India Eases Foreign Flag Restriction

The Indian government has announced a new shipping category that will have priority over foreign flag vessels in the country’s coastal shipping sector.

The new category “Indian controlled tonnage” enables Indian shipowners to take advantage of low cost foreign flags. After Indian flagged vessels, this new category will have the right of first refusal of cargo over non-Indian ships. The policy change is expected to help local lines increase their share of the coastal trade market which is currently less than 10 percent. 

At least 50 percent of the crew, both officers and ratings, must be Indian, and the ship should also be used for training cadets. Additionally, the tonnage acquired under the new category cannot exceed a company’s Indian flag vessels. Shipowners must maintain their Indian tonnage at the level it was at April 1, 2014.

“The most important aspect of this news is that finally the government feels the shipping industry is important. It also recognizes that they need to give some relief to shipowners,” says Captain Rohit Bhatia, managing director of Wade Maritime Consultants in India. 

“It’s definitely good news for the Indian shipowning fraternity who has been pleading for relief for the past few years. I believe it is a step in the right direction to help Indian shipowners and to have them carry more Indian cargo. They would have to maintain their existing fleet under the Indian flag, but any new ships can be flagged out. 

“The requirement to maintain at least 50 percent Indian crew on these vessels means cost, union rules/regulations, training of cadets etc. Most shipowners would have preferred to employ foreign crews which are possibly cheaper and come with lesser regulation,” says Bhatia.

“Remember, it’s never a free lunch, the government will also benefit from additional revenues coming in to the country (read “more tax dollars”) instead of just dividends from foreign subsidiaries of Indian companies. It also means additional security for Indian trade viz-a-viz a larger percentage of cargo being carried by Indian ships.”