2026 | Vol 2(3) | March

The Central Government has appointed March 15, 2026 as the date on which the provisions of the Coastal Shipping Act, 2025 (Act No. 20 of 2025), shall come into force. [S.O. 1243(E)]

The Coastal Shipping Act, 2025 received President assent on August 9, 2025 and was published on August 9, 2025. An Act to consolidate and amend the law relating to regulation of coastal shipping, promote coasting trade and encourage domestic participation therein, to ensure that India is equipped with a coastal fleet, owned and operated by the citizens of India for its national security and commercial needs, and for matters connected therewith or incidental thereto.

The Coastal Shipping Act, 2025, marks a transformative milestone in India's maritime history. Passed by Parliament in August 2025 and receiving Presidential assent on August 9, 2025, this legislation serves as the cornerstone for modernizing India’s domestic shipping sector. By replacing the outdated Part XIV of the Merchant Shipping Act, 1958, the 2025 Act provides a dedicated, streamlined legal framework designed to unlock the economic potential of India's 7,517 km (often cited as 11,098 km including island territories) coastline.

The Act is not merely a regulatory update; it is a strategic instrument intended to align India with global cabotage norms, reduce logistics costs, and transition the nation toward a more sustainable, water-based transport economy.

Objectives and Vision

The primary objective of the Coastal Shipping Act, 2025, is to foster a robust, self-reliant (Atmanirbhar) coastal shipping ecosystem. The Ministry of Ports, Shipping, and Waterways has set an ambitious target to increase coastal cargo traffic from current levels to 230 million metric tonnes by 2030.

Key visions include:

Decarbonization: Shifting cargo from road and rail to sea—the most energy-efficient and eco-friendly mode of transport.

Logistics Efficiency: Reducing India’s logistics cost from double digits to roughly 8% of GDP.

National Security: Building a domestic fleet owned and operated by Indian citizens to ensure supply chain resilience during geopolitical crises.

Employment: Generating thousands of jobs in shipbuilding, port services, and vessel manning.

Key Provisions of the Act

The Act comprises six chapters and 42 clauses, consolidating rules that were previously fragmented across various statutes.

Liberalized Licensing for Indian Vessels

The most significant "Ease of Doing Business" reform is the abolition of general trading licenses for Indian-flagged vessels.

Indian Vessels: Under Section 3, vessels wholly owned by Indian citizens, Indian companies, or registered co-operative societies no longer require a license to engage in coastal trade. This removes a major bureaucratic hurdle for domestic operators.

Expanded Ownership: The Act broadens the definition of "Indian vessel" to include ships owned by Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and Limited Liability Partnerships (LLPs).

Regulation of Foreign Vessels

To protect domestic interests while allowing for capacity gaps, the Act maintains strict oversight over foreign participation:

Mandatory Licensing: No foreign vessel can engage in coastal trade without a specific license from the Director General of Shipping (DGS).

Conditions for Entry: Before granting a license to a foreign ship, the DGS must consider the availability of Indian-flagged vessels on that route, safety concerns, and national security.

Shipbuilding Incentives: The DGS may impose conditions on foreign licenses that encourage the hiring of Indian crew or the use of Indian shipyards for repairs.

National Coastal and Inland Shipping Strategic Plan

Section 8 mandates the creation of a National Strategic Plan within two years of the Act’s commencement.

Integration: This plan will integrate coastal routes with India’s 111 National Waterways, creating a seamless multimodal transport network.

Biennial Updates: The plan will be revised every two years to adapt to changing market conditions and technological advancements.

Cooperative Federalism: The plan is developed by a committee including representatives from State Maritime Boards and Major Ports, ensuring that the interests of coastal states are represented.

Digital Governance: The National Database

The Act introduces a National Database for Coastal Shipping. This electronic portal will maintain real-time data on:

Vessel registrations and license status.

Cargo types and voyage routes.

Port availability and traffic forecasts. This transparency is intended to boost investor confidence by providing authentic data for market analysis and infrastructure planning.

Scope and Definitions

The Act provides a modern definition of "Coasting Trade" and "Vessels" to cover the full spectrum of maritime activities.

Coasting Trade: Beyond just moving goods and passengers, it now includes "services" such as exploration, research, and any commercial activity in coastal waters (excluding fishing, which is governed by separate laws).

Vessels: The definition is technology-neutral, covering traditional ships, boats, sailing vessels, submersibles, hydrofoils, and mobile offshore drilling units.

Coastal Waters: Includes territorial waters (up to 12 nautical miles) and the Exclusive Economic Zone (EEZ) for specific commercial purposes.

Enforcement and Penalties

The Act shifts from the colonial-era approach of criminalization toward a more effective civil penalty regime.

Increased Fines: Penalties for operating without a license have been raised from a symbolic ₹1,000 to up to ₹15 lakh, or four times the gains from the illegal voyage, whichever is higher.

Detention: Authorities (including the Coast Guard and Navy) are empowered to detain vessels that violate safety norms or operate without valid documentation.

Compounding of Offences: To reduce litigation, certain technical violations can be settled through compounding, allowing businesses to resolve disputes without lengthy court battles.

Economic and Environmental Impact

Logistics and Multimodal Shift

Coastal shipping costs roughly ₹0.2–0.3 per tonne-km, compared to ₹1.0 for rail and ₹1.5 for road. By facilitating a shift to the sea, the Act directly lowers the cost of bulk commodities like coal, iron ore, and cement. This makes Indian manufacturing more competitive globally.

Environmental Benefits

Maritime transport accounts for significantly lower CO2 emissions per tonne-mile compared to trucking. The Act aligns with India’s "Maritime Amrit Kaal Vision 2047," which emphasizes green ports and the use of cleaner fuels in coastal vessels.

Strategic and National Security Importance

By encouraging a "citizen-owned" fleet, the Act reduces India's dependence on foreign shipping lines, which currently carry the majority of India's international trade. In times of global supply chain disruptions or conflict, a robust domestic coastal fleet ensures that essential goods (like fuel and food) can continue to move between Indian ports without external interference.

Conclusion

The Coastal Shipping Act, 2025, is a landmark piece of legislation that moves the Indian maritime sector from an era of "Control" to one of "Facilitation." By simplifying licensing, integrating inland waterways, and digitizing governance, the Act creates a fertile ground for private investment.

As India strives to become a USD 5 trillion economy, the efficient utilization of its "Blue Economy" via this Act will be pivotal. It transforms the coastline from a mere boundary into a vibrant highway for trade, innovation, and sustainable growth.

References:

Gazette of India: https://egazette.gov.in/(S(alxv4oy5luni554eyliqcgqv))/ViewPDF.aspx

Gazette of India: https://egazette.gov.in/(S(alxv4oy5luni554eyliqcgqv))/ViewPDF.aspx