The Hindu Business Line : INSA board meet to discuss chartering norms

THE existing ship chartering policy, especially the deployment of governing vessels to carry LNG to India, will dominate discussions at the board meeting of the Indian National Ship-owners Association (INSA) slated for August 4.

This assumes significance in the light of two recent developments that have stirred the shipping industry. One concerns Mercator Shipping Lines' recent conclusion of a Memorandum of Agreement (MOA) with Klaveness Shipping of Norway to operate nine Panamax vessels belonging to the latter on a time charter with the option of buying some of these vessels later.

The second relates to the recent move by the Ministries of Commerce and Petroleum & Natural Gas to water down the existing LNG vessel chartering norms to give more freedom to foreign vessels to bring LNG to India.

A section of the shipping industry feels that both these developments, especially the second one, could bruise the interests of the industry in the long run.

The outcome of the INSA discussions on August 4 will have a significant impact on both these developments, especially as the association has become a major rallying force for all Indian shipping companies and the torchbearer of the industry. INSA, which is headed by Mr P. K. Srivastava, Chairman of Shipping Corporation of India, is committed to promote the overall development of the industry and endeavours to increase the profitability of its member companies.

INSA faces a delicate task on Mercator's decision to in-charter nine vessels of a total 6.44 lakh deadweight tonnes. With some ship owners not having reacted to this development warmly, INSA will have to do some tightrope walking, given the fact that Mercator is also one of its member companies. "INSA cannot overlook the fact that its decisions should be in the interest of the entire industry. Generally, chartering norms have been stiffened with the objective of increasing Indian tonnage," an industry analyst said.

Sources said the INSA board will, however, be discussing the need for modifying the existing chartering norms, which have not been updated even after the introduction of Tonnage Tax (TT).

Under the TT regime, ship owners can charter vessels up to a limit of 49 per cent of their own DWT in operation for that particular year. The outcome of the INSA meet on the Mercator issue is also significant because the Directorate General of Shipping has to give the approval to Mercator to go ahead with the MOA with Klaveness based on INSA's recommendations.

On the LNG ship chartering policy , the INSA board is likely to be unanimous on the need to encourage Indian companies to transport LNG. The sources said INSA has already sent a note to the Shipping Ministry, justifying why the Government should not allow LNG imports on a CIF (cost, insurance and freight) basis. Instead, as has been the practice worldwide, LNG imports should be on a freight on board (FOB) basis, where the importer makes the shipping arrangement.

INSA said that allowing LNG imports on a CIF basis will enable foreign ships to enter this space, stumping the Indian shipping industry's efforts to build its own LNG fleet.

"We missed out on the container front. We should not repeat it on the LNG transportation front," an industry representative said. INSA pointed out that Indian ship owners can make LNG transportation arrangements by forming consortia with foreign ship owners.

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