The Transport Finance Law Review: India


The transportation industry – aviation, shipping and rail – has been predominantly owned by government entities since India's independence in 1947. Historically, Air India and Indian Airlines (now merged into Air India Limited), both government-owned entities, ruled the skies. The Shipping Corporation of India Limited (SCI), which was established in 1961 and owned by the government, owned and operated around one-third of the Indian tonnage. All railway property has always exclusively been government-owned.

However, this trend has been changing. The government has taken up disinvestment through minority stake sale (i.e., retaining ownership of at least 51 per cent of the shareholding and management control) or even strategic sale of a substantial portion (50 per cent or more) of the government shareholding along with transfer of management control of certain identified central public sector enterprises. The Air India strategic disinvestment transaction has now been completed and India's Tata Group has taken control of the state run carrier by offering US$2.4 billion to acquire 100 per cent shares, ending years of struggle to privatise the financially troubled airline. The government is also aggressively pursuing strategic disinvestment in the Shipping Corporation of India and Pawan Hans.

i The transport finance industry

Shipping and aviation are global industries, with cyclical ups and downs. Indian entrepreneurs, in the context of other industries, have not considered these sectors as safe havens for their investments. Both are also dollar-based industries, and global banks tend to focus on large fleet owners of aircraft and ships, which are rare in India. The financing costs of the Indian banks are not competitive in terms of global financing, as interest rates are quite high.

Owing to the vast difference in the costs of domestic borrowing and external commercial borrowing (ECB), Indian companies have for a long time obtained finance for the acquisition of ships and aircraft from foreign banks and financial institutions such as DNB Bank ASA, ING Bank NV, BNS Asia Limited, Bank of America NA located predominantly in Singapore, Hong Kong and Dubai. Indian banks such as SBI, ICICI and Axis Bank also provide finance through their offshore branches. The regulations governing ECB are framed by the Ministry of Finance and the Reserve Bank of India (RBI), and ECB borrowed by Indian companies to finance the cost of acquisition of ships must be in accordance with the Foreign Exchange Management Act, 1999 and the rules, regulations, guidelines, notifications and circulars issued thereunder.

The covid-19 pandemic has disrupted the world economy, including the maritime and aviation sector globally. However, with the easing of restrictions and normality slowly resuming, the country's civil aviation sector has almost reached the pre-covid level in terms of traffic. The overall freight handled by the country's airports during the first two quarters of the financial year 2022 (combined) recovered more than 80 per cent of the pre-pandemic level.

The Indian shipping industry is also reviving from the impact of the covid-19 pandemic. The post-pandemic slack is not for long and the boost impetus provided by the Indian government in the form of subsidies and capital investment for this sector shall bear fruits in the following years.

ii Recent changes

The importance of technology, digitalisation and automation became reinforced during the pandemic. Furthermore, to improve the ease of doing business in India, the RBI has further liberalised the ECB framework. In its attempt to simplify the old ECB framework and influence the inflow of foreign debt, the RBI has further expanded the list of eligible borrowers, widened the list of recognised lenders, reduced the minimum average maturity period to three years and set a uniform individual limit of US$750 million in a financial year for eligible borrowers, applicable across both types of ECB. The end use of the ECB has also been liberalised, and the ECB proceeds may be utilised for any purpose save and except for a prescribed negative list. The RBI has also reduced the mandatory hedging requirement from 100 to 70 per cent under the foreign currency-denominated ECB option for those entities covered under the term infrastructure space companies. To provide relief to ECB borrowers affected by the covid-19 pandemic, as a one-time measure, which took effect on 7 April 2021, RBI permitted the unutilised ECB proceeds drawn down on or before 1 March 2020 to be parked in term deposits with AD Category-I banks in India prospectively, for an additional period up to 1 March 2022.

Legislative framework

i Domestic and international law and regulation


Flag or mortgage registration

The registration of Indian ships and mortgages is governed by:

  1. the Merchant Shipping Act 1958 (MSA);
  2. the Merchant Shipping (Registration of Indian Ships) Rules 1960, as amended from time to time; and
  3. notifications issued by the Ministry of Shipping and the Directorate General of Shipping (DGS) under the MSA from time to time.

