The Hindu Business Line : Confusion still prevails on tanker age norms

EVEN less than 24 hours before the April 1 deadline fixed by the Directorate-General of Shipping for implementation of the new tanker charter guidelines, shipping circles, including exporters and importers of liquid bulk cargoes, are still muddled over the ramifications of the policy.

Several questions regarding the content and scope of the guidelines continue to dog shipping circles, with no clear clarifications forthcoming from the DGS.

As a matter of fact, confusion had been stalking the implementation of the new guidelines ever since they were first issued by the DGS on June 11 last year, which were subsequently revised three times.

The June 11 circular, which had the subject as `Guidelines regarding chartering of foreign clag oil tankers', had stipulated certain minimum guidelines "to be adhered to by the charters and oil terminal operators while in-chartering of foreign flag tankers" from September 1 2003.

However, following representations from shipping circles, the DGS issued another circular on August 14, 2003, which sought to restrict the earlier circular to "crude oil and product tankers on international voyages to and from any Indian port".

The DGS extended the date of implementation of the guidelines to April 1.

Even the second circular did not stop the spate of clarifications and representations from shipping circles, prompting the DGS to issue a `memorandum' on November 21, 2003.

The memorandum sought to clarify that "the said circulars apply to foreign flag vessels as well as Indian flag vessels when on international voyages."

It also clarified that "since the scope of the said circular has been restricted to crude oil carriers and product tankers, the age restrictions obviously apply to them only."

Subsequently, the DGS issued a second `memorandum' on December 31 2003, which further went on to "clarify" that "the circular is applicable to crude and product tankers notwithstanding the type of cargo carried by them... it will be applicable to product tankers even if they do not carry petroleum products".

The confusion is especially more among exporters and importers of edible oil, as they are still unsure whether and how the guidelines could be applicable to them.

In fact, industry sources said that the landed cost of imported edible oils in India is likely to spiral if the new tanker age norms are made applicable for movement of edible oil and fatty acids.

If the age norms for crude tankers cover edible oil and fatty acid imports, the cost of transportation of these products from different sources, including Malaysia, Indonesia, Argentina and Brazil, will sharply increase, as these products would also have to be shipped in vessels less than 25 years of age.

With these younger vessels commanding a premium in the international freight market, shippers of edible oil would have to shell out increased freight charges that would be passed on to the consumers.

Going by the trends in bookings for April shipments, there is already a $10 hike in freight rates, as importers are having to book newer vessels.

With a 70 per cent duty tariff, the increase in duty will be in the region of $7 per tonne.

"We fear that freight rates may increase to $40-45 per tonne in the coming months if the new age norms for tankers apply for edible oil imports.

"We are taking up the issue with the DGS and the Government, for, this would affect the common man," points out Mr Jayant Lapsia, President of the All-India Liquid Bulk Exporters and Importers Association.

Shipping analysts feel that there are several unanswered questions. "For example, will a tanker carrying ballast water is applicable?

Are these guidelines issued to Indian charterers only or foreign charterers as well? And what will be the implementation methodology?" an analyst asked.

Against this background, a majority of the exporters and importers feel that a detailed set of guidelines be issued so that there is no scope for doubts or clarifications.