In reform mode, the Ministry of Shipping will soon allow Indian companies or citizens to charter foreign flag ships without any pre-condition, This comes on the heels of the recent relaxation of the Cabotage law allowing foreign flag ships to operate in Indian waters. But the reform has not gone down well with the Indian National Shipowners’ Association (INSA), the local ship-owners lobby. It’s a “retrograde move,” said the association’s CEO Anil Devli in an interview. Excerpts:
Q: Why is it a retrograde move?
A: Indian ship-owners have invested over 68,000 crore based on the existing policy. The concern is not over losing the privilege of right of first refusal (RoFR), which relates solely to the industry’s growth, but the employees in the industry. Why would a government want a perfectly healthy industry to be set aside and hand over the business to foreign flag ships that have no investment or stake in India ?
Q: What’s the impact on Indian ship-owners?
A: An Indian shipping company will not have the right to match the lowest freight offered by a foreign line. There will be no benefit in bearing the burden of tax, training, employment and other costs towards the exchequer and the economy. Thus, an Indian flag vessel, in order to avoid these costs, may find it attractive to switch to a non-Indian flag and then access Indian cargo.
Q: Relaxing Cabotage and chartering rules, it is said, will reduce the logistics cost ...
A: It is completely wrong and there is no data to support such a claim. Indian ships only exercise RoFR at the lowest price set by the foreign flag ships. Absence of an Indian flag will embolden foreign flags to quote higher because they now know that there is no Indian flag to match or exercise RoFR.
Data indicates that when an Indian ship is actually available, the freight offered by foreign flags are actually lower. It is incorrect to try and justify the removal of RoFR to lowering of price or increasing ship availability. Nearly 92 per cent of India’s EXIM trade is already being carried by foreign flags. What further increase can this bring?
Q: But the present policy seems to be restrictive..
A: There is complete freedom to in-charter a foreign flag ship. However, if an Indian ship is available, then it has the right to carry the cargo at the same freight as offered by the foreign ship under the RoFR policy.
INSA’s fleet has been growing steadily over the past few years despite little or no support from any quarter. Indian companies, as I mentioned earlier, have invested in assets under the Indian flag of over 68,000 crore. In 2017 alone, the investment was around 4,700 crore in shipping assets.