The Ministry of Ports, Shipping and Waterways has issued a draft of The Merchant Shipping Bill 2020 (the MS Bill) for public consultation that, inter alia, aims to repeal the MSA. The envisioned advantages of the MS Bill are the following:

  1. promoting ease of doing business – the MS Bill has removed the requirement of a general trading licence for Indian vessels;
  2. embracing digital technology – the MS Bill enables electronic means of registration, and grants statutory recognition to electronic agreements, records and log books, in addition to electronic licences, certificates and payments;
  3. increasing tonnage and vessel as a tradable asset – the MS Bill seeks to increase India's tonnage by widening the eligibility criteria for ownership of vessels and by providing for the registration of bareboat charter cum demise, thereby increasing opportunities for international trade;
  4. India as a bankable shipping jurisdiction and avoidance of situations leading to a wreck – the proposed MS Bill seeks to introduce for the first time a statutory framework for regulating the maritime emergency response against maritime incidents. The provisions seek to provide effective implementation of response mechanisms in order to ensure that the vessel is prevented from becoming a wreck or to prevent other catastrophic events;
  5. welfare of Indian seafarers on abandoned vessels and safety of abandoned vessels – provisions for repatriation of abandoned seafarers have been enhanced, in line with the MLC regulations;
  6. strengthening adjudication and predictability of claims – to strengthen the investigation and adjudication of claims arising out of a collision between vessels, assessors may be tasked by the High Courts to present their findings on the degrees of fault of each vessel; and
  7. India as an active enforcement jurisdiction – the MS Bill incorporates powers of the Director-General to take action against vessels that are unsafe and that pose a threat to the safety of life at sea and to the environment, and includes a procedure for appeal from detention orders. The MS Bill also incorporates provisions that encourage active enforcement of pollution prevention standards and the central government has been granted the power to mandate compulsory insurance or such other financial security for pollution damage.

Indian shipping companies can own foreign-flagged ships subject to compliance with the DGS guidelines. The Indian-controlled tonnage scheme allows shipowners based in India to acquire ships abroad and flag them in the country of their convenience – typically tax-friendly jurisdictions to help access competitive sources of funds – while achieving fiscal and cargo benefits available in India.

Under India's stringent cabotage policy, no foreign ship can engage in coastal trade between two Indian ports except under a licence issued by the DGS. However, the cabotage policy was also relaxed to allow foreign-flagged vessels carrying passengers to call at more than one Indian port for a period of 10 years (i.e., from 6 February 2009 to 5 February 2019) without obtaining a licence from the DGS. This relaxation period was further extended for a period of five years (i.e., up to 5 February 2024). In 2018, the cabotage policy was further relaxed in relation to foreign-flagged ships engaged in the following coastal activities:

  1. transportation of EXIM export–import laden containers for transshipment and transportation of empty containers;
  2. carriage by sea of prescribed agricultural, fisheries, animal husbandry and horticultural commodities; and
  3. carriage by sea of fertilisers.

Such relaxation of the cabotage rules has attracted more containerised cargo and resulted in the growth of the shipping industry, allowing India to compete internationally with other countries in terms of international shipments. Foreign shipping companies shall be able to take cargo directly from one port to another, which will allow them to accommodate more containers. Relaxation has encouraged farmers to access a larger market, widen the range of goods and products and provide a greater distance for conducting domestic trade. Cabotage relaxation shall also help in acquiring a 5 to 7 per cent cost saving for the cotton and textile industry, as it will help it export goods from domestic ports itself.

Admiralty proceedings

The Admiralty (Jurisdiction and Settlement of Maritime Claims) Act 2017 (the Admiralty Act), which came into force on 1 April 2018, consolidates the existing laws relating to admiralty jurisdiction of courts, admiralty proceedings on maritime claims and arrest of vessels, and stipulates the order of priorities for maritime claims and liens inter se as well as other claims and related issues.

The Admiralty Act has a retrospective application, and therefore all admiralty proceedings pending before commencement of the statute in the concerned High Courts, as well as all actions initiated, and even the by-laws, rules framed and notices issued under the repealed enactments, will now be adjudicated by the provisions of the Admiralty Act, so long as they are not inconsistent with the provisions of the same.

The Admiralty Act confers admiralty jurisdiction on High Courts of coastal states. This jurisdiction extends up to Indian territorial waters. The central government is empowered to further extend, by notification, up to the exclusive economic zone or any other maritime zone of India or islands constituting part of the territory of India. The Admiralty Act covers every vessel irrespective of the place of residence or domicile of owner.

