The Coastal Shipping Act 2025, enacted in August 2025, replaced the coastal shipping provisions that had previously been embedded in the Merchant Shipping Act 1958. It is a standalone legislation governing the movement of goods and passengers along India's coastline of over 7,500 kilometres, and it introduces significant changes to how coastal trade is regulated.
This article explains what the Act does, who it affects, and what the practical implications are for shipping companies, traders, and logistics operators.
Why a Separate Act Was Needed
Coastal shipping, also called cabotage, is the movement of goods between ports within the same country. In India, coastal shipping has historically been reserved for Indian-flagged vessels, with foreign-flagged vessels requiring special permission to participate. The provisions governing this were scattered across the Merchant Shipping Act and various administrative notifications, creating a fragmented and sometimes unclear regulatory environment.
The government's Maritime India Vision 2030 identified coastal shipping as a key area for development. Moving freight from roads and railways to coastal shipping reduces logistics costs and eases pressure on land transport infrastructure. A dedicated, clear legal framework was seen as essential to enabling this shift.
Simplified Licensing for Indian Vessels
One of the most significant changes in the 2025 Act is the removal of the general trading licence requirement for Indian-flagged vessels engaged in coastal trade. Under the old framework, operating in coastal trade required a licence that involved procedural requirements that added friction and cost. The new Act removes this requirement, making it easier for Indian entrepreneurs and companies to operate ships in coastal trade.
This change is intended to increase the number of Indian-flagged vessels in coastal service and reduce dependence on foreign tonnage for domestic cargo movement.
Foreign Vessel Participation
Foreign-flagged vessels are not permitted to engage in coastal trade in India without a licence from the Director General of Shipping. This cabotage restriction is standard in most maritime nations. The 2025 Act maintains this restriction but provides a clearer framework for how licences are granted and what conditions can be attached to them.
The Director General of Shipping is empowered to impose conditions on licences granted to foreign vessels, including requirements to employ Indian crew or to use Indian shipbuilding facilities. This gives the regulator flexibility to use foreign vessel licences as a tool to promote domestic maritime industry development.
Foreign shipping companies that have previously operated in Indian coastal trade under general permits should review their position under the 2025 Act carefully. The licensing framework has changed, and operating without the correct authorisation now attracts significantly higher penalties than under the old regime.
Revised Penalties
The 2025 Act substantially increases the penalties for non-compliance. Operating in coastal trade without the required licence, which under the old Merchant Shipping Act attracted a maximum fine of Rs. 1,000, now attracts a penalty of Rs. 15 lakh or four times the value of the payment received, whichever is higher. This represents a fundamental change in the enforcement posture of the legislation.
The emphasis in the new penalty framework is on monetary penalties rather than imprisonment, except in serious cases. This reflects a broader policy approach of making penalties commercially meaningful for shipping companies rather than primarily relying on criminal sanctions.
National Database for Coastal Shipping
The Act mandates the creation of a National Database for Coastal Shipping providing real-time data on vessels, routes, and licensing. This is a practical tool for regulators, port authorities, and logistics planners. It also improves transparency for businesses seeking to understand the availability of coastal shipping capacity for their cargo.
Strategic Planning Requirement
A notable feature of the 2025 Act is the requirement for a National Coastal and Inland Shipping Strategic Plan to be prepared within two years of the Act coming into force. This plan is intended to integrate coastal shipping with inland waterways, creating a multimodal freight network. For businesses operating in manufacturing, bulk commodities, and heavy industry, this network, once developed, could offer significant logistics cost advantages compared to road transport.
Practical Steps for Businesses
Shipping companies currently operating in coastal trade should verify that their licences and authorisations are compliant with the new Act. Cargo owners who use coastal shipping as part of their supply chain should understand how the new framework affects their carriers. Foreign operators who have previously received ad hoc permits to operate in coastal trade should seek specific advice on their position under the 2025 Act.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. It does not create a lawyer-client relationship. For advice specific to your situation, please consult a qualified legal professional. LawCite Advocates is a law firm registered in India.