Logistics

Government weighs introducing age limit for ships

P Manoj Mumbai | Updated on July 09, 2021

A file picture of container vessel at Mundra Port, which handles the highest volume of cargo   -  AFP

The plan is to bring down to 20 years the age of ships entering the Indian registry

The government is weighing a plan to introduce an age limit for ships, both Indian registered and foreign flagged, calling at Indian ports, as it looks to encourage a younger fleet to improve safety, with an eye on protecting the marine environment from pollution caused by mishaps.

“The plan is under discussion,” said Amitabh Kumar, Director-General of Shipping, the country’s maritime regulator.

“Currently, the cut-off age for registration of ships in India is 25 years. But, there is no age bar for continuation of operations. So, once a ship is registered, it can continue to ply for any number of years. We are trying to fix that,” Kumar told BusinessLine.

The plan is to reduce the age at the time of entering the Indian registry to 20 years from 25 years, and to set an age limit for operations.

Age norms will be prescribed not only for Indian ships, but also foreign ships that are hired by Indian entities and require a licence from the DG Shipping to undertake contracts as well as those seeking permission to enter Indian ports.

“It will have an impact on all; otherwise, it does not make any sense to prescribe age norms only for Indian ships,” Kumar stated. “The age limit to be prescribed is not automatic. Just because we will reduce the age for registering a ship, does not mean that it will be followed by everyone. It has to be a coordinated effort,” he said.

While Kumar said the exercise to set an age limit for ships “started long time back”, sources briefed on the plan said the effort gained momentum in the wake of the sinking of an accommodation barge working for ONGC, after being hit by Cyclone Tauktake in May, in which 86 workers died.

An analysis of the recent ship mishaps indicate that such incidents have mostly occurred on vessels with a higher age profile, a government official said.

Age norms are being brought in to improve the quality of Indian tonnage as a large percentage of ships operating under the Indian flag are more than 20 years old, he added.

The move will be dovetailed with a Budget announcement, to launch a scheme to promote flagging of merchant ships in India by providing subsidy support to Indian shipping companies in global tenders floated by Ministries and CPSEs.

“An amount of Rs 1,624 crore will be provided over five years. This initiative will enable greater training and employment opportunities for Indian seafarers, besides enhancing Indian companies’ share in global shipping,” Finance Minister Nirmala Sitharaman said in her Budget speech to Parliament. The share of Indian flag ships in the country’s EXIM trade has fallen to about 7 per cent from about 40 per cent in the 1980s.

Kumar said the subsidy scheme is yet to be finalised, but indications are that “newer vessels will get more subsidy and older vessels less”.

“To that extend, the subsidy scheme gets dovetailed into the age norms,” Kumar added.

The move has divided the shipping industry, with bigger players such as the Great Eastern Shipping Co Ltd favouring the need for a younger fleet, while smaller players are not keen on it. The Great Eastern Shipping Company has the youngest fleet among local ship-owners.

The absence of age norms has allowed Indian charterers (those hiring ships) to go for older ships and benefit from “better rates” as older tonnage is available at “lower freight rates” as compared to younger vessels, resulting in lower transportation costs. Firms typically pass on transportation costs to end-consumers, though there are doubts whether the lower shipping costs are passed through.

Charterers have also stayed clear of putting age norms in tenders when there is no such stipulation by the maritime regulator.

This has discouraged Indian owners from buying younger ships. “If I want to secure Indian business, I need to buy older vessels, because younger ships cannot compete with older ships on rates to win contracts from state-run firms, particularly for moving oil and petroleum products,” said an executive with a private shipping company.

“Hence, instead of getting younger, the age profile of Indian ships has been spiralling downwards,” the government official said. “As a nation, it is high time, we prescribed age norms. The downward spiral should stop,” he said.

By using the freight subsidy scheme as an incentive, local fleet owners can be encouraged to buy new ships with the latest technology and register them under the Indian flag and get the benefits, the official said.

Smaller fleet owners with older tonnage feel that stipulating an upper age limit will upset their commercial calculations, as the ships they bought a few years ago would no longer be able to operate, hurting their pay-back period.

“The condition of a ship is not related to the age of a ship,” said the managing director of a shipping company based in southern India. “It is the level of maintenance which determines the quality of a ship,” he added.

“No ship registry in the world has an upper age limit on a vessel. They have an age limit at entry into their registry, but no age limit on the upper end of the scale,” he stated.

The fact remains that the world is moving into new technologies, while we are too far back, the government official mentioned earlier said. “Unless we start to engage now, by the time new technologies come, we will be ancient,” he added.

Published on July 09, 2021

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