India has adhered to the 1952 Arrest Convention and 1999 Arrest Convention and accordingly, under the Admiralty Act, arrest can be sought for all claims that have been included in the definition of the term maritime claims under the 1999 Arrest Convention. Additionally, under the Admiralty Act, the following maritime liens are also treated as maritime claims for which an arrest can be sought:

  1. claims for wages and other sums due to the master, officers and other members of the vessel's complement in respect of their employment on the vessel, including costs of repatriation and social insurance contributions payable on their behalf;
  2. claims in respect of loss of life or personal injury occurring, whether on land or on water, in direct connection with the operation of the vessel;
  3. claims for reward for salvage services, including special compensation relating thereto;
  4. claims for port, canal and other waterway dues and pilotage dues and any other statutory dues related to the vessel; and
  5. claims based on tort arising out of loss or damage caused by the operation of the vessel other than loss or damage to cargo and containers carried on the vessel.

While determining maritime claims under the specified conditions, the courts may settle any outstanding accounts between parties with regard to the vessel. They may also direct that the vessel or a share of it be sold. With regard to a sale, courts may determine the title to the proceeds of such sale. Maritime liens are given the highest priority among all claims, followed by mortgages and all other claims. In the case of maritime claims, a claim for wages is given the highest priority, followed by claims with regard to loss of life or personal injury, reward for services, port, canal and other statutory dues, and finally by claims based on a tort arising out of loss or damage caused by the operation of the vessel. Such claims shall continue to exist even with a change in the ownership, registration or flag of the vessel.

Courts may exercise admiralty jurisdiction against a person with regard to maritime claims. However, the courts will not entertain complaints against a person in respect of a damage or loss of life or personal injury arising out of any of the following: collision between vessels, the carrying out of or omission to carry out a manoeuvre in the case of one or more vessels, or non-compliance on the part of one or more vessels, with the collision regulations made in pursuance of the MSA, unless the cause of action, wholly or in part, arises in India; or the defendant, at the time of commencement of the action by the High Court, actually and voluntarily resided, or carried on business or personally worked for gain, in India.

Furthermore, courts will not entertain actions against a person until any case against them with regard to the same incident in any court outside India has ended.

The courts may order the arrest of any vessel within their jurisdiction for providing security against a maritime claim that is the subject of a proceeding. They may do so under various reasons, such as:

  1. the owner of the vessel is liable for the claim;
  2. the demise charterer of the vessel is liable for the claim;
  3. the claim is based on the mortgage or a charge of a similar nature on the vessel;
  4. the claim relates to ownership or possession of the vessel; or
  5. the claim is against the owner, demise charterer, manager or operator of the vessel and is secured by a maritime lien.

With regard to appeals, any judgments made by a single judge of the High Court can be appealed against a division bench of the High Court. Furthermore, the Supreme Court may, on application by any party, transfer an admiralty proceeding at any stage from one High Court to any other High Court. The latter High Court will proceed with the matter from the stage where it stood at the time of the transfer.

The Major Port Authorities Act 2021 (1 of 2021) came into force on 3 November 2021. The Act provides greater autonomy and flexibility to major ports and decentralises decision-making to ensure transparency in operations. The Act defines public–private partnership projects as projects taken up through a concession contract by the board on a revenue or royalty-sharing basis. It also creates an adjudicatory board for adjudication of disputes and to look into complaints received from port users.


The civil aviation sector is regulated by:

  1. the Aircraft Act 1934 and the Aircraft Rules 1937;
  2. the Airports Authority of India Act 1994;
  3. the Airports Economic Regulatory Authority of India Act 2008;
  4. the Civil Aviation Requirements, issued from time to time;
  5. the Convention on International Interests in Mobile Equipment 2001 and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment 2001 (Cape Town Convention);
  6. the Carriage by Air Act 1972;
  7. the Aircraft (Carriage of Dangerous Goods) Rules 2003;
  8. the Foreign Aircraft Exemption from Taxes and Duties on Fuel and Lubricants Act 2002;
  9. the Tokyo Convention Act 1975; and
  10. the Suppression of Unlawful Acts against Safety of Civil Aviation Act 1982.

The Cape Town Convention was ratified by India in 2008 to protect the interests of lenders and lessors involved in the financing of aircraft. It provides for the repossession of aircraft or collateral in the event of financial default by the lessee of the aircraft or borrower. It is pertinent to note that although the Cape Town Convention has been ratified, the government, except for certain amendments to the Aircraft Rules 1937 implementing relevant provisions of the Cape Town Convention relating to deregistration and export of aircraft, has not enacted any legislation as at the time of writing for implementing the Convention.

ii Specific practices

Real-time registration of mortgages over vessels cannot be done in India. Even if all documents required for registration of mortgage over a vessel are submitted to the Registry, registration of mortgages takes around 20–30 working days. Thus, lenders do not have a registered mortgage in their favour for this interim period. The mortgage shall be recorded in the order of time in which it was submitted for registration to the Registry.

