Why in the News?

• India recently issued its first ship recycling credit note under a new incentive scheme aimed at promoting green ship recycling and domestic shipbuilding.

What’s in Today’s Article?

• Ship Recycling in India (Background, Major Centres, Legal & Environmental Framework, Significance, etc.)
• News Summary (Green Recycling, Working of Credit Note Scheme, Challenges, etc.)

Ship Recycling in India

• Ship recycling refers to the dismantling of old or decommissioned ships for recovering valuable materials such as steel, machinery, spare parts, and reusable equipment.
• It also ensures the environmentally safe disposal of hazardous substances present in ships.
• Ship recycling is economically important because ships contain large quantities of recyclable steel and equipment, making the sector valuable for the metal, manufacturing, and shipping industries.
• India is one of the world’s leading ship recycling nations and plays an important role in the global maritime economy.

Major Ship Recycling Centres in India

• India’s ship recycling industry is concentrated primarily in:

• Alang-Sosiya Ship Recycling Yard, Gujarat
• Ship recycling facilities in Maharashtra and Tamil Nadu

• Among these, Alang in Gujarat is globally significant and represents one of the largest ship recycling clusters in the world.
• The region hosts around 120 operational plots, representing one of the highest concentrations of Hong Kong International Convention (HKC)-compliant ship recycling facilities worldwide.

Legal and Environmental Framework

• Ship recycling involves environmental and occupational safety risks because old vessels often contain hazardous materials such as:

• Asbestos
• Heavy metals
• Toxic oils and chemicals
• Polluting waste materials

• To regulate the sector, India enacted the Recycling of Ships Act, 2019, which aligns domestic regulations with the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (HKC).
• The Act seeks to:

• Promote safe recycling practices
• Improve worker safety standards
• Reduce marine and coastal pollution
• Encourage environmentally sustainable dismantling

• India ratified the Hong Kong Convention in 2019, strengthening its position as a major global ship recycling destination.

Economic Importance of Ship Recycling

• The ship recycling sector contributes to:

• Recovery of steel for domestic industries
• Employment generation in coastal regions
• Growth of maritime ancillary industries
• Reduction in dependence on imported scrap metal

• Additionally, the sector supports India’s broader maritime ambitions under initiatives such as the Maritime India Vision 2030 and the Blue Economy framework.

News Summary

• India has issued its first-ever ship recycling credit note to Bella Shipping, marking the beginning of a new incentive framework intended to strengthen the circular economy and promote environmentally sustainable ship recycling.
• The company received the credit note after recycling and dismantling a Capesize bulk carrier at an Indian shipyard.
• The scheme was introduced under the Budget 2025-26, as part of broader efforts to boost maritime growth through a ship recycling and shipbuilding support mechanism.

How the Credit Note Scheme Works?

• Under the scheme, ship owners will receive a credit note equal to 40% of the scrap value generated from a recycled ship.
• The credit note can later be redeemed for up to 5% of the fair price of a new vessel built in an Indian shipyard.
• The scheme seeks to create a stronger link between ship dismantling and domestic shipbuilding, thereby encouraging shipping companies to place orders with Indian shipyards.
• According to officials, the initiative aims to:

• Increase domestic shipbuilding activity.
• Strengthen circular economic practices.
• Improve the competitiveness of Indian shipyards.
• Encourage environmentally safe recycling practices.

Eligibility and Environmental Conditions

• The benefits are available only to HKC-compliant recycling yards, ensuring that environmental safeguards remain central to the scheme.
• To qualify, recycling facilities must maintain standards related to:

• Hazardous waste handling
• Worker safety and emergency preparedness
• Environmental monitoring systems
• Pollution control measures

• The Directorate General of Shipping, State Maritime Boards, and recognised agencies conduct inspections and certification to ensure compliance.

Early Industry Response and Challenges

• Industry stakeholders have welcomed the move, viewing it as a positive beginning for India's maritime manufacturing ecosystem.
• According to the Ship Recycling Industries Association (India), around 119 ships were recycled in the country during FY26, accounting for nearly one-third of global ship recycling activity by number of vessels.
• However, India processed only around 13% of recycled tonnage globally, indicating that the country still mainly handles relatively smaller ships.
• Experts argue that while the scheme is promising, success will depend on:

• Faster implementation of digital credit note systems
• Simplified approval processes
• Expansion of domestic shipbuilding capacity
• Availability of skilled maritime labour

• A major concern highlighted by industry representatives is India’s current inability to build many large commercial vessels domestically, which may initially limit utilisation of the credit note scheme.