It was at shipowners’ request that the government introduced the ‘Indian controlled tonnage’ scheme, allowing domestic firms to own foreign flag vessels — suggested as an easier way to buy more ships and take advantage of overseas business opportunities. The scheme allows shipping lines to flag out or register their vessels under any flag of their convenience subject to certain conditions.

To its credit, the country’s maritime administration implemented the scheme in less than a fortnight after it was announced in the Union Budget. However, shipowners who asked for the facility appear to have developed cold feet, saying that conditions in the policy are restrictive. There could be scope for relaxing the conditions, but they do not make it difficult for a company which is already operating vessels to buy a ship under the controlled tonnage scheme. Instead of waiting for more leeway, it would be better for shipping companies to make a beginning to create this new class of tonnage.

Conditions What are these conditions? The most restrictive is said to be the one which makes it mandatory for those going for controlled tonnage to maintain their Indian tonnage at April 1, 2014 level.

This means, a company will have to first go and buy a ship to register under the new category; it cannot flag out one from its existing fleet. Also, the controlled tonnage should not exceed the owned ones. This condition is to ensure that Indian tonnage is maintained at a certain level.

After all, the objective of the policy is to increase the Indian (controlled or owned) shipping tonnage. Shipowners, however, think the provision restricts their freedom to sell ships. If their local tonnage falls below the stipulated level, they will not be able to operate those acquired under the foreign flag. In short, shipowners want full freedom to flag out and flag in vessels at their will.

Such flexibility, they argue, is crucial for them to make optimum use of their assets in the global shipping market, which is subject to cyclical fluctuations.

National tonnage Indeed, shipping firms, like any other enterprise, need the freedom and flexibility to buy and sell assets. And more so, as shipping firms often make up their operating losses through asset trading. But here, the restriction is a safeguard against a possible fall in the national tonnage.

Indian shipowners, as pointed out by an official, want the best of both worlds — be a national carrier and also have the freedom to flag out without any restriction.

Blanket permission to flag out may lead to the danger of domestic shipping gradually losing its steam. This is not to say that there should not be any relaxation in the said provision, but to point out that the policy should not be seen just as an easier option to flag out at the cost of losing Indian tonnage. There are other conditions such as having a minimum 50 per cent Indian crew on board the controlled ships, and mandatory training of cadets. These are not seen as major barriers.

While granting domestic shipping lines the option to flag out, New Delhi should think about ways to make their life under Indian flag more comfortable.

Why should they flag out when there is enough cargo available on their own shores?

Currently, Indian ships carry less than ten per cent of the country’s cargo — a fact those making new schemes such as controlled tonnage need to ponder.

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