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Thursday, May 21, 2009

India: Rules on hiring foreign ships set for an overhaul

Thursday, 21 May 2009

India is set to overhaul rules related to the hiring of foreign vessels to ship cargo overseas. The country’s maritime regulator, the director general of shipping (DGS), has set up a committee headed by maritime lawyer S. Venkiteswaran to review existing rules on hiring foreign ships, framed in 2002, and suggest ways to make them more effective in protecting Indian-registered ships, said an industry executive who is part of the panel, and didn’t want to be named.
Protectionism desirable? A cargo terminal at JN Port, Mumbai. The maritime regulator has set up a committee to review existing rules. Ashesh Shah / Mint
The move is seen as a bid to make hiring of foreign ships more stringent and protect Indian ships from competition at a time when local shipowners are reeling under a global slowdown.
A Mumbai-based shipbroking executive, who also declined being named, said local entities are now opening offices in Singapore and Dubai to bypass the country’s ship hiring rules. Hiring through overseas offices for carrying Indian cargo doesn’t require the regulator’s permission.
Under the rules, public sector entities have to give the right of first refusal to Indian-registered ships for transporting cargo in and out of India. That is, if a foreign ship quotes the lowest rate for a tender or enquiry floated by a public sector entity, an Indian ship has the right to match that rate and take the contract.
In effect, foreign ships can be hired by public sector firms only when Indian ships are not available. Hiring foreign ships also needs regulatory permission.
Private firms looking to hire foreign ships to haul cargo have to get a no-objection certificate (NOC) from the Indian National Shipowners’ Association (Insa) ahead of submitting an application to the regulator.
Currently, DGS allows local entities, both public and private, to hire foreign ships on contracts of up to two years if Indian ships are not available. Similarly, for the country’s coastal trade—carrying cargo on ships between two Indian ports—foreign ships can be hired to transport cargo with the regulator’s permission, but only when Indian ships are not available.
But in a recent case, a Chennai-based logistics firm was granted permission by the regulator to hire a foreign ship to carry cargo along the coast after it filed a writ petition in the Mumbai high court complaining about delays in getting the clearance.
Caravel Logistics Pvt. Ltd was granted an NOC by Insa, according to procedure, but this was withdrawn when one of its members, Shreyas Shipping and Logistics Ltd, said it had a ship for Caravel’s requirements. But Caravel said the price quoted by Shreyas for hiring out the ship was unacceptable as it was higher than the market rate.
Faced with a court case, Insa relented and granted an NOC to Caravel after several months.
“After this incident, we don’t want anybody else to come for an NOC to hire a foreign ship citing this as an example,” an Insa member said on condition of anonymity.
The industry body says Indian ships are available and should be utilized to the fullest extent so that everybody benefits at a time when freight rates and demand have plunged to the lowest levels in many years.
Agreeing that preference and protectionism for Indian ships were desirable to an extent, critics, however, said it cannot be at the cost of customers.
“Protectionism should not be at the expense of customers,” said the shipbroker mentioned earlier. “Rates should be competitive.”
“Protectionism can never be unconditional,” said another Mumbai-based maritime lawyer on condition of anonymity. “Otherwise, it will lead to cartelization and monopoly.”
Source: Livemint