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Friday, Jun 07, 2002

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West coast ports are `unsafe destinations' -- Insurers impose war-risk premium on foreign ships

P. Manoj
Harish Damodaran


IN what could adversely impact exports from the country, overseas marine insurers have clamped an additional 0.1 per cent `war-risk' premium on all foreign vessels calling at ports on the west coast including Kandla, Mumbai and Jawaharlal Nehru Port Trust.

According to a notice issued by the London-based IPBCC conference - a group of shipping lines operating between Europe and the sub-continent - the 0.1 per cent additional war-risk premium will be levied on foreign vessels calling at ports located North of 18 degree N and West of 73 degree E. This will cover all ports along the country's west coast north of Mumbai.

Industry sources say that the 0.1 per cent additional premium is to be charged on the vessel's insured value (sans cargo) over a defined risk period of seven days.

Assuming the insured value of a 10-year-old 25,000-tonne, general cargo vessel at $10 million, the extra cost on account of the additional premium works out to $10,000, i.e., around 40 cents per tonne.

In case the vessel is detained at the port for even a day beyond the risk period, the shipping line will have to cough up the 0.1 per cent additional premium for the succeeding seven-day risk period as well.

"The additional war-risk premium is being imposed on vessels calling or transiting certain specified ports and areas in the South Asian region in the light of the escalating tension between India and Pakistan," the sources added.

According to them, exports of bulk commodities such as rice and wheat will be particularly hit hard by the extra levy. "Given the lower margins on export of foodgrains at barely $1-3 per tonne, it would affect the profitability of exporters," they pointed out.

Trading houses like Cargill and Glencore, for instance, will end up incurring higher freight costs.

Significantly, the trade has expressed surprise over the re-introduction of the war-risk premium, which was lifted in early May, when the tension between India and Pakistan was cooling off.

When the London marine insurers had imposed a war-risk premium on foreign ships sailing into Sri Lanka and West Asian Gulf after the September 11 attacks on the World Trade Center, India was excluded from the levy.

Moreover, while the war-risk premium imposed last year was less than 0.1 per cent, the re-introduction of the premium at 0.1 per cent is considered to be on the higher side.

Indian flag vessels are excluded from the fresh war-risk premium since the hull & machinery cover of domestic vessels are insured with the public sector insurance companies.

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