The Government of India is considering a calibrated policy framework that would allow entities operating from GIFT City to register ships both overseas and domestically in equal proportion, as it seeks to strike a balance between industry demands and safeguarding national shipping capacity.
According to officials, the proposal under discussion would permit GIFT City-based companies to adopt a “one-in, one-out” model—registering one vessel under a foreign flag and the next under the Indian registry. The approach mirrors elements of the Indian Controlled Tonnage (ICT) scheme introduced in 2014, which enabled Indian shipping firms to flag out vessels while retaining operational control within India.
Unlike the Domestic Tariff Area (DTA) regime—where fleet owners must first build and maintain Indian-flag tonnage before registering up to 50% abroad—the proposed framework for GIFT City entities would relax the initial requirement of compulsory domestic registration. “We are exploring a model where parity is maintained between foreign and Indian registrations without stringent preconditions,” a government official said.
The move follows representations by the International Financial Services Centres Authority (IFSCA), which has sought regulatory relaxations under the Merchant Shipping Act, 2025. The regulator has pushed for greater flexibility in ship flagging to enhance the attractiveness of GIFT City as a global ship leasing and financing hub.
IFSCA has also urged the Ministry of Ports, Shipping and Waterways to remove licensing requirements for GIFT City firms chartering foreign-flag vessels. Currently, under the Coastal Shipping Act, 2025, Indian entities—including companies, LLPs, and NRIs—must obtain a licence from the Directorate General of Maritime Administration to charter foreign ships for coastal operations, export-import (EXIM) trade, or even international cross-trade.
While the government is inclined to ease norms, it has opted for a middle path. It is expected to soon allow GIFT City entities to charter foreign-flag vessels for exclusive overseas operations without requiring a licence. However, this relaxation will not extend to EXIM or coastal trade, reflecting concerns about regulatory arbitrage and its potential impact on domestic operators.
The twin demands from GIFT City stakeholders had raised apprehensions within the government. Officials fear that unrestricted overseas registration could trigger similar demands from DTA-based fleet owners, potentially eroding India’s shipping tonnage at a time when capacity expansion is a national priority.
To address these concerns, the government has also clarified that entities choosing to register ships abroad may not be eligible for benefits under the Right of First Refusal (RoFR) policy. RoFR provides cargo support to Indian shipping companies in tenders floated by state-run firms.
“If companies opt for foreign jurisdictions to avail tax benefits and flagging advantages, they cannot simultaneously seek RoFR benefits,” an official noted, underscoring the need for policy consistency.
The RoFR framework, last revised in October 2023, prioritises Indian-built, Indian-flagged, and Indian-owned vessels, followed by Indian-flagged ships owned by GIFT City entities. The revised hierarchy was introduced to accommodate emerging ownership structures while retaining a clear preference for domestically registered tonnage.
Industry stakeholders have welcomed the government’s balanced stance. The Indian National Shipowners Association (INSA), representing DTA-based fleet owners, had opposed a blanket relaxation for GIFT City entities, citing risks of regulatory circumvention.
The proposed “middle path” is thus seen as an attempt to harmonise the interests of two competing constituencies—GIFT City-based global leasing players and traditional domestic shipowners—while advancing India’s ambitions to become a maritime and financial hub without compromising its shipping base.
