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The government has introduced norms limiting the redemption of ship-recycling credit notes to 5% of a new vessel's contract value. Shipowners receive credit notes equal to 40?% of the fair scrap value when eligible vessels are recycled at Indian yards certified under the Hong Kong International Convention. The note must be fully applied against a single new shipbuilding contract within three years, and partial utilisation is not allowed. Transfer or sale of unused notes is now permitted, offering flexibility and encouraging domestic shipbuilding growth while linking recycling benefits to fresh orders.
Shipowners recycling vessels in India will now face a cap on the benefits they can redeem. The Ministry of Ports, Shipping and Waterways has set rules stating that credit notes issued when a vessel is scrapped at an Indian yard certified under the Hong Kong International Convention for Safe and Environmentally Sound Recycling can only be redeemed up to 5% of the cost of a new vessel built under the scheme. Advertisement
These credit notes, valued at 40% of the fair scrap price of the vessel, must be used fully against a single new building contract, without splitting the amount across multiple projects. The note remains valid for three years from the scrapping date. If the owner does not plan to build a vessel domestically, the credit note can be transferred or sold to another shipbuilder placing a domestic order, making the system more flexible.
For example, if a vessel's scrap value is determined at INR 100 crore, the owner would get a credit note of INR 40 crore. However, under the new cap, only 5% of the new vessel's contract value can be redeemed through the note. This ensures that the incentive is directed towards encouraging fresh shipbuilding orders in India.
This measure forms part of a larger maritime development package approved by the Cabinet, valued at roughly INR 69,725 crore. The policy aims to support sustainable ship recycling, boost domestic shipbuilding, generate employment, and attract investment. Previous rules allowed limited options for owners not building new vessels domestically. The new provision for transferring or selling credit notes is intended to increase participation and make the scheme more practical.
Officials emphasize that this approach ensures the credit note acts as a genuine subsidy for domestic construction rather than a simple financial benefit from recycling. It also discourages fragmented utilisation of credit notes across smaller contracts, maintaining alignment with policy goals.
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