Centre Scraps Partial Cabotage Relaxation for Foreign Ships, Citing Failure to Meet Objectives

With this move, the government has effectively rolled back the partial relaxation of India’s cabotage regime, under which coastal trade is reserved for Indian-flagged vessels, with foreign ships permitted only in the absence of suitable domestic tonnage. The revocation will come into force three months from January 21, providing stakeholders time to transition to the revised regulatory framework.

The Ministry of Ports, Shipping and Waterways said the decision followed an extensive review, public consultations, inputs from trade bodies and a detailed assessment by the DG Shipping, which found that the objectives of the 2018 orders had not been achieved.

The three general orders were introduced to reduce the transshipment of Indian EXIM cargo through foreign ports, lower freight costs, improve container availability and foster a competitive ecosystem for Indian shipping and logistics. However, the Ministry noted that representations from stakeholders pointed to persistent challenges.

“Transshipment of Indian containerised cargo through foreign ports has not decreased, nor has the cost for Indian exporters and importers been significantly reduced,” the Ministry said in its January 21 order.

It further observed that the anticipated increase in feeder capacity and availability of empty containers did not materialise, while the Indian-flagged container fleet stagnated, discouraging fresh investment. Issues such as higher freight costs, container shortages and predatory practices by foreign carriers were also highlighted by stakeholders.

The Ministry noted that Indian trade remains heavily dependent on foreign-flagged vessels, exposing exports to external market forces. “The continued lack of a substantial Indian container fleet has hindered India’s ability to reduce dependency on foreign carriers, impacting efforts to retain foreign exchange and promote domestic shipping,” it said.

Promoting Indian shipping tonnage and ensuring seamless coastal and international cargo movement are critical to achieving India’s $1 trillion goods export target by 2030, the Ministry added.

Following the revocation, provisions under Sections 406 and 407 of the Merchant Shipping Act, 1958, along with existing rules, regulations and guidelines, will continue to apply to foreign vessels engaged in containerised cargo transportation, subject to relaxations notified in May 2018.

The move aligns with the Maritime Amrit Kaal Vision 2047, which had called for revisiting cabotage relaxations to strengthen India’s domestic shipping sector. The Ministry also noted that recent policy initiatives—such as granting infrastructure status to large ships and approving a ₹25,000-crore Maritime Development Fund to support shipping and shipbuilding—have reduced the relevance of partial cabotage relaxations.

The decision also comes ahead of the proposed launch of the Bharat Container Shipping Line, a joint venture involving Shipping Corporation of India (SCI), Container Corporation of India (CONCOR), VOC Port Authority, Chennai Port Authority and Kamarajar Port Ltd.

Anticipating the policy reversal, global container shipping lines have begun flagging vessels in India. CMA CGM and A.P. Moller-Maersk converted four and two vessels, respectively to the Indian flag in 2025, while Mediterranean Shipping Company (MSC) is in the process of registering around a dozen foreign-flagged ships under the Indian registry.

The DG Shipping underscored the importance of ensuring cargo owners have access to competitive freight services while promoting Indian shipping through incentives and regulatory support. Such measures, it said, could enhance service reliability, foster competition and positively influence freight rates.

The regulator noted that between 2013 and 2018, Indian container shipping showed steady growth, with a gradual increase in Indian-flagged vessels, employment opportunities for Indian seafarers and potential for domestic container manufacturing. However, following the introduction of the 2018 orders, the sector entered a phase of stagnation and decline.

Today, only about 36 container ships are registered under the Indian flag, nearly half of which are owned and operated by Indian companies. During pandemic-era supply chain disruptions, global carriers earned windfall profits, while Indian-flagged vessels struggled to compete.

According to the DG Shipping, higher operational and capital costs, compounded by domestic fiscal structures, have further eroded the competitiveness of Indian operators, leading to a growing reliance on foreign vessels.

The regulator stressed that protecting smaller players in markets dominated by large global carriers is essential for maintaining competitive pricing, fostering innovation and ensuring market resilience. A diversified shipping ecosystem, it said, reduces vulnerability to disruptions and benefits consumers through fair pricing and better service quality.

“By promoting a diverse market structure and implementing policies that level the playing field—such as tax incentives, access to finance and regulatory support—India can build a more equitable, resilient and competitive maritime sector,” the DG Shipping added.