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All Above Board | India liberalizes ship licensing rule

The Indian shipping ministry has said that life-time licences will, henceforth, be issued to Indian ships and any other ship charted by an Indian citizen or an Indian firm which will be co-terminus with the certificate of registry of the ship. Photo: MintPremium
The Indian shipping ministry has said that life-time licences will, henceforth, be issued to Indian ships and any other ship charted by an Indian citizen or an Indian firm which will be co-terminus with the certificate of registry of the ship. Photo: Mint

The move is a much needed simplification of a rule which makes life easier for shipowners, besides reducing transaction costs and delays

For many years, it has been an annual ritual for India’s shipowners to troop to the office of the directorate general of shipping to get a so-called general trading licence (GTL) renewed.

Without such a licence, ships cannot ply, according to Indian laws. Indian customs department will not grant port clearance to a ship if it does not have a valid general trading licence.

Section 406 of India’s Merchant Shipping Act, 1958, specifies that “no Indian ship and no other ship chartered by a citizen of India or a company or a co-operative society shall be taken to sea from a port or place within or outside India except under a licence granted by the director general of shipping".

A licence granted under this section may be a general licence, a licence for the whole or any part of the coasting trade of India or a licence for a specified period or voyage.

In the initial years, the process of issuing the general trading licence was a formality, but progressively it was made more and more difficult for fleet-owners. While filing applications with India’s maritime regulator to renew the licences, it was made mandatory for shipowners to enclose/append as many as 20 other globally mandated certificates relating to the condition and running of the ship which have their own validity periods.

So, if any of these 20 certificates were invalid at the time of applying for renewing the general trading licences, the renewal process would be stalled. In any case, no ship can sail if any of these 20 certificates are not valid, as per global rules.

Why this duplication and extra work? The process of getting the general trading licences renewed is quite often fraught with delays and rent-seeking, leading to loss of precious revenue earning days for the fleet owner.

The Indian government has now scrapped this requirement, which is seen as a remnant of the time when the country was ruled by the British. There is no concept of a general trading licence anywhere in the world; it is a requirement when a ship operates along the Indian coast.

On 20 July, India’s shipping ministry said in a statement that life-time licences will, henceforth, be issued to Indian ships and any other ship charted by an Indian citizen or an Indian company which will be co-terminus with the certificate of registry of the ship.

In effect, the general trading licence, once issued, will be valid as long as the ship remains under the Indian registry.

Officers of mercantile marine departments located in Mumbai, Chennai, Kolkata, Cochin and Goa who are designated registrars of ships by the director general of shipping, will have the powers to issue life-time licences. Shipowners will have to pay a one-time fee for such licences.

This is a much needed simplification of a rule which makes life easier for shipowners, besides reducing transaction costs and delays.

There are many more such archaic laws/rules which deserve a similar treatment because they are just not in sync with the times.

For instance, a prominent case is the disparity in the tax treatment of Indian seafarers working on Indian-flagged shipped, compared with Indians working on foreign ships. A seafarer serving on Indian ships outside India for a period of 182 days or more in a year is considered to be a non-resident. However, the time spent by a ship in Indian territorial waters is considered a period of service in India.

As Indian ships generally operate in Indian trade and Indian ships call frequently at Indian ports, a large number of Indian crew employed on Indian ships, though trading outside India, face difficulties in complying with the 182-days criterion for getting non-resident Indian status.

But, due to lack of monitoring, Indian crew serving on foreign ships for 182 days or more are treated as non-resident, irrespective of where the ship trades (including Indian waters).

As a result, Indian-flagged ships that are by law required to hire only Indian crew, face an acute shortage of experienced workforce, particularly in the officers category.

There is a continuous drift of personnel from Indian ships to foreign flag ships under the lure of higher “take home" pay packets, without having to pay tax in India due to an un-intended differential tax treatment.

A solution to this has eluded the government for years.

The National Democratic Alliance (NDA) government led by Narendra Modi has done much since assuming power in May to convey that shipping is one of its priority areas, unlike the previous government.

Hopefully, simplification of more laws and rules such as the one on seafarers’ taxation would give a much-needed boost to the sector.

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