Seek scrapping of circular, notification taking away their Right of First Refusal
Over two dozen Indian shipping companies have submitted a memorandum to the Prime Minister Narendra Modi, seeking his immediate intervention to scrap a recent notification and a circular which, according to them, would force them to shut down, resulting in heavy job losses.
They said the Indian flag shipping industry was heading for a crisis arising out of Notification No. 2 of ‘Make in India’ dated February 13, 2019, issued by the Ministry of Shipping, and Circular No. 2 of 2019 issued by the Director General of Shipping, Mumbai.
These changes would take away business from the Indian shipping companies, they said.
The circular equates a foreign ship taken on hire, with a ship actually owned under the Indian flag by an Indian company. Besides it gives priority in government contracts to those ships, just because they were once built in India.
Advantage foreign firms
Indian flag vessels have been enjoying the Right of First Refusal (ROF) which enables them to match the lowest rates quoted by a foreign vessel and take that business. This has aided growth of the Indian fleet since it helps to ensure that no Indian asset remains idle. Indian ship owners said this right has been taken away by the government and given to foreign shipping companies.
“While we applaud the intent of the notification in respect of incentivising ship building in India, we are concerned that the notification and the circular issued by the government are detrimental to the survival of the Indian shipping industry,” the memorandum said.
“It removes the Right of First Refusal (ROFR) available to the Indian flag vessels which enables an Indian flag vessel to match the lower rates given by a foreign flag vessel so that the Indian business is available to Indian flag vessels,” it added.
Indian ship owners said the notification and circular indicate that the Ministry and the DG Shipping favour those who temporarily hire foreign flag assets and remit money out of India, rather than those investing in the Indian economy with a $15- 50 million asset.
“The government gives preference to foreign flag vessels built in Indian yardsbut not owned by Indian companies, over [those under] Indian flag,” said Sachin. K. Kshirsagar, Director, SS Offshore Pvt. Ltd.
The Indian ships provide employment to about 25,000 Indian seafarers, who now face the risk of losing their jobs, in addition to many people employed in offices and ports.
“What would be graver is the fact that Indian shipping companies will become financially weaker and will impact the Indian economy and lenders. This action has the ability to create potential NPAs for Indian banks,” Mr. Kshirsagar added.
The memorandum pointed out that the notification would not serve the purpose of ‘Make in India’ as ships already ‘made’ in India have been given preference.
Captain Vikas Vij, managing director, I-Marine Infratech (India) Pvt. Ltd., said: “The ship owners completely support the Prime Minister’s effort towards Make in India, but such changes should be done through a well-thought policy intervention and not policies which will destroy the Indian shipping industry.”