Shippers Say India’s New Coastal Law Delivers More Rules, Not Gains
The Coastal Shipping Act 2025 was billed as a logistics game-changer. Months later, industry insiders call it business as usual.
The Gist
India's Coastal Shipping Act, 2025, aims to modernise coastal trade but faces criticism for limited benefits.
- Replaces the outdated Coastal Shipping Act of 1838, focusing on modern regulations.
- Industry insiders argue the Act merely codifies existing practices without addressing key bottlenecks.
- Concerns over excessive discretion given to the DG Shipping could undermine Indian-flagged vessels.
When Parliament passed the Coastal Shipping Act, 2025 in August, the government hailed it as a milestone — a law to replace a colonial-era relic and finally give India’s coastal trade its own modern regulatory backbone. Officials spoke of unclogging roads, reducing logistics costs, and giving Indian-flagged ships priority on domestic waters.
India’s extensive coastline, if utilised, could be a game-changer for logistics. The new law was aimed at modernising and regulating India’s coastal shipping, promoting safer, faster, and more efficient movement of goods along the coast.
Months later, shippers, shipowners, and maritime veterans reveal a different story — one of limited benefits, heightened compliance, and little real relief for those moving cargo along India’s 7,500-km coastline. For all its fanfare, the Act is struggling to convince the very people it was designed to serve.
What Changed and Why It Matters
The starting point for reform was almost symbolic. The earlier Coastal Shipping Act of 1838, born under the East India Company, had been patched over time but never comprehensively updated.
The Coastal Shipping Act of 1838 was outdated and ill-suited for modern India. Its framework focused on colonial-era trade, covering only traditional cargo ships, while newer categories, such as barges, rigs and passenger ships, were excluded and not covered under that law. Instead, they ended up being regulated under a patchwork of other laws.
Coastal trade rules were buried within the broader Merchant Shipping Act of 1958, creating regulatory confusion, and enforcement mechanisms were weak, making compliance easy to overlook. Inflexible and archaic, the law could not keep pace with the growth, technology, and complexity of India’s contemporary coastal shipping sector.
The new law repeals the Coastal Shipping Act of 1838, finally separating coastal trade rules from the Merchant Shipping Act, 1958. It widens the scope to include barges, jack-up rigs, and accommodation vessels, while strengthening penalties for violations.
The Merchant Shipping Act is India’s primary law governing ocean-going and international shipping, which encompasses nearly all aspects related to ships that sail beyond Indian coastal waters — from their construction and registration to crewing, operation, and the procedures in place in the event of maritime incidents.
On paper, it looks like a long-overdue clean-up. But industry insiders argue it merely codifies existing practices without solving bottlenecks.
“Honestly speaking, I don’t see how this is going to help in any way to ameliorate or alleviate the requirements of a coastal shipper,” said John Mathews, a shipping veteran with three decades in the sector.
He gave a simple example: moving 1,000 containers of tiles from Gujarat to Kerala. Today, only large vessels can carry that kind of load in a single trip — but most of those are foreign-owned. India’s coastal ships are small, so they end up making multiple voyages, which defeats the cost advantage.
“If the big cargo is anyway moving on foreign-flagged ships along our coast, the Indian coastal shippers and the new act have no role here?” Mathew said. “The Coastal Shipping Act alone cannot ease cargo movement. You need larger ships and a supportive regulatory framework.”
The foreign carriers operate most large vessels, and the smaller ships that handle daily coastal trade simply cannot transport cargo like 1,000 containers.
“The new act doesn’t address construction rules, flagging norms, or administrative ease. Without those, shipping is going to remain as usual,” Mathews added.
Mathews said that the act focuses heavily on penalties, ensuring shipowners and cargo owners “follow rules they were already following.” In his view, it amounts to codifying the status quo rather than enabling growth.
The Government’s Pitch
Inside the corridors of the Directorate General of Shipping (DG Shipping), the act is viewed as transformative.
“Through this legislation, we have built in safeguards to ensure coastal shipping develops in line with national needs,” said Ravi Kumar, a senior DG Shipping official.
He highlighted four pillars:
- National strategy: A Coastal and Inland Shipping Committee will draw up five-year strategies to align industry, state governments, and regulators.
- Digitalisation: A centralised portal will handle all licensing and permits, reducing paperwork and discretionary delays.
- Indian preference: The act reaffirms cabotage restrictions, giving Indian-flagged vessels first rights on domestic cargo, though the DG Shipping retains powers to allow foreign ships if capacity falls short.
- Financing support: The Maritime Development Fund, announced during the 2025 Budget, promises cheaper capital for small and medium shipowners, traditionally priced out by high vessel construction costs.
