Rewriting maritime map: Centre charts course for broader ship ownership

Shipping ministry seeks maritime overhaul with 4 key bills lined up in Parliament session

Building on the Centre’s Budget announcement this year to increase India’s share in ship owning and shipbuilding, the Ministry of Ports, Shipping and Waterways is looking to overhaul the domestic maritime space by introducing four new legislations. These proposed Bills, among other provisions, will allow for an expanded scope of ownership for ships to be considered India-flagged.

 

The Merchant Shipping Bill, 2024, which is expected to be discussed in the Parliament’s ongoing winter session, will allow for easier eligibility for vessel registration — allowing overseas citizens of India, non-resident Indians, and limited liability partnerships to register ships under the Indian flag, according to officials aware of the developments.

 

The current Merchant Shipping Act, 1958, allows only Indian citizens and companies wholly owned by Indian entities to register vessels under the Indian flag.

 

“To meet the new challenges and promote ease of doing business, reforms were necessitated in the Merchant Shipping Act. Reforms were also required due to various obsolete provisions and to accommodate India’s international maritime obligations. The Merchant Shipping Act as it is has not incorporated the mandatory requirements under various international conventions,” a senior government official told this paper.

 

The new proposed legislation will allow the registration of vessels acquired on a bareboat charter-cum-demise (BBCD) basis, which is a part-payment structure allowing ownership of vessels by paying a third of the vessel cost over a longer period and a 25 per cent upfront payment.

 

Under the current rules, a BBCD vessel can only be registered under the Indian flag once the entire transaction has been completed with the overseas party. Now, the ministry is looking to ease this requirement and allow registration before the final stage.

 

The Bill also proposes the constitution of a body, which would be responsible for undertaking regulatory and oversight functions relating to the security of vessels and port facilities, a second official said.

 

Earlier this month, the Union Cabinet had approved the Bill. A week before that, it had also approved the Coastal Shipping Bill, 2024, which seeks to ease regulatory burdens on Indian ships operating in India’s coastal waters.

 

Both these Bills, though not available for dissemination, borrow heavily from their preceding Bills proposed in 2020.

 

The Merchant Shipping Bill had also been tabled in Parliament in 2016 but could not see the light of day because of the eventual dissolution of the 16th Lok Sabha in 2019.

 

The Coastal Shipping Bill removes the requirement of a general trading licence for Indian vessels to participate in the coasting trade. Moreover, the licence conditions for foreign ships have been made statutory through this Bill, which will be done by categorising these vessels into two categories.

 

“Given the strategic nature of coastal shipping to the domestic economy and efforts to give impetus to the sector, it was felt necessary to give due weight to coastal shipping provisions and make them easily accessible to the industry,” one of the officials quoted above said.

 

The proposed legislation will also allow riverine vessels to operate on coastal waters and vice versa. Officials said that the rationale is to remove the need for costly transshipment from one vessel to another when the domestic movement of goods happens through both rivers and coastal waters.

 

Sources said that the ministry will also allow river-sea vessels to facilitate this legislative provision, pending the passing of the Bill in Parliament.

 

Industry representatives feel that the Bills are a major step in the right direction, but these need to be supplemented with reliefs in provisions and tax burdens that pose a major cash flow concern to domestic vessel owners and operators.

 

These include reliefs in goods and services tax for repairing ships overseas, tax breaks on salaries paid to seafarers, and other regulations considered cost burdens by Indian shipowners.

 

Parallelly, the central government is exploring a policy to indigenise shipbuilding in the country by allowing only India-built ships to register for coastal and inland waterways operations starting in 2030, this paper had previously reported.

 

The proposal, among others, was a part of deliberations at a workshop on revitalising the Indian shipbuilding industry in July. The recommendation was part of a document prepared by KPMG, which estimated India’s position in global shipbuilding at 20th and India’s share in global shipbuilding to be 0.06 per cent.

 

Two other Bills in line for the current Parliament session include the Bills of Lading Bill and Carriage of Goods by Sea Bill, which aim to simplify the language of pre-Independence laws and allow the central government to make changes to provisions that are in line with international conventions. 

 

REWRITING MARITIME MAP

 

·         Centre to introduce 4 key Bills: Merchant Shipping, Coastal Shipping, Bill of Lading, and Carriage of Goods by Sea

·         Govt aims to simplify vessel registration under Indian flag for NRIs, OCIs, and LLPs

·         Vessels on bareboat charter-cum-demise may register before final payment

·         Proposed law will allow Indian vessels to operate in coastal waters without a general trading licence and enable interoperability between coastal and riverine vessels