IFSC entities should be freed from taking D G Shipping

MUMBAI: The International Financial Services Centres Authority (IFSCA) is urging the Central government to exempt entities operating within the tax-free International Financial Services Centre (IFSC) from the licensing requirements imposed by the Directorate General of Shipping (DGS) when leasing foreign-flagged vessels. This request comes as the government prepares to finalize regulations under the new Coastal Shipping Act, which governs the licensing of foreign vessels in Indian coastal waters.

An official from the IFSCA stated, “Leave IFSC entities out of the licensing requirement. When IFSC entities lease foreign vessels, they should not be subjected to taking permission from DGS.” The rationale behind this exemption is that these entities typically charter foreign vessels to either Indian companies in the Domestic Tariff Area (DTA), which would still require DGS approval, or to overseas entities that do not fall under Indian jurisdiction.

The Right of First Refusal (RoFR) policy, designed to support domestic fleet owners during public tenders by state-owned entities, remains unaffected by this proposed exemption. The IFSCA clarified that entities registered in the IFSC can only engage in time charters of foreign vessels and cannot undertake voyage charters under the current framework. This distinction is crucial, as it ensures compliance with existing regulations while promoting operational flexibility for IFSC entities.

New Coastal Shipping Regulations and Their Implications

On December 19, 2025, the Central government published draft rules for the Coastal Shipping (Licensing of Foreign Vessels) Rules 2026, which will be considered after a 30-day public review period. According to the Coastal Shipping Act, foreign-flagged vessels are prohibited from participating in coasting trade within Indian waters without a license from the DGS. This regulation also encompasses India’s export-import (EXIM) trade.

The IFSCA argues that the current licensing framework is a barrier to attracting Indian ship operators who are currently based overseas. The authority believes that exempting IFSC entities from licensing requirements will encourage these operators to return to India, thereby enhancing the domestic shipping industry. The official emphasized that the exemption would not compromise the RoFR policy, as it is designed to prioritize Indian-built, flagged, and owned vessels.

The government’s intent is to broaden the scope of operations within the IFSC by attracting entities engaged in international business. The revised RoFR rules, implemented in 2023, prioritize Indian-built and flagged vessels, followed by foreign-built, Indian-flagged vessels. This tiered approach aims to ensure that Indian operators benefit from lucrative coastal and government cargo contracts, which are often priced significantly above market rates.

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The IFSCA’s push for licensing exemptions for foreign vessel leasing is part of a broader strategy to revitalize the Indian shipping industry and attract international operators back to the domestic market. The proposed changes are expected to facilitate smoother operations for IFSC entities while maintaining the integrity of the RoFR policy.