The Union Budget 2025-26 was presented today in the Lok Sabha. Spearheading the presentation, Union Finance Minister Nirmala Sitharaman introduced a multi-faceted draft of the Budget, with one of the inclusions being the continuation of the Basic Customs Duty (BCD) exemptions on raw materials, components, and consumables used in shipbuilding for another ten years, with similar benefits given to the shipbreaking industry as well.
For the unversed, shipbreaking is the process of dismantling and scrapping an old or decommissioned ship. The parts retrieved from the ship are then either upcycled or recycled to be used to manufacture other products.
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Being an industry dense with environmental hazards and the need for manpower, the Central Government has proposed adequate reforms to the breaking and building of ships with India’s eyes set on enlarging its maritime industry.
Identifying the qualms of the long gestation periods associated with shipbuilding, the Finance Minister commented that “Considering that shipbuilding has a long gestation period, I propose to continue the exemption of BCD on raw materials, components, consumables or parts for the manufacture of ships for another ten years. I also propose the same dispensation for shipbreaking to make it more competitive.”
Previously, Notification No. 50/2017-Customs dated June 30, 2017 permitted concessional BCD rates to shipping companies with the leeways set to expire on March 31, 2025.
Following the presentation of the Union Budget, Declaration D.O.F.No.334/3/2025-TRU dated 01 February, 2025 was released by The Central Board of Indirect Taxes and Customs provides for the status-quo maintenance of the following entries till March 31, 2035:
Entry No. 555A: Ships and vessels for breaking up – Extended
Entry No. 559: Raw materials, components, consumables, or parts for use in ship/vessel manufacturing
Additionally, the Shipbuilding Financial Assistance Policy will be revamped to address cost disadvantages, including the provisions to issue Credit Notes for Shipbreaking in Indian yards to further incentivize the domestic recycling of the vessels.
Furthermore, large ships above a specified size will now be included in the Infrastructure Harmonized Master List (HML), while the government had also promised to promote Shipbuilding Clusters, enhancing capacity, infrastructure, and technological advancements.
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