Why in news
- The government announced plans to add 100 new merchant ships to address India's high foreign freight reliance and cut maritime costs.
Current State of Indian Maritime Freight
- India pays approximately $75 billion annually in foreign freight charges due to a low proportion of national flag tonnage.
- Indian-flagged vessels carry less than 10% of the country's total EXIM (export-import) trade by value.
Structural Challenges and Strategic Mandate
- Cost Disadvantage: Operating under an Indian flag incurs a 16-20% cost premium over foreign flags due to local taxation, fuel levies, and compliance costs.
- Expansion Strategy: Acquisition of 100 ships aims to build sovereign capacity in critical liquid bulk, dry bulk, and container transport.
Why it Matters
- Reduces current account deficit vulnerability from foreign freight payouts.
- Enhances supply chain security during geopolitical maritime disruptions.
Key terms
Flag of Convenience
Registering a merchant ship in a foreign state with lenient tax or operational regulations rather than the owner's home country.
Tonnage Tax Scheme
A taxation method applied to shipping companies based on the net tonnage of the fleet rather than corporate profits.
Prelims facts
- Indian-flagged ships are subject to domestic taxation and stringent flag-state inspection rules unlike flags of convenience.
Mains discussion
- Analyze the strategic and economic necessity of building a sovereign merchant shipping fleet for India's international trade resilience.
Source: LiveMint
Same topic · past papers
UPSC has asked this before
These previous-year questions sit on the same topic. Open one to practise the earlier ask.
-
2023 · Q19 · GS II · 15 marks
'The expansion and strengthening of NATO and a stronger US-Europe strategic partnership works well in India.' What is your opinion about this statement? Give reasons and examples to support your answer. -
2025 · Q69 · General Studies · 2 marks
Consider the following countries : I. United Arab Emirates III. France III. Germany IV. Singapore V. Bangladesh How many countries amongst the above are there other than India where international merchant payments are accepted under UPI? -
2018 · Q6 · General Studies · 2 marks
Which one of the following best describes the term "Merchant Discount Rate" sometimes seen in news? -
2026 · Q24 · General Studies · 2 marks
In what way(s) does the Vizhinjam International Seaport represent a structural shift in India's maritime trade and logistics policy? 1. By functioning exclusively as a domestic cargo hub to reduce reliance on coastal shipping and eliminate the need for foreign collaborations. 2. By focusing primarily on passenger cruise tourism and heritage shipping to increase Kerala's profile as a maritime heritage destination. 3. By leveraging its natural deep draft and strategic location to reduce dependence on foreign trans-shipment ports, enhance revenue retention, and reposition India in regional maritime trade. Select the answer using the code given below: -
2026 · Q35 · General Studies · 2 marks
Consider the following statements with reference to the Sagarmala Programme of the Government of India: I. The Sagarmala Programme seeks to achieve port-led economic growth through cost- effective and sustainable coastal infrastructure. II. The success of the Sagarmala Programme is reflected in significant growth in coastal and inland waterway shipping, along with improved global port rankings. III. Sagarmala 2.0 aims to position India as a global maritime innovation hub aligned with Atmanirbhar Bharat and Viksit Bharat 2047 visions. Which of the following relationships among the above statements is/are correct? 1. Statement II validates the effectiveness of the strategies envisioned in statement I. 2. Statement III extends the objectives of statement I by embedding them into a future- oriented innovation framework. 3. Statement I contradicts statement III by focusing only on traditional infrastructure instead of modern innovation. Select the answer using the code given below: