 "India needs its own P&I entity for maritime, says FM Nirmala Sitharaman")
India should have a full-fledged protection and indemnity entity in order to reduce the country’s vulnerability to international sanctions and pressures, Finance Minister Nirmala Sitharaman said on Thursday.
Addressing the Global Maritime India Summit 2023, the finance minister said such an entity would provide greater strategic flexibility to India’s shipping operations. “It would also provide a foothold into the specialised segments of protection and indemnity (P&I) business, currently dominated by very few global players,” she said.
Having an India-owned and India-based entity would also provide protection against liabilities to ships operating in coastal waters as well as inland waters during their operation, she said.
Shipowners buy P&I insurance to cover themselves from huge costs of any accident that could harm cargo, lives of people, and the environment. This cover is usually bought through not-for-profit clubs of like-minded shipowners.
The International Group, or IG, comprises 13 P&I clubs. This group provides marine liability cover to 90-95 per cent of all global sea tonnage.
In the past, oil supply from Russia in the wake of the Russia-Ukraine war was impacted as ships carrying the commodity struggled to get insurance due to the sanctions imposed by the European Union. EU insurers were prohibited from providing cover to tankers carrying Russian oil.
Sitharaman said Indian P&I services could also help encourage maritime arbitrations in the country to redress disputes.
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“Most often India’s problems, which are unique to its jurisprudence, or the way in which Indian systems work, are put forward less for their (other international arbitration centres) consideration in arbitration courts,” she added.
On the need to improve financing to the maritime sector, she admitted that despite having a strong balance sheet, banks were not very enthused about funding this sector, largely due to higher risks associated with it.
Sitharaman said banks needed to work together with the government to understand the needs of the shipping sector in terms of financing issues without waiting for the categorisation of the sector as infrastructure or industry. “The shipping sector says banks won't touch us unless you give us industry status,” she said.
“Today banks are also dynamic, and they don’t wait for labels. Financing will play a key role in attracting public-private partnerships in the maritime sector,” she said.
She also said an expert committee was looking into how periodically the government could go about changing and categorising relevant sectors as infrastructure.
The shipping ministry has been advocating for the grant of infrastructure status to vessels under the harmonised list of infrastructure sub-sectors, so that access to financing becomes easier. This is also likely to give a push to the FM’s budget announcement to promote coastal shipping in PPP mode.
Sitharaman said she was in talks with public sector banks to have a more positive approach to this sector. “I also want private sector lenders to look at shipping and maritime sectors more proactively. The operators should also look at fundraising on their own by asset monetisation.”
She said nine of the 12 government ports had identified 35 projects for monetisation and Rs 14,483 crore worth of projects were expected to be monetised as part of the national asset monetisation pipeline.