Additionally, while the MSA permits enforcement of a mortgage by a sole mortgagee without intervention of the court, to gain a clean title to the vessel, free and clear of all claims, liens and encumbrances, and to avoid the mortgagee's exposure to claims from other parties as also to ensure cooperation of the master and crew, lenders are usually left with no choice but to enforce the mortgage through the admiralty courts.

In addition, pursuant to the General Insurance Business Act 1972, Indian entities are not allowed to insure any of their property in India, including any ship or aircraft registered in India, with insurers whose principal places of business are outside India, except with prior permission of the government. This restriction is not applicable in respect of types of insurance that are not offered by Indian insurance companies – for example, protection and indemnity insurance cover.

The Indian flag, although considered expensive, is still bankable with several international lenders, having lent funds to Indian shipowners such as SCI, the Great Eastern Shipping Company Limited, and Greatship (India) Limited.

Financial regulation

i Regulatory capital and liquidity

In accordance with the RBI guidelines, full implementation of the Basel III regulations in India was extended to October 2021, instead of 30 September 2020, on account of the continuing stress brought about by the covid-19 pandemic. The RBI has fixed the minimum Tier 1 capital ratio at 7 per cent of risk-weighted assets, of which 5.5 per cent must be common equity with Additional Tier 1 instruments (i.e., perpetual non-convertible preference shares and perpetual debt instruments rising to 6.125 per cent of risk-weighted assets from 1 April 12021).

The net stable funding ratio (NSFR) and liquidity coverage ratio are significant components of the Basel III reforms. The RBI, vide a notification dated 29 September 2020, stated that due to the constraints imposed by the covid-19 pandemic. The NSFR guidelines are now in effect.

ii Supervisory regime

Under the ECB regulations, whether under the automatic route or the approval route, Indian borrowers have to apply for and obtain loan registration numbers from the RBI. Monthly reporting of withdrawals, utilisation, repayment and other payments is required, including any revisions or modifications in the ECB, such as an increase or reduction in the loan amount or revisions to the schedule of disbursements, repayments or interest payments. Thus, the RBI governs and regulates the borrowing of funds and security, and also monitors the ECB until it is repaid, including enforcement of security.

Such stringent regulations have reassured foreign banks that borrowers' crucial activities are being overseen.

Security and enforcement

The ECB guidelines permit Indian borrowers to grant security of their choice to foreign lenders. Primarily, ships and aircraft for the acquisition of which the ECB is borrowed are secured in favour of the lenders. No approval is required from the RBI or authorised dealer for creation of a mortgage or charge over the ships and aircraft, or for the assignment of insurance or charter hire income of such ships and aircraft. Security over aircraft may also be created by way of hypothecation, fixed or floating charge, lien, pledge, retention of title, conditional sale and assignment.

Pursuant to the MSA, multiple mortgages can be created over a vessel, but the sole mortgagee of a vessel can enforce its rights over the vessel without the intervention of the court whereas, in the case of multiple mortgages registered over a vessel, a mortgage can only be enforced by applying to the competent court.

i Financing of contracts

Under Indian law, a mortgage can only be created over a vessel that has been provisionally or permanently registered with the Registrar of Ships and cannot be created over a hull under construction. Hence, financing of newly built ships is secured by the assignment of the shipbuilding contract executed between the shipbuilder and the borrower (i.e., purchaser) and the refund guarantees issued by the banks of the shipbuilders in favour of the lenders until such time as the ship is constructed and delivered to the borrower and registered with the Registrar of Ships.

ii Enforcement


A mortgage registered over an Indian vessel may be enforced in India or outside India. In India, a vessel can be arrested and sold through the admiralty courts in India by public auction, thereby vesting in the purchaser a clean title to the vessel, free and clear of all claims, liens and encumbrances. Port dues, admiralty marshal's costs and maritime liens ranking in priority, however, must be paid.

Under the MSA, the sole mortgagee may also enforce a mortgage by taking possession of the vessel and selling it to a third party without the involvement of the courts. Although in law a sole mortgagee has the right to proceed against and sell a vessel without the intervention of the courts, in reality, the cooperation of the master and crew is necessary. In addition, a private sale does not clear the title of the vessel of all claims and encumbrances, and the buyer of the vessel has to acquire the vessel subject to such claims and encumbrances.

A mortgage registered over an Indian vessel can also be enforced outside India, provided the loan documentation permits such enforcement. If the mortgage is enforced outside India, the foreign lender who has obtained a decree from a court in a foreign country can approach an Indian court for enforcement of the decree under the Civil Procedure Code 1908.

