The Indian Coast Guard has diverted ships that were at sea, and some ships from Mumbai are also sailing to help with the ongoing rescue operations.
The deceased have been identified as Sonal Surati, Janhavi Surati and Sanskriti Mayavanshi.
According to the police, a group of 34 students from Ponda College in Dahanu set out around 11 a.m. for the ride aboard a boat named "Dahanu Queen".
Moshudi Pervez Sheikh, a 17-year-old girl who survived, said the boat tilted and sank as the schoolchildren moved to one side to take selfies using their smartphones.More news: Denzel Ward skips Cotton Bowl, senior season to enter National Football League draft
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According to news agency ANI, four students lost their lives, while 25 have been rescued.
Police said the boat made it up to one nautical mile from the shore before it overturned. Dahanu is about 100 kilometres away from the Mumbai city where the incident took place. She added: "There were more students on the boat than its capacity". The state government has rescued most of the passengers and is making efforts to trace those still missing.
The police have said the owner of the boat along with three others, whose identities are yet to be revealed, was arrested on the evening of January 13.
The CG station at Dahanu coordinated with the local authorities and school staff before confirming the number of students on board the ill-fated boat.