“We have worked on an alternate plan to offer some competitive advantage to Indian liners. A proposal has been sent to the Ministry of Shipping to introduce a concept of Indian controlled tonnage,” said director-general of shipping Gautam Chatterjee. “Indian controlled tonnage” will be a category for foreign flag carriers with Indian management. There are a number of carriers with foreign flags but controlled by Indian operators, who avoid Indian registration to access cheaper credit and various tax benefits.
Using a provision of the Indian Merchant Shipping Act, the Shipping Ministry would not require the Cabinet’s approval to introduce the concept, according to the DG Shipping.
“Once this alternate plan comes into being, foreign flag liners controlled by Indian owners can register in India, and get all tax benefits and cheaper credit that foreign flag carriers enjoy over domestic carriers,” said Chatterjee.
“Until such time that Indian liners are unable to get access to a level playing field, the Indian controlled tonnage system will help the government to have better control on foreign flag carriers with Indian management by relaxing certain norms to enjoy similar benefits with Indian registration – which was not allowed earlier.”
With the results of India’s Parliamentary election scheduled to be declared on May 16, Indian shipping companies are pinning hopes that the incoming government in New Delhi will act on a two-point agenda that they think will facilitate smoother sailing.
“We want the government to do just two things – first, permit Indian lines to own and operate foreign flag vessels, as suggested by the DG Shipping; and second, ensure 100% reservation of coastal cargo for local ships,” says Atul Agarwal, president of the Indian National Shipowners’ Association (INSA) and managing director of Mercator Ltd.
“These measures, which can be implemented without any change to existing laws, will not only help Indian lines to grow both locally and globally, but will also contribute to the Indian economy.”
INSA has already made a proposal to the government to change the law that restricts them to chartering foreign flag vessels for a specific period or voyages, and not owning them. It would like its members to be permitted to own and operate foreign flag vessels. Shipowners are convinced this would give them more operational freedom and flexibility to tap overseas opportunities.
Currently, Indian lines mainly operate services abroad through foreign subsidiaries. This is because Indian flag vessels are not allowed to employ foreign crew, while some countries insist on employment of their nationals as a pre-condition to operate services in their waters.
The disadvantage of the subsidiary route is that Indian companies are not able to repatriate their entire profits. They also have to follow local regulations.
“If Indian lines are allowed to operate foreign flag vessels, their earnings will come directly to India,” says Agarwal. “These vessels will be part of Indian tonnage, though not eligible for coastal cargo. This will also help Indian shipowners to raise funds overseas at lower rates.” The INSA chief insists that allowing Indian lines to operate foreign flag vessels will not violate any provisions of the Indian Merchant Shipping Act. It also does not require changes in laws; and the DG Shipping is empowered to accord permission to shipowners.
Domestic shipping lines have been consistently opposing relaxation in cabotage. Last year, the government had relaxed cabotage for the DP World run International Container Transhipment Terminal at Vallarpadam, near Kochi.
In India, though cabotage is applicable to coastal cargo, it is not fully implemented, and hence, foreign ships are allowed to carry local cargo. The usual excuse is that Indian owners do not have the required type of ships to meet the demand.
“That is a poor argument, and a major reason why Indian flag liners currently have only an 8% share of the country’s import and export cargo,” says Agarwal. “When there is demand, capacity can be acquired in no time.
“Relaxation in cabotage has not led to growth in traffic at any port. Since 100% foreign direct investment is allowed in shipping, there is no restriction on foreign companies coming to India. In other segments of the transport industry, such as airlines and roads, foreign companies are not allowed to operate local services.”
All eyes are trained on 16 May, when a new government will take guard at the Centre, and hopefully give greater importance to shipping, considered the lifeblood of the economy.
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