If a judgment has been obtained in any reciprocating territory, the same will be recognised and enforced by the courts in India without re-examination of the issues, provided the judgment is pronounced by a competent court and is on the merits and based on principles of international law, and not opposed to natural justice or founded on fraud or a breach of any Indian law.


The Cape Town Convention confers remedial rights on a lender when the facility has been charged and registered as per the Convention. The chargee can take possession of the aircraft from the lessee in the event of default. Because India is a signatory to the Cape Town Convention, the Directorate General of Civil Aviation (DGCA) will cancel the registration of the aircraft, thereby permitting the chargee to take possession of it.

In the event of financial default, the lessor may unilaterally terminate the agreement and repossess the aircraft or obtain an order from the district court having jurisdiction over the place at which the aircraft is located, for its repossession. The lessors are also required to have the aircraft deregistered from the DGCA prior to repossessing the aircraft. Unless there is an explicit provision in the Cape Town Convention requiring the chargee to seek leave of the court, India has declared that a chargee will not require leave of the court. This can be construed to imply that, even in the case of a bankruptcy of an Indian lessee, such chargee will not be required to obtain leave of the court to repossess the aircraft.

The DGCA requires the consent of the lessee to deregister the aircraft. It may also receive objections to such cancellation from government departments if they are owed money by the defaulting airlines. Moreover, even after deregistration of the lessor's aircraft by the DGCA, the Airports Authority of India may impose a lien on the aircraft for unpaid dues by way of, inter alia, ground rent and landing charges, and has the right to detain the aircraft. The aircraft are also sometimes impounded by the custom authorities for non-payment of custom duties, which can be a problem in the repossession of an aircraft by lessors.

In a matter brought by the service tax authorities relating to the attachment of engines belonging to Natixis, the High Court rejected the lien exercised by the service tax authorities. In another similar matter, the International Lease Finance Corporation challenged the attachment order passed under Section 87(c) of the Finance Act by the service tax authorities: the engines have now been redelivered. In the Natixis decision, the Court held that property owned by a third party cannot be attached for the dues payable by Kingfisher Airlines.

iii Arrest and judicial sale

Section 3 of the Admiralty Act states that the jurisdiction of all maritime claims under the Act shall vest in the respective High Courts and can be exercised up to and within their respective territorial jurisdiction.

Courts may, under the Admiralty Act, order the arrest of any vessel within their jurisdiction for providing security against a maritime claim that is the subject of a proceeding. The Act sets out a list of maritime claims that is similar to Article 1 of the Arrest Convention, 1999. The Admiralty Court also incorporates the following additional claims as maritime claims in relation to which a vessel can be proceeded against and arrested:

  1. port or harbour dues, canal, dock or light tolls, waterway charges and such like;
  2. particular average claims;
  3. claims by the master or crew or their heirs or dependents for wages, cost of repatriation or social insurance contributions;
  4. insurance premiums, mutual insurance calls;
  5. commission or brokerage agency fees payable by the vessel owner or demise charterer;
  6. environment damage claims or threats thereof; and
  7. wreck removal claims.

The prerequisite for an admiralty action for enforcing in rem rights is that the claimant must demonstrate that the res – the ship – is in Indian waters; hence, no action can be filed in anticipation of a ship that is yet to arrive. A substantive admiralty suit must be filed, unlike in other jurisdictions where only a writ need be entered. Further arrest of bunkers is not permissible in India. As per Indian law, bunkers are not considered to be maritime property. Bombay High Court in Mansel Limited v. The bunkers on board the Ship m v Giovanna Luliano & Ors did not accept the contentions of the arrestor that even in England, an admiralty court in exercise of its admiralty jurisdiction can order the arrest of bunkers on board a vessel.

The suit must be filed in the admiralty division of the High Court by submitting a complaint with full documentation. The High Court will schedule a hearing to consider the merits of the claim for arrest. The arrest warrant is issued by the sheriff's office, and is served on the vessel or the master, ports agent or customs authorities. A court sale is achieved by public auction conducted by the sheriff, inviting offers through advertisements in leading shipping papers such as Lloyd's List or Tradewinds. If the borrower contests the mortgage claim or other creditors apply to intervene in the proceedings, additional hearings are scheduled and the priorities of claim are determined. The order of maritime claims determining the inter se priority in an admiralty proceeding is determined under Section 10 of the Admiralty Act.

