“Despite so much Indian cargo being available for transportation, it is sad that our country’s flag vessels get to carry so little of it, even as Indian shipowners keep flagging their vessels out,” says Anil Devli, secretary-general of the Indian National Shipowners’ Association (INSA).
“Our law-makers need to work out ways of making life under the Indian flag more comfortable, so that owners do not see the need to fly flags of convenience on their vessels.”
Ironically, it was at the request of shipowners that the government introduced the “Indian controlled tonnage” scheme, allowing domestic firms to own foreign flag vessels. It was suggested as an easier way to buy more ships and take advantage of overseas business opportunities.
The scheme allows shipping lines to flag out or register their vessels under any flag of their convenience, subject to certain conditions. And it is some of these conditions that the very same shipowners are finding restrictive.
There could be scope for relaxing the conditions, but they do make it difficult for a company, which is already operating vessels to buy a ship under the controlled tonnage scheme. It would be best for shipping companies to make a beginning to create this new class of tonnage.
The most restrictive condition is said to be the one which makes it mandatory for those going for controlled tonnage to maintain their Indian flagged tonnage at the 1 April 2014, level. In other words, a company would have to first go and buy a ship to register under the new category; it cannot flag out one from its existing fleet.
Another condition is that the controlled tonnage should not exceed the owned ones. This condition is to ensure that Indian tonnage is maintained at a certain level, since the basic objective of the policy is to increase the Indian (controlled or owned) shipping tonnage.
Shipowners, however, think the provision restricts their freedom to sell ships. If their local tonnage were to fall below the stipulated level, they would not be able to operate vessels acquired under the foreign flag.
To put it succinctly, shipowners want to retain full freedom to flag out and flag in vessels at their will. Such flexibility, they argue, is crucial for them to make optimum use of their assets in the global shipping market, which is subject to cyclical fluctuations.
Indeed, shipping firms, like any other enterprise, need the freedom and flexibility to buy and sell assets. And more so, as shipping firms often make up their operating losses through asset trading. India’s largest private sector owner, Great Eastern Shipping, is a prime example of a company that has shored up its balance sheet through judicious asset play.
While there are other conditions such as having minimum 50% Indian crew on board the controlled ships, and mandatory training of cadets, these are not seen as major barriers. It is the restriction on the sale of Indian flagged tonnage that has had owners champing at the bit.
Copyright © 2024. All rights reserved. Seatrade, a trading name of Informa Markets (UK) Limited. Add Seatrade Maritime News to your Google News feed.
