India conducts most of its trade by sea but relies heavily on foreign-flagged vessels—a structural gap a new South Korea partnership now aims to address.

India and South Korea on Monday unveiled a cooperation framework spanning shipyards, logistics and maritime technology, signed during South Korean President Lee Jae Myung’s visit to New Delhi.

The move targets a structural gap: India conducts most of its trade by sea but relies heavily on foreign-flagged vessels.

What do the India–South Korea maritime agreements include?

The framework covers shipbuilding, shipping and maritime logistics, linking maritime infrastructure to energy security.

Agreements signed include greenfield shipbuilding clusters with Korean technical partnerships, a large shipyard in southern India, and expansion of existing yards with dry docks and fabrication facilities. South Korean firms will act as “technical and strategic anchors” for design, manufacturing and operations.

India is also building a demand pipeline, with plans to acquire over 400 vessels worth Rs 2.2 lakh crore through public agencies.

Why does India have a shipbuilding and freight dependence gap?

Nearly 95 per cent of India’s overseas trade by volume moves by sea, and about 92 per cent is carried on foreign-flagged vessels. As of December 2024, India had 1,545 vessels with 13.50 million gross tonnage, with only 32 per cent engaged in overseas trade.

A 2024 Parliamentary Standing Committee report flags multiple structural constraints, including higher steel costs, elevated interest rates and low labour productivity, resulting in a 20–25 per cent cost disadvantage versus global competitors. It also noted that many Indian yards rely heavily on defence orders, which do not build a competitive commercial orderbook.

Capt Shyam Paliwal, CEO at Moim Consulting & Tank Terminal Training, said the issue goes beyond capacity. “In South Korea, a shipyard is supported by a 50 km radius of specialised vendors (valves, specialised steel, sensors). In India, we often have to import these components, leading to higher costs and ‘dead time’ during construction,” he said.

“Indian large yards have historically focused on complex, high-value naval contracts. While prestigious, these don’t offer the ‘assembly line’ efficiency required for commercial bulkers or tankers,” he added.

Capt Ritesh Kumar, CEO at Broadside Marine Pvt Ltd, said India lacks a full ecosystem. “Demand remains weak, with few domestic shipowners placing large commercial orders beyond public sector entities. India also lacks integrated maritime manufacturing clusters that supply engines, navigation systems and marine equipment efficiently,” he said.

“Financing is another constraint, as shipbuilding requires long-term, low-cost capital and export credit support. Execution delays, cost overruns and regulatory bottlenecks also reduce competitiveness,” Capt Ritesh added.

How will the South Korea partnership help India’s shipbuilding sector?

The framework aims to address these gaps through scale, technology and ecosystem development.

South Korean firms will support design, production engineering and advanced manufacturing. As Paliwal noted, execution discipline is critical. “Korean yards like HD KSOE use massive ‘block fabrication’ techniques. They build the ship in giant sections with 90 per cent of the internal piping and electricals already installed before the blocks are even joined,” he said.

It also targets supplier ecosystem development and links demand with financing through the ?2.2 lakh crore order pipeline. “Their ability to manage a 400-vessel pipeline (like the one India just announced for its public agencies) is something no Indian yard can currently handle alone,” Capt Paliwal said.

Capt Ritesh said that South Korean shipbuilders offer strengths across technology, scale and execution discipline. “In terms of scale, India builds ships; Korea manufactures ships through serial production lines. Entire yards are designed like assembly lines for automobiles. Ships are produced through modular assembly methods that sharply reduce construction time,” he said.

Why does this deal matter amid global supply chain disruptions?

The move comes amid the ongoing West Asia crisis and the resulting supply chain disruption around the Strait of Hormuz, which has increased freight costs and transit durations.

Capt Ritesh said the crisis has exposed a long-term dependence. “India is the world’s third-largest oil importer, yet much of its crude is transported on foreign-flagged tankers, resulting in significant freight outflows and higher trade costs. This vulnerability has existed for years, but geopolitical disruption has made it more visible,” he said.

Capt Paliwal said the crisis has been a “stress test” for India’s self-reliance goal. “Because we own so few of the ships that carry our trade, we are price-takers. When insurance premiums spiked and routes were diverted around the Cape of Good Hope, Indian exporters saw their margins evaporate,” he said.

What should be watched next in India’s shipbuilding push?

Experts say capacity creation will take time. “Developing a globally competitive shipbuilding industry requires sustained policy support, technology partnerships and long-term financing over decades,” Capt Ritesh said.

India has set ambitious goals of entering the world’s top five shipbuilding nations by 2047. If executed well, the partnership with South Korea could help New Delhi reduce dependence on foreign carriers and strengthen maritime self-reliance.

Source: Business Standard 

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