To protect owners or demise charterers of the arrested vessel from possible vexatious and frivolous claims, the High Court may, as a condition of arrest of the vessel, require the arrestor (the claimant) to provide an unconditional undertaking to pay damages or provide security for an amount to be determined by the Court for any loss or damage that the owner or demise charter may suffer as a result of the arrest, should the arrest subsequently be found to be wrongful or if the claimant demanded excessive security.

Current developments

i Recent cases


The Bombay High Court, presided over by Justice Sriram, passed a landmark judgment on 19 May 2020 in DVB Group Merchant Bank Asia Ltd v. GOL Offshore Ltd, ruling that the Admiralty Act, being a special act, prevails over the Companies Act when determining priorities of claim. It also held that no prior permission is required under the Company Law to commence proceedings under the admiralty jurisdiction against the assets of a company in liquidation, including the sale of a ship. The Court held that where there is a conflict between the Admiralty Act and the Companies Act regarding a priority of claims, the priorities under the Admiralty Act will prevail where there is such a conflict.

The Supreme Court in The Chairman, Board of Trustees, Cochin Port Trust v. M/s Arebee Star Maritime Agencies Pvt Ltd. & Ors held, inter alia, that port authorities cannot claim from a steamer agent for demurrage and ground rent, as was previously the practice. This judgment bears immense importance, as it changes the situation dramatically for steamer agents who have been adversely affected for years.

The Supreme Court in the landmark case of PASL Wind Solutions Private Limited v. GE Power Conversion India Private Limited has held that the two Indian parties can elect a foreign seat of arbitration. Such an award would be considered as foreign and the court had jurisdiction to grant interim measures with respect to the award.


Jet Airways (India) Limited entered into a corporate insolvency resolution process on 20 June 2019. The National Company Law Tribunal, Mumbai, by its order dated 22 June 2021, has accepted the resolution plan of Jalan-Kalrock Capital. Jet airways is the first airline to see a successful resolution plan under the Insolvency and Bankruptcy Code and plans to resume its domestic operations from Q1 2022 and short-haul international operations by Q3/Q4 2022.

In relation to a petition filed by the aircraft lessor of SpiceJet Limited on account of non-payment of lease rentals, the Delhi High Court issued an interim order on 22 September 2021 that prohibited SpiceJet from transferring its assets worth the decretal value to a different entity. The matter is currently sub judice before the Delhi High Court.

ii Developments in policy and legislation


The shipping industry is continuously changing and adapting to meet the needs of the commercial marketplace so that it can become more competitive and cost-effective. The shipping market is continually affected by global trends and by advances in technology, materials and fuels. There have been numerous significant initiatives in this industry including, among other things, the development of cargo handling capacity at major ports and a reduction of the average turnaround time of ships.

The following are a few of the recent trends and developments that illustrate the dynamic changes that are happening in the shipping industry, and the new opportunities that these create for marine businesses:

  1. the Marine Aids to Navigation Act, 2021 came into force on 2 August 2021. It seeks to provide a framework for the development, maintenance and management of aids to navigation in India. It repeals the Lighthouse Act, 1927, which provides for the maintenance and control of lighthouses in India;
  2. in the Federal Budget 2021–2022, the Finance Minister proposed to double the ship recycling capacity of 4.5 million light displacement tonnes (LDT) by 2024. The government also announced a subsidy worth US$218.40 million to Indian shipping companies to encourage merchant ship flagging;
  3. in the Maritime India Summit in March 2021, India announced 400 new projects in the maritime sector with an investment potential of US$30 billion for the development of the country's coastline. India has also released a 10-year maritime sector blueprint, 'Vision India 2030', which outlines its vision for the development of the sector. This vision includes setting up smart ports, the creation of a Maritime Development Fund (MDF) with a corpus of US$3.36 billion, and the establishment of a pan-India port regulatory authority. Upgradation and integration with recent technologies such as the intergrated government online training (IGoT) platform and blockchain to ease transactions, and real-time basis tracking has been envisaged in Maritime India Vision 2030;
  4. the privatisation of the shipping industry is increasing. The Ministry of Ports, Shipping and Waterways have launched a dispute redressal portal called 'SAROD-Ports' (Society for Affordable Redressal of Disputes – Ports) to help develop confidence in the sector. The Ministry also launched an indigenous software solution for vessel traffic services (VTS) and vessels traffic monitoring systems (VTMS), making strides towards the digitisation of the sector; and
  5. the Government of India introduced the Finance Bill, 2022 (the Bill) in the Lok Sabha on 1 February 2022. The Bill, among other things, proposes to incentivise the maiden International Financial Services Centre, which was established under the International Financial Services Centres Authority Act, 2019 (IFSCA) and is headquartered in Gujarat International Finance Tech – Hub (GIFT) City, Gujarat. Presently, any income of a non-resident by way of royalty or interest, on account of lease of an aircraft in a previous year, paid by a unit of an IFSC is exempt from being included in the taxable income of such non-resident person. The amendment to this section proposes to include income being accrued either through royalty or interest on account of lease of ships in addition to aircrafts. In other words, the amended sections would exempt from direct taxation any income received by a non-resident as a result of earnings on account of lease of an aircraft or a ship in a previous year, paid by a unit of an IFSC. The amendment would also exempt any earnings arising from the transfer of not only aircraft but also ships, which were leased by any unit of an IFSC set up in a Special Economic Zone (SEZ), provided that the concerned unit has commenced operation on or before the 31 March 2024 from direct taxation. The amendments proposed by the Bill appear to be a step in the right direction towards the government's endeavour to use the GIFT IFSC to propel India towards its goal to become the next global financial services hub. It can be reasonably anticipated that this move will attract foreign stakeholders to do business with GIFT IFSC and by extension with various parties in the Indian shipping industry. Once the Bill has been passed, the amendments will come into force on 1 April 2023.
Inland waterways

