Logistics

Freedom and flexibility on the flag should be left to the new owner of Shipping Corporation, says Safesea Group’s Anchan

P Manoj Mumbai | Updated on February 25, 2021

Indian-origin businessman SV Anchan, Chairman of the US-based Safesea Group, is taking a shot at the privatisation of Shipping Corporation of India Ltd (SCI).

Hailing from a shipping background going back three generations, Anchan was bestowed with the Shipping Pravasi award (Eminent Overseas Maritime Personality Award) by the Indian government in 2016.

Being the only Indian-origin shipowner in the Americas, he has contributed to the framing of shipping policy to meet both national and international standards.

Safesea Group’s involvement in the entire range of shipping activities makes it globally, perhaps, the only shipping group that caters to all aspects of shipping operations under one umbrella. During a recent visit to India, Anchan spoke to BusinessLine on a couple of key issues surrounding SCI privatisation. Excerpts from a conversation:

Should the government allow freedom and flexibility to the successful buyer of Shipping Corporation of India to re-flag the ships from India to overseas post the transaction?

Reflagging clarity will be crucial for foreign-based interest in SCI, though, the Indian flag is considered to be one of the worthiest flags globally in many ways including from commercial angle.

However, it does call for in-depth dwelling in terms of regulatory matters coupled with turnaround time (on flagging procedures) from the authorities compared to flags of convenience. I am not touching upon the tax liability, which is a standalone subject.

So, to be candid, freedom and flexibility on the flag should be left to the new owner.

If it is not allowed, how will it impact the sale process/attractiveness of SCI during privatisation?

Among many conditions laid down in the expression of interest (EoI), retention of Indian flag is not expressed. So, it will not be fair to speculate otherwise. Irrespective, it will be of utmost importance to see and understand improved excellence of India’s shipping processes and greater ease of doing business.

Why should we even think that there will be an impact on privatisation of SCI if the government does not allow changeover of flag, despite India projected to be the third largest economy by 2030 with abundance of coastal shipping opportunities?

However, it’s time to look at our dispute resolution mechanism, which will give a much-needed confidence to investors. The government can look at having a dedicated Admiralty Court at major ports, with access to foreign counsels to represent their clients.

I strongly believe in the future of India as a major maritime destination. There are various ways in which I am confident that India can consolidate and grow its position in the maritime industry. Setting-up of Admiralty Court is one of them.

What is your view on the government’s recent policy decision to tie the right of first refusal (RoFR) for government owned/controlled cargo to Indian-built, Indian-owned and Indian flagged ships? Is this a rationale and workable decision?

Conceptually, RoFR is a good idea and many countries including the US and China practice it. Having said that, many other concessions or facilitations need to be done to make the Indian flag ships attractive. RoFR is certainly one way of making the Indian flag ships attractive but that in itself, is not enough. There are a host of issues that needs to be addressed to make the Indian flag the preferred flag.

RoFR is made to sound like a dirty word or some sort of subsidy. In reality, it is neither. There is no loss to either party. The customer does not pay a penny extra and gets the cargo transported at the most competitively discovered market rate.

The government does not offer any subsidy to the shipowners to carry the cargo at the lowest rate. So, who is the loser? No one. Who is the winner? Customers.

Many times, it is also true that foreign owners on learning that Indian ship owners are in the fray, drop their rates to unbearable levels which the Indian owners are required to match. In such cases, the customer gains. However, the reverse is also true when foreign owners jack up their rates when there are no competing Indian flag ships on the tender.

Due to inadequacy of Indian tonnage, there aren’t any Indian flag ships participating in maximum number of cases (tenders). As a result, the latter case holds true and the Indian EXIM trade is forced to pay higher freight. Therefore, the government should encourage the growth of Indian tonnage.

Published on February 25, 2021

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