The local shipping industry has hailed the ₹1,624-crore subsidy support over a five-year period to promote flagging of ships in India announced in the Budget but said that clarity was needed on how the scheme will be implemented and in what form the subsidy will be disbursed.

“A scheme to promote flagging of merchant ships in India will be launched by providing subsidy support to Indian shipping companies in global tenders floated by Ministries and CPSEs,” Finance Minister Nirmala Sitharaman said in her Budget speech to Parliament.

“An amount of ₹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,” she added.

Indian flagged ships are, by law, required to hire only Indian nationals as crew.

“It’s a great announcement but nobody knows how it is going to work or be implemented,” said an executive with a private shipping company.

Fleet owners are clueless on what form the subsidy will come in, whether it will benefit the existing Indian shipping companies or whether it is aimed at incentivising foreign shipping companies to flag ships in India by setting up an Indian subsidiary.

India has allowed 100 per cent foreign direct investment in shipping since early 2000, but none of the foreign fleet owners has set up shop in India due to unfavourable tax and operating reasons.

Lack of long-term, low-cost funds and long-term cargo support has been cited by fleet owners as the main reason for stalling the growth of Indian tonnage.

Currently, Indian fleet owners get a so-called right of first refusal (RoFR) to match the lowest rate offered by a foreign flag ship in global tenders issued by state-run firms for hiring ships under the chartering guidelines framed by the Directorate General of Shipping.

Local fleet owners have to come within 20 per cent of the lowest foreign bidder, to get the right of first refusal.

The order of grant of RoFR was recently revised to give top priority to lndian built, lndian flagged and lndian owned ships followed by foreign built, lndian flagged and lndian owned vessels. The third priority will be given to lndian built, foreign flagged and foreign owned ships.

However, all vessels flying the flag of lndia (but built in foreign yards) up to January 15, 2021, will be treated as lndian built vessels and get top priority while exercising the RoFR.

The subsidy scheme for ship owners will complete the Central government’s efforts towards encouragement and development of the lndian shipbuilding and ship owning industry as part of the Make in India and Atmanirbhar Bharat programme.

In 2016, the government introduced a long-term subsidy scheme for ship yards under the shipbuilding financial assistance policy for a ten year period.

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