The Centre is preparing to introduce a ₹2,000-crore insurance corpus to shield Indian shipbuilders from buyer defaults, a move aimed at improving business sustainability in the capital-intensive sector. The Ministry of Ports, Shipping and Waterways is in talks with the finance ministry and other stakeholders to launch a buyer’s default insurance product through a public-sector agency, a senior official said. The scheme would compensate shipyards if a client backs out of an order midway or at delivery.
The shipbuilding sector in India is both capital intensive and nascent—one buyer’s default can often threaten the survival of a shipyard. This proposed corpus will provide protection in the absence of any such product in India.
The initiative forms part of the broader ₹20,000-crore shipbuilding cluster scheme announced in the Union Budget, which seeks to establish integrated hubs, attract global shipbuilders, and strengthen the domestic ecosystem.
Models in countries like South Korea show that government-backed default insurance helps keep premiums low, encouraging shipyards to adopt such products. At present, Indian shipyards have limited recourse in the event of buyer default, particularly for large, customised vessels that are difficult to resell. The government is considering entities such as the National Credit Guarantee Trustee Company (NCGTC) and the Export Credit Guarantee Corporation (ECGC) to manage the fund. Premium replenishment would depend on claims, which globally average around 5% of orders.
Past defaults have hurt Indian shipbuilders, with Larsen & Toubro among firms that faced stranded vessels before exiting commercial shipbuilding. Experts say the insurance measure could support both shipbuilding and ship financing by reducing risks and attracting foreign investors.
