Monday, July 26, 2021

Flagging of merchant ships in India | New door of opportunities

India, the 16th largest maritime country in the world, has registered remarkable growth in the sector. There had been numerous attempts held by the government to promote shipping in the country.

In another significant move, the Union Cabinet has approved a scheme for the promotion of flagging of merchant ships in India. It has been decided that Rs 1,624 crores will be provided over five years as a subsidy to Indian Shipping companies in global tenders floated by Ministries and Central Public Sector Enterprises for the import of government cargo.

Before moving ahead, let’s get to know the basics of India’s Shipping Industry.

The shipping industry is one of the most globalised industries operating in a highly competitive business environment that is far more liberalized than most of the other industries. Shipping plays an important role in the transport sector of India’s economy as 95% of the country’s trade in terms of volume and 68% in terms of value is moved by sea.

India is strategically located on the world’s shipping routes with a coastline of approximately 7,517 km. Owing to this advantage, the nation has various growth and investment opportunities in the maritime sector.

Flagging of ships is also an important aspect of this industry where a ship is entitled to fly the flag of a country only after being registered in that country. The object of registration is to ensure that persons who are entitled to the privilege and protection of the Indian flag receive the assured facilities. This registration of the ship plays an imperative function towards its safety and security.

Now, let’s have a look at the scheme approved for the promotion of flagging of merchant ships.

A ship that is flagged in India after 1st February 2021 and is less than 10 years at the time of flagging will receive subsidy support of 15% of the quote offered by the L1 foreign shipping company whereas subsidy support would be extended to 10% of the quote offered by the L1 foreign shipping company for the ship which is around 10 to 20 years old at the time of flagging.

It becomes important to understand that a freight/shipping quote offers an estimate of the total cost of shipping.

Further, the subsidy support would be extended only to those ships which have bagged the award after the implementation of the scheme. It is also being assured that flexibility exists in the allocation of funds for expenditure from one year to another and within the various Ministries/Departments of the scheme. The ships that are older than 20 years would not be eligible for any subsidy and this subsidy scheme would be reviewed after every 5 years.

Benefits

The scheme has immense potential to generate employment. An increase in the Indian fleet will provide direct employment to Indian seafarers since Indian ships are required to employ only Indian seafarers. It will also enhance the share of Indian seafarers in global shipping.

Further, the increase in the Indian fleet will also generate indirect employment in the development of industries such as shipbuilding, ship repair, recruitment, banking and contribute to the Indian GDP.

The proposed subsidy support that is being provided to Indian shipping companies would enable an increased number of government imports to be carried on Indian flagships and will make it more attractive to flag merchant ships in India, thus, giving a major boost to the shipping sector and Aatmanirbhar Bharat.

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