‘Indian controlled ships’ to get cargo preference over foreign-owned carriers

NK Kurup Mumbai | Updated on July 24, 2014

Government issues guidelines for the creation of a new category of vessels

Ships under the new category of “Indian controlled tonnage” will get preference in carrying coastal cargo over ships owned by foreign lines, when such vessels are in-chartered, according to the guidelines issued by the government on Thursday.

Ships under this category, though owned by Indian companies, will be registered under foreign flags. When such vessels are charted to India, they will have the right of first refusal of cargo over non-Indian ships.

Creation of this new category of ships, announced by the Finance Minister in the Union Budget, is expected to enable Indian companies to register ships under “tax-friendly” foreign countries. It is also expected to help them to raise funds at lower cost.

If an Indian flag vessel is not available to carry a particular coastal cargo, the ships under the controlled tonnage will be eligible for the priority to carry the same cargo. This is expected to help increase the share of Indian lines in the country’s cargo, which is currently less than 10 per cent.

“When ships are chartered under Section 406 and 407 of the Indian Merchant shipping Act, such ships shall be treated in a new category of Indian controlled ships, and shall be eligible for a priority higher than non-Indian ship; they shall be given the Right of First Refusal next in the hierarchy after Indian flagged ships,” the guidelines stated.

The guidelines stipulated that minimum 50 per cent of the crew — both officers and rating— on the controlled ships should be Indian.

Company’s in-chartering such vessels should also undertake training of cadets on board according to the Tonnage Tax provisions.

The tonnage acquired under the controlled category should not exceed the company’s Indian flag vessels. They should maintain the tonnage level as on April 1, 2014.

Though the domestic shipping companies are happy with the new policy, they are a bit disappointed over the stipulation that they should maintain the level of Indian tonnage they own as on April 1, 2014. This means they cannot flag out any of their existing ships.

Published on July 24, 2014

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