India’s shipping sector is poised for a significant overhaul with the introduction of three pivotal bills in Parliament: the Merchant Shipping Bill, 2024, the Coastal Shipping Bill, 2024, and the Indian Ports Bill, 2024. These legislations aim to modernise regulatory frameworks, ease operational challenges, and align the industry with global standards. With India’s share in global shipbuilding at a mere 0.06%, these reforms come at a critical juncture. Here’s an in-depth analysis of their potential impact.
India’s shipping industry, vital to its trade ecosystem, handles about 95% of the country’s trade by volume, supported by a 7,517-kilometer coastline, 12 major ports, and over 200 non-major ports with a combined capacity of 2,400 million tonnes annually. Despite being strategically located on global trade routes, India’s share in the global shipbuilding market is less than 1%, hindered by infrastructure gaps, high logistics costs, and reliance on road transport for freight. Government initiatives like the Maritime India Vision 2030 and proposed legislative reforms aim to address these challenges, modernise the sector, and boost its global competitiveness.
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Merchant Shipping Bill, 2024
The Merchant Shipping Bill, 2024, is a sweeping reform designed to replace the outdated Merchant Shipping Act, 1958. One of its most notable changes is the expansion of eligibility for registering India-flagged ships. The new provisions allow entities like Overseas Citizens of India (OCIs), Non-Resident Indians (NRIs), and limited liability partnerships (LLPs) to own and register vessels under the Indian flag. This represents a shift from earlier rules that restricted ship registration to entities wholly owned by Indian citizens, a limitation that stifled foreign investments and reduced India’s competitiveness in the global maritime sector. By broadening ownership criteria, the bill is poised to attract fresh investments and boost the number of India-flagged vessels.
Additionally, the bill simplifies the financial and procedural challenges associated with vessel acquisition. It introduces flexibility for ships acquired through bareboat charter-cum-demise (BBCD) contracts, allowing these vessels to be registered before the final ownership is transferred. This adjustment eases financial burdens by enabling staggered payments, making it more feasible for Indian entities to acquire modern vessels without immediate full payment.
The bill also focuses on improving conditions for seafarers, an integral part of the maritime ecosystem. For the first time, there are provisions to strengthen the rights of seafarers, including clear procedures for the repatriation of abandoned crew members and a framework to deal with unsafe vessels. These measures aim to ensure greater safety and dignity for those working in the sector while also addressing maritime threats.
Environmental sustainability is another key aspect of the proposed legislation. Mandatory insurance requirements and a dedicated fund for compensating oil pollution damage highlight the government’s commitment to protecting marine ecosystems. Authorities will also have the power to monitor and penalise vessels that pose environmental risks, ensuring that maritime growth is balanced with ecological responsibility.
Coastal Shipping Bill, 2024
The Coastal Shipping Bill, 2024, seeks to rejuvenate India’s coastal shipping sector by simplifying regulations and integrating it with inland waterways. A significant change introduced by this bill is the removal of the requirement for a general trading license for Indian-flagged vessels engaged in coastal trade. This move reduces bureaucratic hurdles and fosters a more efficient operational environment, allowing shipping companies to focus on trade rather than compliance.
One of the most innovative aspects of the bill is the provision that allows riverine vessels to operate in coastal waters and vice versa. This integration reduces the need for costly transshipment between different types of vessels, ensuring smoother logistics for domestic goods movement. For example, goods transported via rivers can seamlessly transition to coastal shipping without additional handling, saving time and resources. The inclusion of river-sea vessels further facilitates this integration, demonstrating the government’s commitment to leveraging the full potential of India’s extensive waterway network.
The bill also aligns with India’s broader goal of strengthening its domestic shipbuilding industry. By encouraging the use of India-built ships for certain operations, the government hopes to boost the country’s shipbuilding capabilities, which currently lag significantly behind global leaders. This strategic focus not only promotes indigenous manufacturing but also generates employment opportunities in the maritime sector.
By addressing these structural inefficiencies and fostering a conducive environment for growth, the Coastal Shipping Bill positions India to fully exploit its vast coastline for economic development.
Indian Ports Bill, 2024
The Indian Ports Bill, 2024, aims to replace the century-old Indian Ports Act of 1908, bringing much-needed modernisation to the sector. One of the central objectives of this bill is to promote integrated planning between the central and state governments. The bill introduces a consultative framework that encourages coordination across jurisdictions, enabling the development of port infrastructure in a manner that supports national economic goals.
Environmental sustainability is a key focus of the bill, with provisions to prevent pollution and align port operations with international environmental standards. These measures include mandatory compliance with treaties that India is a signatory to, ensuring that Indian ports meet global benchmarks for environmental protection. This focus on sustainability is particularly relevant as ports are often hubs of high activity, making them vulnerable to environmental degradation.
The bill also seeks to address inefficiencies in the current dispute resolution framework. By streamlining procedures and introducing mechanisms to resolve conflicts more effectively, the bill ensures smoother operations in a rapidly expanding ports sector. Moreover, the emphasis on transparency through the use of technology fosters trust among stakeholders and improves decision-making processes.
With its comprehensive approach to planning, environmental protection, and conflict resolution, the Indian Ports Bill ensures that India’s port infrastructure remains competitive and capable of handling increasing trade volumes.
Addressing industry concerns
While these bills signal a transformative shift, industry representatives have voiced concerns about financial and tax burdens that continue to impede growth. Key among these is the need for relief in goods and services tax (GST) for overseas ship repairs, which remains a significant cost for Indian shipowners.
Additionally, tax breaks on salaries paid to seafarers could help improve cash flows and make the sector more attractive to skilled professionals. These measures, if implemented, could complement the legislative reforms and provide the sector with much-needed financial stability.
The government’s proposal to prioritise India-built ships for inland waterways and coastal operations must also be accompanied by financial incentives. This would encourage investment in domestic shipbuilding and ensure the long-term sustainability of the industry. Without such support, the ambitious goals set by the reforms may prove challenging to achieve.
Global alignment and future prospects
India’s maritime reforms are informed by best practices from global maritime hubs like the UK, Singapore, and Japan. By incorporating elements of these successful models, the proposed bills aim to position India as a major player in global shipping.
The Merchant Shipping Bill’s focus on salvage operations and maritime emergency response, coupled with the Coastal Shipping Bill’s emphasis on domestic trade integration, creates a robust framework for sectoral growth. Meanwhile, the Indian Ports Bill’s modernisation of port infrastructure ensures that India’s maritime facilities are equipped to handle increasing trade volumes.
The three bills collectively address critical gaps in India’s maritime ecosystem, from outdated regulations to environmental challenges and operational inefficiencies. By fostering ease of doing business, integrating coastal and inland waterway systems, and promoting sustainable practices, these reforms lay a strong foundation for India’s maritime resurgence.
However, to fully realise the potential of these legislations, the government must complement them with financial incentives, capacity building initiatives, and sustained stakeholder engagement. With timely implementation and a collaborative approach, these reforms could usher in a new era of growth and global competitiveness for India’s shipping sector.