State-runs firms have been vested with powers to scrap contracts awarded to fleet owners on the basis of Indian registered ships offered by them under a local rule if they convert their ships into foreign flag before the tenure ends, the country’s maritime administration has said.
The so-called right of first refusal or RoFR allows fleet owners to take the benefit available to Indian registered ships for doing business along the Indian coast.
In a public tender, an Indian flag ship or ships registered in India has the right of first refusal to match the lowest rate quoted by a foreign flagship and take the contract, according to rules set by the Directorate General of Shipping (DGS) to support the local shipping industry.
The country’s coastal trade is reserved for Indian-registered ships and foreign ships can be hired to operate in Indian territorial waters only when Indian ships are not available and that too with the regulator’s approval. “The vessel needs to continue to be Indian flag vessel at all times from the date of opening of tender till the end of the contract period to avail the benefits of RoFR failing which the contract awarded to it shall be withdrawn,” Ash Mohomad, a deputy director general of shipping, wrote in a circular dated August 7, 2017.
There have been instances where entities are seen applying for tenders by offering Indian flag vessels to take advantage of the right of first refusal. “When they apply for the tender, they bring a foreign flag vessel and register it under the Indian flag, win the tender and later change it into foreign flag. So, the purpose of promoting Indian flag is getting defeated. That’s why we are saying once you are getting the benefit of a contract in India by availing the RoFR, you should continue to be Indian vessel till the contract is completed. Otherwise, it is very unfair. You are taking contract as an Indian flag vessel and after getting the contract you are going away,” Mohomad told BusinessLine .
“The intention is to promote Indian tonnage so that fleet owners come and register in India”, Mohomad added.