Government Weighs Shipping Law Tweaks to Boost GIFT City Maritime Hub

By Admin

27 Dec, 2025

India is considering a fresh round of shipping sector reforms as it looks to strengthen Gujarat International Finance Tec-City (GIFT City) as a global maritime and financial hub. At the centre of the discussions are potential relaxations under the Merchant Shipping Act, 2025 and the Coastal Shipping Act, 2025, aimed at giving greater operational flexibility to companies based in the International Financial Services Centre (IFSC).

Driving GIFT City’s Maritime Push

The move has been initiated following proposals from the International Financial Services Centres Authority (IFSCA), which is keen to position GIFT City as a competitive base for global shipping, leasing and maritime services. IFSCA has requested exemptions from certain provisions of the Merchant Shipping Act to allow GIFT City entities to own and register ships outside India. It has also urged the removal of the requirement to obtain licences from the Directorate General of Shipping when chartering foreign-flag vessels for cross-trade and export-import operations.

Government officials have confirmed that DG Shipping will soon seek stakeholder feedback to assess whether these proposals can be accommodated within the existing legal framework without compromising maritime safety, governance or national interests. The stated objective is to arrive at a balanced policy that enhances India’s maritime competitiveness while preserving regulatory oversight.

Concerns Over Indian Flag Capacity

While the proposals could make GIFT City more attractive to global maritime businesses, they have raised concerns within the government. Officials fear that allowing IFSC entities to freely own and register vessels overseas could prompt similar demands from shipowners in the domestic tariff area. This, they argue, may weaken efforts to expand India’s national fleet at a time when shipping capacity growth is a strategic priority.

Another sensitive issue relates to the Right of First Refusal policy, which gives Indian fleet owners priority in public sector cargo tenders. The government has indicated that GIFT City entities registering ships under foreign flags may not be eligible for these benefits. Officials have stressed that companies availing tax and regulatory incentives overseas cannot simultaneously claim policy support designed to strengthen Indian-flag tonnage.

Role of RoFR and Policy Priorities

Under amendments made to the RoFR policy in October 2023, the highest priority is given to Indian-built, Indian-flagged and Indian-owned vessels. This is followed by Indian-built and Indian-flagged ships owned by IFSC entities. Foreign-built or foreign-flag vessels fall lower in the priority order. These distinctions reflect the government’s intent to encourage domestic shipbuilding, ownership and flagging as part of a long-term maritime strategy.

The policy framework underscores the broader challenge facing policymakers—how to support GIFT City’s ambitions without undermining incentives meant to expand India’s shipping tonnage and self-reliance.

Indian Controlled Tonnage as a Middle Path

To bridge the gap, the government is exploring the possibility of extending the Indian Controlled Tonnage scheme to IFSC entities. Introduced in 2014, the ICT scheme allows Indian shipping companies to flag vessels abroad under defined conditions while retaining effective control in India. Applying a similar model to GIFT City could allow overseas registration while mandating partial Indian flagging, domestic management and Indian crewing.

Such a compromise could help attract global capital to GIFT City while ensuring that India retains strategic control over shipping assets and maritime operations.

Why Shipping Capacity Matters

The debate comes against the backdrop of the Merchant Shipping Act, 2025, which replaced a law more than six decades old. The new legislation liberalised ship registration norms by allowing vessels substantially owned by Indian entities, NRIs, OCIs and LLPs to fly the Indian flag. The reform was aimed at reversing India’s weak position in global shipping.

India currently controls just 1.4 per cent of global shipping tonnage, ranking 18th worldwide, despite accounting for around 11 per cent of global seaborne trade—a figure projected to rise to 30 per cent by 2047. In FY20 alone, India paid $85 billion in sea freight, most of it to foreign shipping lines. Between 2008 and 2021, outbound freight payments totalled $637 billion, highlighting the economic cost of dependence on foreign fleets.

Strategic Imperatives Ahead

The Ministry of Ports, Shipping and Waterways has repeatedly warned that overreliance on foreign tonnage poses risks to food and energy security during global crises, as seen during the COVID-19 pandemic, the Russia-Ukraine conflict and the Red Sea disruptions. Expanding India’s shipping capacity, estimated to require investments of about ₹55 lakh crore under the Maritime Amrit Kaal Vision 2047, is therefore seen as essential to building a resilient and globally competitive maritime sector.

As consultations move forward, the government faces a delicate balancing act. The challenge lies in leveraging GIFT City’s global potential while ensuring that regulatory reforms reinforce, rather than dilute, the long-term goal of strengthening India’s national shipping fleet and maritime sovereignty.