The Hindu Business Line : To attract more tonnage — Govt to flag off `open register'

THE Shipping Ministry is looking at the possibility of having another international/open register to attract more tonnage, keeping in view the availability of 100 per cent foreign direct investment (FDI) in the sector. According to the Draft Maritime Policy, the Merchant Shipping Act would require amendments to facilitate this task.

Open registers are mainly intended for use by foreign nationals and are generally called flags of convenience (FoCs) because the nationality of the real owner is not projected in the flag that is flown. India now has a national register, like most maritime nations, in which ships flying the country's flag are registered. All the laws of the land apply without exception to ships registered under the national register. Open registers are generally resorted to by countries which do not have a large national fleet of their own.

Experts say that the advantage of being associated with the Indian open register may appeal to a number of shipowners, given the fact that India's maritime administration enjoys a far higher reputation than that of other FoCs such as Liberia and Panama.

"The Indian open register will offer the facility of respectable registry and efficient control and oil pollution prevention standards. To that extent, respectable shipowners, as opposed to fly-by-night operators, may be more attracted to the Indian open register than to other FoCs," a shipping industry official pointed out.

Indian owners would also be entitled to take advantage of the open register in which case, they would not be subjected to Indian corporate tax or any other Indian law, including the MS Act. The open register would only ensure their compliance with international regulations on sea-worthiness, safety and ILO standards of employment.

Shipowners opting for the Indian open register would be freed from the obligation of hiring crew from the flag country, which is mandatory under the national register. However, they will be denied the benefit of cargo support, which ships registered under the national register are entitled to.

However, critics are doubtful whether a large number of foreign shipowners would be motivated to register themselves in an Indian open register in preference to registers of other FoCs such as Panama and Liberia. "Besides, there would be very little benefit to the country in terms of earnings or higher employment," says an industry analyst.

As things stand, Indian seafarers are employed on foreign ships the world over, including those on FoC ships. "Open register should not be a mere device to get around the need for employing crew from the flag country. For India, which is a net supplier of labour to the maritime world and whose industry is in constant search for more and more Indian seafarers, the establishment of an open register would not address the problem," he asserted.

Initial registration fee might augment Government revenue, but to make the open register attractive, these must be kept at a lower level. Similarly, a moderate annual tonnage tax may be levied on the ships registered.

Besides, a spin-off effect in terms of growth of ancillary industries such as ship-building, -repair, marine specialised services are possible, but it cannot be predicted with any degree of accuracy to what extent this will occur.

Opening such a register would subject the Indian shipping industry to stiff competition from ships owned by foreigners who would enjoy tax and other benefits. Indian shipowners registered under this register would not be subjected to Indian tax laws, thus reducing the amount collected by way of tax revenue.