From the government’s standpoint, this is a balancing act: supporting Indian shipping, ensuring cargo keeps moving and keeping pace with environmental and safety norms. “It will modernise shipping much like Sagarmala modernised ports,” Kumar added.
The Sagarmala Project was launched in 2015 to improve port infrastructure, develop new ports, enhance logistics efficiency, and promote industrial growth along the coastline. The project seeks to reduce transportation costs, decongest roads and increase the share of coastal and inland shipping in the country’s freight movement.
A Law With Too Much Discretion?
Yet for industry insiders like Abhijit Singh, a retired naval officer turned shipping consultant, the devil lies in the details.
“The DG Shipping has been handed wide, arbitrary powers to suspend or revoke licences on grounds of ‘national interest.’ There are no clear criteria, no appeal process. That is a recipe for lobbying and regulatory capture,” he said.
The law allows DG Shipping to make exceptions to cabotage, ostensibly to prevent cargo bottlenecks. But shippers fear this discretion could undermine Indian-flag operators and perpetuate dependence on foreign vessels.
Cabotage rules give priority to Indian-flagged ships for transporting cargo along domestic waters. If DG Shipping frequently allows exceptions, foreign vessels can carry coastal cargo instead, reducing business for Indian operators. Over time, this could weaken the domestic fleet, making India dependent on foreign ships for coastal trade.
Federalism is another sore point. Coastal states, which handle port infrastructure, fisheries, and coastal communities, find themselves sidelined. “The centre has centralised powers in the name of national coordination, but coastal trade is inherently regional. States will now be mere implementers,” Singh added.
Compliance, too, is a sticking issue. The act expands reporting, environmental, and equipment mandates. For large players, that is manageable. For small operators, already on thin margins, it could be crippling.
Data Check
The backdrop to this debate is India’s stubbornly low share of coastal shipping in freight movement.
Some of the existing coastal shipping routes are:
Cochin → Beypore → Azhikkal (Kerala) (later Kollam)
Kandla / Pipavav → South Sector (Cochin - Mangalore - Tuticorin); also Kandla → East Sector (Chennai – Vizag – Krishnapatnam); Kandla → East (Kakinada - Paradip - Haldia)
Despite a coastline that could rival China’s, coastal shipping accounts for only 6–7% of India’s domestic cargo. In contrast, China moves over 25% of its domestic freight by water.
Road and rail still dominate India’s logistics, driving up costs to 13–14% of GDP, compared with 8–9% in advanced economies.
Government strategies, from Sagarmala to the National Logistics Policy, have consistently pitched coastal shipping as the low-cost, greener alternative. But cargo owners remain unconvinced — pointing to limited frequency, high port charges, first- and last-mile bottlenecks, and the absence of dedicated coastal infrastructure.
“The law alone cannot shift cargo to the coast. You need vessels, competitive tariffs, and last-mile connectivity. None of that has been addressed,” Singh said.
What India Isn’t Fixing
For Mathews, the real problem is structural. “If you apply the same rules to coastal shipping as to international shipping, it won’t work,” he argued.
Classification rules: The Indian Register of Shipping follows international norms designed for deep-sea voyages. “But a vessel operating within 12 miles of the coast doesn’t need the same costly specifications as one crossing the North Sea. China and Japan have separate rules for coastal vessels. India doesn’t,” Mathew said.
Administration: DG Shipping applies IMO norms, rules and standards set by the International Maritime Organisation (IMO), across the board, creating regulatory overkill for near-shore operators.
Vessel construction: Building vessels in India remains prohibitively expensive, with no targeted subsidy or regulatory relaxation for coastal craft.
“If India realises this and follows the Chinese or Japanese model, maybe we’ll make headway. But the Coastal Shipping Act doesn’t touch these fundamentals,” Mathews said.
The Road Ahead: Reform or Stagnation?
To its credit, the government has promised supportive steps — a Maritime Development Fund, easier ship registration at GIFT City, and a digitalised licensing portal.
But industry watchers remain cautious. “All this sounds good on paper. But unless the DG Shipping enforces rules with fairness and transparency, the trust deficit will remain,” Singh said.
Shippers, meanwhile, are pragmatic. “We are dependent on foreign vessels, whether we like it or not. That won’t change overnight. But at least coastal vessel administration, construction rules, and compliance norms are within our control. Those are the levers India must pull,” Mathews said.
For now, coastal shipping remains India’s untapped highway — promising in theory, underwhelming in practice. “Unless you take a larger perspective — vessels, flags, administration — this law will do little. It codifies the old, without enabling the new,” Singh said.