India has a vast riverine system that is underdeveloped and underutilised for the transportation of cargo. The government has realised the potential of India's inland waterways, and has directed the Inland Waterways Authority of India (IWAI) to make riverine transportation in India a reality. There is an enormous focus on the development of inland waterways, and the IWAI is going full throttle on reviving inland waterways to reduce logistics costs to less than 10 per cent of GDP – on par with developed countries such as Germany – from the current 14 per cent.

Bulk cargo such as coal, fly-ash and iron ore are economical and cost effective for movement via inland water transport (IWT), which is environmentally friendly and is a less polluting form of transportation than rail and road. The cargo via inland ship is transported in barges and there is no direct contact between the cargo and water and therefore there are no ecological impacts. The development of these waterways opens up new opportunities for business, such as:

  1. supplying dredgers;
  2. barges and cargo-handling equipment;
  3. the construction and management of terminals; and
  4. hydrographic services.

To promote IWT in India, 111 waterways (including five existing and 106 new) have been declared as national waterways (NWs) under the National Waterways Act, 2016.

The Inland Vessels Act, 2021 came into force on 11 August 2021 and repealed the Inland Vessels Act, 1917. The Act provides for the regulation of inland vessel navigation by states, including the registration of vessels, and the safe carriage of goods and passengers.

In July 2020, the shipping ministry waived waterway usage charges in a bid to promote inland waterways as a cheaper mode of transport. Water usage charges are applicable on the use of all national waterways by vessels, and the waiver, applicable immediately, will remain in effect for a period of three years. This will attract industries to use India's national waterways for their logistical needs. The decision is estimated to increase inland waterway traffic movement.

Port-led developments

The port sector is a critical infrastructure segment, which plays a crucial role in the country's economic growth by ensuring better connectivity for global trade and by helping to moderate the price of logistics. During the financial year 2022 (until October 2021), cargo traffic handled by India's major ports reached 406.98 million metric tonnes, which is a 14.59 per cent increase over the same period last year.

The government has been focusing on improving the port infrastructure under programmes such as Sagarmala, which was approved in 2015. Around 800 projects have been implemented between 2015 and 2035, with an estimated cost of US$78.65 billion, covering areas like port modernisation, port connectivity, port-led industrialisation, and coastal community development. Key strides have been taken at the major Indian ports towards the digitisation of key EXIM processes. The radio frequency identification device (RFID) has been implemented at all major ports to enable the seamless movement of traffic across port gates, including substantial reductions in documentation checks.

The Indian government has issued a draft Indian Ports Bill, 2021, which aims to centralise the administration of minor ports that are currently managed by state governments. The Bill is currently at the consultative stage.

Jawaharlal Nehru Port Trust (JNPT) SEZ became the first operational port-based multi-product SEZ in India.

In March 2021, Adani Ports announced its partnership with John Keells Holdings and Sri Lankan Ports Authority to develop and operate the West Container Terminal of the Colombo Port in Sri Lanka for 35 years.

In June 2021, the Ministry of Ports, Shipping and Waterways and Ministry of Civil Aviation signed a memorandum of understanding (MoU) to develop sea plane services in India.


FDI regulations have been relaxed to permit foreign airlines to invest up to 49 per cent in the paid-up capital of Air India. Such investment should, however, be subject to, among other things, the condition that the investment should be made under the government approval route, and that the 49 per cent limit will subsume the FDI and the foreign institutional investor's or foreign portfolio investor's investment.

