The Union Cabinet has approved the Coastal Shipping Bill, 2024, which, once passed by Parliament, will eliminate the requirement for Indian-flagged vessels to obtain a general trading license to operate in coastal waters. This move aims to boost the domestic coastal shipping sector by simplifying regulatory processes.
According to officials familiar with the matter, coastal shipping is of strategic importance to the Indian economy, and the bill is designed to make the industry more accessible by removing licensing requirements for Indian vessels. Foreign vessels, however, will still be subject to statutory licensing conditions under the new legislation.
The bill is based on a draft introduced for public comments in 2020 and builds upon Part 14 of the Merchant Shipping Act, 1958. Once the new bill becomes law, this section of the act will be repealed to further streamline coastal shipping regulations. Although the full text of the bill has not yet been released, it is expected to be presented in Parliament soon, according to the Ministry of Ports, Shipping, and Waterways.
The legislation aims to impose statutory requirements on foreign vessels regarding staffing and other conditions, potentially mandating a minimum number of Indian seafarers aboard foreign ships operating in coastal waters. India is a significant contributor to the global seafarer workforce. The bill will also allow coastal vessels to operate on inland waterways and calls for the creation of a coastal shipping database.
While industry leaders view the bill as a positive development, they emphasize the need for additional relief measures, including changes to provisions and tax burdens that affect domestic vessel owners and operators. Shipowners have also called for the reversal of three 2018 orders that grant competitive advantages to foreign-flagged vessels.
The Directorate General of Shipping is moving to revoke these orders, which currently allow foreign-flagged vessels to engage in coastal trade for specific commodities, such as EXIM transshipment containers and agricultural products, without a license. The regulator noted that these orders may have placed Indian-flagged vessels at a disadvantage, leading to stagnation in the domestic container shipping market and increased reliance on foreign ships.
Revoking these privileges, coupled with regulatory support for Indian shipping, could improve service reliability, promote competition, and positively impact freight rates. The Ministry is considering these changes as part of its efforts to enhance operational efficiency and boost the domestic shipping industry.
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