New Shipping Law Ownership Rule Could Slow GIFT City’s Global Push

India is reviewing its maritime regulations through a draft Merchant Shipping Bill and new vessel registration rules, which aim to replace laws dating back to 1958.

A key proposal under consideration is that any ship registered in India must have at least 51% ownership by Indian entities.

This is a change to the existing structure where leasing companies based at Gujarat International Finance Tec-City (GIFT) have been given permission to register ships without any equity limitations.

Experts in the industry feel that this change would have a massive influence on the world in terms of investment in the rising maritime finance industry in India, especially ship leasing.

Why Does This Matter For GIFT City?

GIFT City has seen growing interest from global players in recent years. Companies such as Transworld Group and Mitsui OSK Lines have already started operations, while firms like DP World are exploring entry.

GIFT City has emerged as a growing global ship leasing and maritime finance hub by offering flexibility similar to established centres like Singapore and Hong Kong.

The absence of ownership restrictions has enabled international companies to operate using global financing models.

However, the proposed rule could limit this flexibility and reduce the attractiveness of the platform for foreign investors.

The players in the industry have emphasised that regulatory certainty and consistency with international practices are necessary to continue the growth in the industry.

What Are The Key Industry Concerns?

Legal and industry analysts are of the opinion that the ownership condition would likely upset the normal financing frameworks.

The international ship leasing usually uses sale-and-leaseback models, which are based on international investors and adaptable ownership structures.

An obligatory Indian majority ownership can enhance the complexity and cost of transactions, and restricts the number of international investors.

It is also feared that capital could be transferred to rival jurisdictions like Singapore and Hong Kong, which provide a more predictable regulatory environment and no equivalent ownership requirements.

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What Does This Mean For Investors?

For investors, the proposed regulation introduces uncertainty around India’s maritime finance ecosystem.

Ship leasing companies, logistics companies, and port operation companies can experience the capital flow and investment structure.

A tighter ownership system might retard foreign investment, whereas more relaxed international centres might be more appealing to capital.

Regulatory clarity and policy direction are two other areas that investors need to watch, as they will define the competitiveness of GIFT City in global maritime finance.

Sources:

The Economic Times

India Seatrade News