Govt to scrap licensing of Indian ships
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Bengaluru: India-registered ships will no longer need to hold permits from India’s director general of shipping to operate, according to the draft of a new merchant shipping bill drafted by the government to make it easier for companies to do business.
The new bill, once cleared by Parliament, will replace the existing Merchant Shipping Act which was framed in 1958. Mint has reviewed a copy of the new bill. The focus of the new bill is to make it compact (the bill contains 267 sections compared with the 461 sections in the existing Act) and easily implementable, to promote ease of doing business in tune with the prevailing socio-economic realities.
“We have proposed removing licensing requirements for Indian-registered ships from the new Act,” a spokesman for the shipping ministry said.” As a result, licensing raj will disappear,” he added.
The scrapping of the licensing requirement will help simplify customs procedures and dispense with port clearance requirements. “In future, registration of ship will be sufficient because the registration certificate will be deemed to be the licence,” the ministry spokesman said. “So long as a ship is registered under the Indian flag, a licence is not required,” said Amitava Majumdar, managing partner at maritime law firm Bose & Mitra & Co.
Shipping minister Nitin Gadkari simplified the ship-licensing regime for Indian ships a few months ago by making it a one-time, life-long licence co-terminus with the registration of the vessel. Earlier, Indian-registered ships had to renew their licences every year from the director general of shipping, India’s maritime regulator.
Even the one-time licensing is now being dispensed with.
The licensing requirement will, however, remain for ships registered overseas when they are hired to operate on local routes.
A new scheme for ship acquisition introduced by the government will be brought under the revamped merchant shipping Act.
The so-called Indian controlled tonnage scheme allows shipowners based in India to acquire ships abroad and also flag them in the country of their convenience—typically tax-friendly jurisdictions to help access cheap source of funds—yet get fiscal and cargo benefits available in India.
The scheme gives local shipping firms the flexibility to directly register their ships overseas sitting in India without opening multiple subsidiaries abroad to acquire and manage such ships, which had become a trend among fleet owners due to tax reasons.
Such Indian-controlled foreign registered ships should hire at least 50% of the crew required to run the vessel from India to improve employment opportunities for Indian seafarers. This stipulation, though, will be subject to the staffing requirements of the flag state (where the ship is registered) or the operating state (where it is plying).
If the local rules require hiring of crew from that place, then the number of Indian seafarers would be reduced to that extent.
The foreign-registered ships controlled by Indian entities can be in-chartered (hired) by the same entity and such ships will get second preference for moving cargo along local routes within Indian waters after full-fledged Indian registered ships.
“Bringing Indian-controlled tonnage under the Indian statute will be detrimental to Indian fleet owners,” said the managing director of a shipping company based in southern India. “The current Merchant Shipping Act is very onerous in terms of staffing of Indian crew. That’s why we are flagging ships outside. If the government brings the scheme under the new merchant shipping Act, all provisions of the Act will apply. Then, why would we opt for the controlled tonnage scheme? By opening a subsidiary abroad, we might as well register ships outside where no provisions of the merchant shipping act are applicable,” he said, asking not to be named.