On 30 September 2021, the Ministry of Finance amended the custom regulations whereby the transfer of aircraft from one lessee to another is permitted without re-exporting, subject to compliance of the prescribed conditions. Previously, to transfer a lease from one lessee to another, the aircraft had to be physically exported and then re-imported into India.

The Ministry of Civil Aviation has announced the Drone Rules, 2021, which provide for the registration, licensing and airspace segregation of drone operations.

The International Financial Services Centres Authority Act, 2019 was created to provide for the establishment of an authority to develop and regulate the financial services market in IFSCs in India. The Gujarat International Finance Tec-City (GIFT City) is a government initiative to provide a platform to set up Indian companies whose business, inter alia, includes banking, insurance, aircraft financing and leasing activities under the IFSC Act.

The Ministry of Finance has notified that aircraft leases, including operating leases, financial leases and hybrids of operating and finance leases of aircrafts, helicopters or engines will be considered financial products. This has created an opportunity for the establishment of the viable aircraft leasing market in India, especially GIFT City. The government has provided multiple tax benefits and the ease of set up for lessors that propose to lease aircraft through establishments in IFSCs.

In April 2021, Boeing, an aircraft manufacturer, announced that it had partnered with the Indian Aviation Academy (IAA) and the University of Southern California (USC) to conduct safety management system training sessions for all stakeholders in the domestic aviation industry.

Akasa Air, backed by investor Rakesh Jhunjhunwala, is an upcoming low-cost Indian airline. It received a No Objection Certificate from the Ministry of Civil Aviation in October 2021 and is in the process of receiving its Air Operator's Certificate (AOC). It aims to start flights in late May or early June 2022.

In June 2021, SpiceJet announced its ambitious target to fly 100 million domestic passengers on a sustainable aviation fuel (SAF) blend by 2030 under the aegis of the World Economic Forum (WEF).

In August 2021, Indira Gandhi International Airport was declared the best airport in India and Central Asia at Skytrax World Airport Awards.

iii Trends and outlook for the future


The past two years have been very challenging across the sector, but these challenges have been positive lessons, especially for adaptive and disruptive business practices. The covid-19 pandemic has reinforced a higher adoption of technology, digitalisation and automation in the sector than pre-pandemic. In addition to the gamut of aforementioned initiatives and policies by the government, pursuing the 'Make in India' initiative offers tremendous opportunities in the maritime sector, particularly in the shipbuilding and ship repair industry. The Shipping Ministry has invited shipowners worldwide to flag their ships in India and take advantage of the Make in India policy.

In tandem with the increasing awareness about being environmentally conscious, the maritime industry is pushing towards using alternative cleaner fuels to reduce carbon emissions as much as possible. Factors such as government initiatives, technological advancements, safe shipping, increased seaborne trade and the use of greener fuels will further drive India's maritime logistics industry growth. Although the short-term outlook is positive, the medium- and longer-term prospects remain uncertain: the upturn will be directed by the future path of the pandemic and the associated lockdowns and restrictions.


The Indian aviation industry's capacity and passenger growth have been significantly impacted since the covid-19 pandemic. Global travel restrictions, grounded fleets, benched staff, uncertainties in travel schedule, ticket liabilities, visas not being issued, inbound lockdowns and a ban on Indian travellers by different countries have all led to a chaotic situation. The Indian industry was able to breathe a little easier in 2021 compared to 2020, as domestic flight operations reached their pre-pandemic levels even though international services continued to remain curtailed due to covid-related travel restrictions.

Air India's sale to the Tata Group and the arrival of the new Rakesh Jhunjhunwala-backed airline Akasa Air are likely to introduce more competition and change the dynamics of the Indian sector in the coming years. The industry expects financial aid and a reduction in levies and taxes in the immediate near term to revitalise operations and boost passenger traffic. The industry requires aid in terms of lowered taxes on aviation turbine fuels, and a reduction in other levies such as airport charges, parking, landing and navigation charges. To bring some relief to the financially distressed aviation industry, the Ministry of Civil Aviation on 12 February 2021 increased the minimum and maximum cap on fares across all bands.

The government is expected to reiterate its focus on improving regional connectivity through its regional connectivity scheme, UDAN, and making flying affordable to the masses by providing a favourable ecosystem. The government is also expected to increase its focus on tourism development in India and undertaking measures to boost tourism. There is also an expectation to expand the e-visa scheme to more countries.


1 Shardul J Thacker is a partner at Mulla & Mulla & Craigie Blunt & Caroe.

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