The Hindu Business Line : Anticipating tonnage tax in Budget — Ministry unveils norms for chartering LNG tankers

ANTICIPATING the introduction of a new tonnage-based tax for the shipping industry in the Budget, the Shipping Ministry has stipulated that LNG promoters must compulsorily haul their LNG cargoes into India only on Indian flagged LNG carriers.

These carriers should either be wholly-owned by an Indian entity or should have an Indian partner holding not less than 26 per cent stake in the company.

The stipulation forms part of the guidelines notified on Monday by the Director-General of Shipping for grant of permission for in-chartering of LNG tankers for import, coasting trade and implementation of LNG projects.

"No license will be granted to the LNG promoters for in-chartering of LNG tankers unless these conditions are fulfilled. However, the above stipulation will be enforced only when the tonnage tax regime is introduced," the notification said.

Until then, the vessel may be registered as a foreign flag vessel, on the condition that 26 per cent of the ownership of the vessel shall be held by an Indian partner.

Moreover, the owners of the LNG carrier will have to submit an "unconditional and irrevocable undertaking" to the Director-General to convert the foreign flag LNG ship into an India flag carrier within one year of the introduction of tonnage tax.

The LNG tanker thus hired on long-term charter basis should employ a minimum of two Indian officers - one each on the engineering side and the deck side - as well as two trainee officers/cadets, one each on the engineering side and deck side respectively.

According to the notification, the LNG promoter may be permitted to bring the cargo on vessels hired on spot basis subject to the condition that the total cargo carried on such spot vessels should not exceed 10 per cent of the total annual imports during a financial year. "In such cases, the 10 per cent limit will be calculated separately for each project/re-gasification terminal," the notification said.

Besides, all partners of the consortium/company owning the LNG carrier should agree for transfer of technology to the Indian partner such that within a period of five years from the date of registration of the LNG tanker used for the transportation of LNG to or within India, the tankers will be managed, maintained and operated by the Indian partner and through Indian crew/personnel.

An Indian partner would mean any shipping entity incorporated/registered under relevant Indian statutes having vessels licensed/registered with the Director General of Shipping under the Merchant Shipping Act, 1958, having sound financial position and having either a minimum of 5 years of cryogenic (gas carrier) ownership and experience or a minimum of 10 years of hydrocarbon (product and or crude tanker) ownership and experience.

"The objective of the policy is to promote Indian tonnage in general and LNG tonnage in particular. At the same time, the Government is conscious of the fact that any policy should not generally add to the cost of transportation to Indian consumers nor should it hinder transportation while the Indian ship owners achieve the necessary capacity and competency to transport the required quantity," the notification said.

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