New incentive schemes for shipbuilding and recycling in India

India’s latest shipbuilding reforms tie recycling and newbuild incentives together through tradable Shipbreaking Credit Notes, seeking to reshape the economics of both sectors

On 26^th December 2025, the Ministry of Ports, Shipping and Waterways in the government of India approved two schemes aimed at strengthening India’s position as both a shipbuilding and ship-owning nation.[1] The two schemes are:

1. Shipbuilding Financial Assistance Scheme (“SBFAS”) and National Shipbuilding Mission Scheme (“NSM”); and
2. Scheme for Capacity & Capability to Development and credit risk coverage for Shipping in India – Shipbuilding Development Scheme (“SbDS”)

The focus of this article is the SBFAS, and more specifically the recycling-related components within Chapter II of the SBFAS, which sets out a number of incentives aimed at reaching India’s goal as set out above. One of these incentives are linked to recycling of vessels at Indian yards, whereunder the sellers/owners of such vessels that have been recycled at certain Indian yards are eligible for a Shipbreaking Credit Note (“SCN”) that may be used to reduce the price for a newbuilding at Indian yards. We will in this article look more closely into the eligibility of the recycling part of this scheme. 

Chapter II of the SBFAS deals with the SCN. This provides that that if an eligible vessel is recycled at an Indian shipbreaking / recycling yard, a SCN equivalent to 40 % of the Fair Scrap Value is issued to the owner of the Vessel. The SCN is then valid for three years and can also be transferred freely on the market.

There are certain requirements that must be met for the owner to be able to redeem the SCN:

1. The Vessel must be recycled at a ship recycling yard in India, which is certified as Hong Kong Convention compliant by recognised organisations and approved by the applicable authorities in India.
2. The permit to recycle the Vessel must have been granted by the State Maritime Board / State Government on or after 24^th September 2025.
3. A certificate of Completion of Recycling has been issued by the State Maritime Board / State Government.

Given that most compliant recycling today takes place at Hong Kong Convention-certified yards, many owners of vessels commencing recycling after 24^th September 2025 are likely to fall within the scope of the scheme. Application to the portal must be submitted within three months of the completion of the recycling as confirmed in the certificate of Completion of Recycling. 

As regards the value of the SCN, this is meant to be set at “40 % of the Fair Scrap Value”. The Fair Scrap Value is defined in the Guidelines as “… the product of the price per Light Displacement Tonnage (LDT) of ship scrapping for the quarter (as published by the Competent Authority on a quarterly basis) in which Certificate of Recycling Certificate was issued and the LDT value of the Vessel as determined in Certificate of Recycling Completion”. The intention is for the Indian authorities to engage a third party to conduct a quarterly study to then make a recommendation for the price per LDT for recycling. This recommendation will again the considered by an appointed committee consisting of representatives from both the yards, shipping community and steel owners. Based on these recommendations, the price per LDT for ship recycling will be published. There is accordingly an element of averaging of the recycling prices on a quarterly basis being applied. 

Once an SCN has been obtained, it may be redeemed within a period of three years, after which it will lapse and have no further effect. SCNs may be utilised up to a maximum ceiling of 5% of the fair price of the new vessel, which must be built in Indian shipyards. Redemption of SCNs operates such that the buyer under the shipbuilding contract redeems the SCN value through the Directorate General of Shipping, which in turn pays the amount specified in the SCN directly to the relevant shipyard constructing the vessel (and not to the owner). This mechanism would need to be addressed in the drafting of the payment provisions of the relevant shipbuilding contract.

The application for an SCN must be done through an online portal with the Indian government, which will also be the place where a SCN is issued and then registered.

Lastly, and this may be of interest to many, an SCN may be sold on the open market, allowing the purchaser to utilise the value of the SCN under a new or an existing shipbuilding contract. The Indian government has expressly stated that it will not have any role in determining the price, which will instead be driven by what the market is willing to pay. Any transfer of the SCN will be effected through the same online portal on which the SCNs are initially registered.

Whether the scheme will materially expand India’s shipbuilding base remains to be seen. However, given the scale of the country’s ship recycling industry, there is potential for significant issuance of SCNs, which in turn may create a more competitive environment for newbuilding orders in India.

Nordisk Transaction Team remains ready to assist with both shipbuilding and recycling matters. If you have any questions or comments about these schemes, please do not hesitate to reach out to: 

Olav Eriksen (oeriksen@nordisk.no)
Mats E. Sæther (msaether@nordisk.no) 
Ola Granhus Mediås (omedias@nordisk.no) 

[1] By way of background, India’s Maritime Amrit Kaal Vision (MAKV 2047) targets a top-10 global ranking in ship ownership and shipbuilding by 2030 and a top- five ranking by 2047. The Guidelines can  be found here: Modified Guidelines for implementation of Shipbuilding Financial Assistance Scheme (SBFAS)_0.pdf