Strategic Collaboration Between Indian Oil Corporation and NIIF

In a significant development poised to reshape India’s maritime and shipbuilding landscape, Indian Oil Corporation (IOCL) and the National Investment and Infrastructure Fund (NIIF) have entered into a strategic partnership for co-ownership of crude oil tankers. The initiative is part of the Government of India’s broader vision to position India among the top five global shipbuilding nations by 2047.

This collaboration, formalised through a recently signed Memorandum of Understanding (MoU), identifies maritime infrastructure as one of the four primary areas for potential joint evaluation and investment. While discussions are still in the early stages, Indian Oil may soon be appointed as the nodal agency by the Ministry of Petroleum and Natural Gas (MoPNG) to spearhead a flagship order for the construction of ten Medium Range (MR) oil tankers at domestic shipyards.

Of the ten Medium Range (MR) oil tankers envisioned, seven are earmarked for IOCL, two for Bharat Petroleum Corporation Limited (BPCL), and one for Hindustan Petroleum Corporation Limited (HPCL). This marks the first tranche of a large projected demand for tankers by public sector oil companies over the next decade.

The Expression of Interest (EoI) for the tankers is likely to be floated within the next few weeks. Shipyards such as Cochin Shipyard Ltd., Swan Defence and Heavy Industries, and L&T Shipbuilding Ltd. have already provided indicative costs to aid budgeting and internal board approvals at the respective oil PSUs. Technical specifications for the MR tankers have been finalised by a committee constituted under the Ministry of Ports, Shipping and Waterways and have been shared with the oil companies to expedite procurement.

This initiative is being driven by strong policy support from the Prime Minister’s Office and the Ministry of Ports, Shipping and Waterways, with the MR tanker project being treated as a strategic endeavour. It also sets the stage for future orders, including Very Large Gas Carriers (VLGCs) and Very Large Ethane Carriers (VLECs), to be built locally.

The policy thrust behind this initiative is twofold: to instill confidence among global fleet owners by demonstrating India’s capability to construct quality ships within stipulated timelines and budgets and to reduce the substantial outflow of foreign exchange that India incurs annually towards shipping freight paid to foreign vessel operators due to the scarcity of Indian-flagged ships. The shift towards domestic shipbuilding is thus expected not only to localise value addition and generate employment but also to promote maritime self-reliance.

There is a necessity of enabling access to ship financing, akin to China’s successful model, where shipowners were supported with state-backed loans and infrastructure to expand domestic capacity. Suggestions have also been made to leverage India’s Gujarat International Finance Tec-City (GIFT City) ecosystem to provide tax benefits and targeted financial products for ship acquisition and construction.

If the collaboration between Indian Oil and NIIF materializes into co-ownership and investment in shipping assets, it could become a template for other PSUs and pave the way for a renaissance in Indian shipbuilding, one that aligns with the government’s long-term ambition to emerge as a global maritime powerhouse.