Parliament Approves Historic Merchant Shipping Bill to Transform India’s Shipping Industry, ETInfra

MUMBAI: The Rajya Sabha on Monday passed the new

The Merchant Shipping Bill, 2025 (A cargo ship full of shipping containers – Representational Image) Merchant Shipping Bill, clearing the decks for the government to overhaul a more than six decades old law governing the nation’s shipping sector that had restrictions on registering ships under the Indian flag and stalled growth.

The Bill was passed by the Lok Sabha last week and when signed into law by the President, it will facilitate reforms relating to ownership of ships that can be registered in India, a step that is aimed at boosting India’s below par shipping tonnage.

The passage of the Merchant Shipping Bill is the latest in a series of initiatives taken by the Narendra Modi-led government to overhaul old legislation and rules relating to the maritime sector and bring them up to date with modern day realities.

The Bill seeks to promote ease of doing business in the maritime sector, increase India’s tonnage, strengthen the country as a bankable shipping jurisdiction, enhance welfare of Indian seafarers, improve adjudication and predictability of claims.

It will help expand the ownership criteria of Indian vessels, allowing Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), joint ventures and body corporates to make investments in India and own vessels under the Indian flag.

It will facilitate registration of a foreign vessel chartered on a so-called bareboat charter cum demise (BBCD) contract by an Indian charterer.

BBCD is a form of financing ship acquisition, whereby the purchase is typically done by paying one-fourth of the total cost of the vessel as down payment while the balance is paid in instalments over the demise period, typically ranging from three-five years.

Currently, a BBCD ship is allowed be converted to an Indian flag ship only when the last instalment is paid to the overseas owner. Till then, it flies the flag of the jurisdiction where it is registered.

The Ministry plans to permit ships acquired through the BBCD route to be registered even before the last instalment is paid.

“These reforms are aimed at encouraging investors, including smaller investors, to make investments in the shipping sector by way of ownership or joint ownership, resulting in increasing the Indian tonnage,” said Sarbananda Sonowal, Union Minister of Ports, Shipping and Waterways.

It allows registration of Indian flagged vessels without the need to visit Indian ports.

The Bill enables electronic means of registration, and grants statutory recognition to electronic agreements, records, and logbooks, in addition to electronic licenses, certificates and payments. The Bill also includes an enabling provision to notify an electronic database for inspections and conducting inspections based on ship risk profiles attributed to ships, thereby creating an efficient Port State Control and coordinated inspection mechanism.

These measures are aimed at increasing the country’s shipping tonnage and help tap a larger slice of international trade, a government official explained.

In 2022, India was ranked 18th globally in ship owning, controlling a meagre 1.4 per cent of the global tonnage. In comparison, India’s export-import (EXIM) trade is about 11 per cent of the global seaborne cargo trade, and this share is expected to rise to 30 per cent by 2047.

In FY20, India paid $85 billion in sea freight, of which some $75 billion was paid to foreign shipping companies, resulting in a huge outflow of foreign exchange. This is because the share of overseas cargo carried by Indian flagged vessels has dwindled from 40.7 per cent in 1988 to less than 5 per cent now.

Between 2008 and 2021, the reliance on foreign fleets for hauling export-import cargo led to outbound freight charges of a whopping $637 billion, according to a document prepared by the Ministry of Ports, Shipping and Waterways.

Risk of reliance on foreign fleet in geo-political situations may result in food and energy security disruptions, the document added.

Outlining the benefits of having a robust national shipping fleet, the Ministry said it would mitigate “supply chain disruptions and unforeseen geopolitical risks such as the COVID pandemic, Russia-Ukraine conflict and the Red Sea crisis”.

It would make Indian shipping “Atmanirbhar and globally recognized” besides enhancing the share of transport services in the export basket from 12 per cent.

Expanding India’s shipping tonnage is estimated to cost some ₹55 lakh crore, according to the Maritime Amrit Kaal 2047 Vision document.

About 95 per cent of India’s trade by volume and about 70 per cent by value is hauled via sea routes. A robust maritime sector is thus indispensable for realizing the vision of a $5 trillion economy and cementing India’s position as a global economic powerhouse, Sonowal added.

• Published On Aug 11, 2025 at 07:19 PM IST

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