The Central government is set to ease registration rules for Indian flag ships by changing the ownership requirement for registration from ‘wholly-owned’ to ‘substantially-owned’ as part of a plan to boost Indian tonnage.

The plan will be implemented through the new merchant shipping Bill, currently pending before Parliament, which also seeks to allow registration of ships purchased through a so-called bare-boat-charter-cum-demise (BBCD) route having a charter period of at least three years.

Indian Controlled Tonnage — a new scheme for ship acquisition introduced by the government — will also be brought under the revamped merchant shipping Act as a separate category.

The aim behind the policy changes is to bring more ships under Indian tonnage which is hovering at about 12.268 million gross tonnage (GT) comprising 1,348 ships. The Shipping Ministry has set an ambitious target to raise the country’s tonnage by four times to 43 million tonnes by 2020.

For the purposes of registration, substantially owned implies ownership of more than 50 per cent shares of the vessel. “Vessels owned by joint owners, where Indian owners have a majority stake in the vessel, will be able to register under Indian flag. This will encourage vessels owned jointly by Indian and foreign entities to be registered under Indian flag, and it will be easy for small ship-owners to acquire and register the vessels. It will facilitate development of tonnage under Indian flag,” a shipping industry executive said. BBCD is a form of financing ship acquisition.

Hire-purchase

Under this hire-purchase scheme, the acquisition is typically done by paying a fourth of the total cost of the vessel as down payment while the balance is paid in instalments over the demise period, typically ranging from three to five years, out of the revenues earned from operating the ship.

During the lease rental period, the ship flies the flag of the country from where the acquisition is made. On completion of the lease rentals, the ownership of the vessel is transferred to the Indian entity, which hired the vessel, and the ship becomes an Indian flag ship thereafter.

By allowing BBCD ships to be registered in India and be entitled to fly the Indian flag before the end of lease period, the Ministry is trying to tap small ship-owners or entities who cannot invest huge sum of money for purchasing vessels. “They may charter/hire the vessel on BBCD basis with an intention to transfer the ownership to an Indian owner and register such vessel as an Indian vessel,” a Shipping Ministry spokesman said.

Local ship owners say there is scope for “potential mischief” as BBCD vessels are entitled to fly the Indian flag and allowed to participate in the country’s coastal trade, a business that is reserved for Indian flag ships.

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