge on a firm milestone timeline for an early final investment decision," the official added. Union ports, shipping and waterways minister Sarbananda Sonowal met HD Hyundai Chairman Chung Ki-sun in Seoul last week. A government statement issued later said the meeting "added momentum to the project, and the day's engagements produced a clear path forward".

HD Korea Shipbuilding & Offshore Engineering (HD KSOE), HD Hyundai's shipbuilding arm, reiterated its intent to participate in the project as a primary strategic investor, the statement said, adding a joint working group would now oversee project development.

"The two sides will work towards agreeing a joint venture structure, and the detailed project report is expected to be finalised within six months," the statement said. "We have a clear mandate to scale up our work together...A greenfield shipyard with $4 billion investment is a massive milestone, and we are completely committed to backing it," Sonowal said.

The memorandum of understanding for this project was signed in April 2026. The proposed shipyard is envisaged to have an annual shipbuilding capacity of about 2.5 million gross tonnage. Once operational, it is expected to be India's largest commercial shipyard.