Over the past decade, ship leasing has emerged as a significant substitute for ship acquisition financing. The ship leasing market is expected to continue growing at a fairly substantial pace in the near future with the expansion of Chinese leasing companies. India’s International Financial Services Authority (hereinafter referred to as “IFSA”) in line with global trends in the ship leasing market, the recently published framework for ship leasing. The idea led to the purchase of the ship, financing and leasing (hereinafter referred to as “SAFAL”) Report redefining a ship leasing as a financial product to compete in the global maritime game. The current framework serves as an enabler to achieve the original goal of SAFAL. Of course, considering the increase of several companies establishing their operations in the Indian IFSC after the IFSC authority issued the framework enabling aircraft leasing and ancillary services, one can also predict a positive outcome of the ship leasing framework. 
Any company that conducts ship leasing in IFSC must be registered as a finance company/entity. It may operate in the form of a corporation or limited liability partnership (LLP) or trust or branch. Such IFSCA registered companies are subject to the IFSCA (Finance Company) Regulations 2021. The framework allows financial companies to carry out core and non-core activities, to the extent permitted, which depend on capital and regulatory requirements and differ in the nature of the correspond to activity. Exceptionally, the framework includes policies on operating leases, finance leases, and a mix of both, or an ocean-going vessel, marine engine, or other part thereof. Such leases must comply with Indian Lease Accounting Standards. In addition, the Merchant Shipping Act 1958 applies to meet the requirements, exemptions and regulations as communicated. The Circular also grants the imposition of notices by competent authorities as provided for in the Articles of Association, such as: B. the Ministry of Shipping or the Director General for Shipping.
To pave the way for an owner’s market position, a lessor will be permitted to perform operating leases, asset management support services for assets owned by a specific company or its wholly owned subsidiaries or their assets incorporated or leased under IFSC in India . including transfer, assignment, purchase, sale and leaseback, novation or similar transaction in connection with a ship lease. To further stimulate investment in ship leasing finance, interest and royalties income received by a non-resident from a ship leasing of an entity of the IFSC is expected to be exempt from tax under the new Union budget. 
Comparison with global jurisdictions
It is noteworthy that IFSCA recognizes the potential of the global ship leasing scenario to further promote GIFT IFC and the idea of a “Atma Nirbhar Bharat”. The aim is seen through and through to establish India as a global hub for ship leasing and financing activities. Speculation also suggests that Asia is an important ship finance market compared to Europe and the US, and as ship owners turn to Chinese leasing houses, India needs to acknowledge this progress and continue to encourage ship leasing finance. To draw a parallel, India has only 1% of the global market share compared to China’s 16%. Given India’s excellent common law system, enormous workforce, large number of ports, proximity to important markets, as well as the fact that Asia is a base of operations, countries like China with low tax regimes look forward to offshore ownership, what makes the ship leasing industry lucrative Opportunity for India to benefit from a more owner-centric approach.
With the Indian rental market focused on a charterer approach, the imminent advance of China, which owns a very large number of vessels, is indeed alarming. The current position of the ship leasing market makes it a significant source of finance rather than an alternative, so the IFSC needs to issue further guidance that will make it easier for lessors to access finance, as they should be encouraged to operate vessels and ancillary vessels as owners rather than lessees.  To compile statistics, due to the tenant approach, the Indian shipping industry has become charterers rather than owners, spending a whopping $75 billion annually on chartering foreign shipping vessels. However, the introduction of the framework is a step towards flagship ownership in India rather than drawing on industry stakeholders ie Panama, Marshall Islands, Dubai, Liberia and China. Will we still remain a charterer market with tremendous growth in manufacturing and exporting, or should we actually move today and support the manufacturers, distributors and exporters on their own to transform India into an owner market in the years to come ?
Initiatives like these can also help improve the framework for ship financing in India, but they require huge investments. There have been new reports that CSSC Shipping, the finance leasing arm of China State Shipbuilding Corporation (CSSC), is announcing plans to issue two bonds totaling US$800 million with maturities in 2025 and 2030 and to primarily use the net proceeds expand its leasing business and refinance its existing debt.
Similarly, Japanese and South Korean financial institutions have also promised to become prominent players in the ship leasing space. In June 2020, the Hong Kong government released a rather attractive ship leasing tax incentive to compete with tax-friendly regimes in Singapore and other jurisdictions by offering profit tax breaks for qualified ship lessors and ship leasing managers, in a similar fashion by the Indian government. The incentive applies to Hong Kong based managers using separate Hong Kong incorporated special purpose entities to own and lease vessels for use outside Hong Kong waters based on operating or finance leases entered into with either related or third party lessees. The ship leasing company must have a reasonable number of full-time employees in Hong Kong (in any event not less than two) and reasonable annual operating expenses in Hong Kong (in any case not less than approximately US$1 million), while the figures for a ship leasing Management Company are one and $128,000 respectively. The terms are generally intended to be less lengthy than Singapore’s and are intended to help promote Hong Kong as a preferred jurisdiction for ship leasing activities.11
Refreshingly, the Indian framework also offers interesting incentives, e.g. B. All transactions made by a Lessor must be made in a freely convertible foreign currency, but a Lessor may settle all administrative costs through another INR account, the provision proving to be accommodating and reassuring for ship lessors. Indian entities may face shortages of maritime finance and insurance, they are commonly referred to as non-risk takers and the framework may also prove time consuming. In addition, the tax system needs to be reviewed against the backdrop of the shipping industry, as illustrated by the tax systems in Singapore, Panama, Malta and Cyprus, which are proving to be centers of booming ship financing. The above nations allow the smaller ones to work without tax burdens. Similarly, GST regulations in India also need to be evaluated more closely as the current framework favors foreign companies rather than promoting the Make-in-India regime. A holistic approach considering the Indian legal framework, competition from multiple maritime jurisdictions and flag states, making investments in the maritime industry attractive is the need of the hour. Indian banks and financial institutions must also explore leasing structures and business opportunities at the same time to encourage this initiative.
The objectives of the framework were previously set out in a report by the Committee on Developing Pathways for Ship Acquisition, Financing and Leasing Activities, IFSC, which again featured advancing an owner market. The report pledged to encourage further development of ship leasing, financing and ownership in IFSC to boost employment opportunities and output multipliers in the field and boost the Indian economy.12