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players given that there is a need for large scale acquisitions in the shipping sector. It is consid- ered prudent that the national fleet is at least large enough to carry 50% of national critical cargoes and today the share of Indian ships is less than 10%.
Currently, only three major Indian banks, large- ly, participate in the funding of shipping assets and the cost of funds averages about 13.5% that has to be repaid in 7 years. Comparatively, the competing foreign shipping companies are able to source funds at about 2-3.5% for about 12 to 15 years.
The Committee of Secretaries (COS) has ap- proved of a Maritime Development Fund (MDF) for funding all maritime related activities in In- dia. This project needs traction.
iii. Reaffirmation of the GoI policy of Imports on the basis of “Free on Board” (FoB policy) and strengthen the policy of Right of First Refusal (RoFR) thereby enhancing the participation of Indian shipping companies in the carriage of Indian cargo.
It is necessary that all Contracts of Affreight- ment for carriage of cargo or on Time Char- ter for a period exceeding 60 days should be awarded to a foreign shipping company only on the condition that such contracts would be executed after converting their own foreign flag ship to an Indian flag. Spot enquiries or voy- age charters may be continued to be carried as they are today.
iv. The contentious recent regulations
The orders 1 of 2018, 2 of 2018 and 3 of 2018 permit foreign flag vessels to transport EXIM laden containers, agri products, horticulture, fisheries, animal husbandry commodities and fertilizers between two or more Indian ports without obtaining a license from the Director General of Shipping.
These orders are detrimental to and damage the interests of the existing Indian flag industry and Indian seamen with not a single commen- surate benefit to the Indian economy or India. We expect the government of India to reverse these orders.
v. Need to strictly implement the revised Depart- ment for Promotion of Industry and Internal Trade Public Procurement (Preference to Make in India) 2017. The revised order of 4th June 2020 states that orders below Rs. 200 crore have to be floated among Indian companies only.
Annual Review 2020
INTERNATIONAL LESSONS
FOR INDIA
EU Emissions Trading System
In a move that is bound to impact India’s maritime trade with Europe and other cross trades, the Euro- pean Parliament on 15 September voted to include greenhouse gas (GHG) emissions from ships over 5,000 gross tonnes in its emissions trading system (EU ETS) by 2022. The billions of euros raised from the sale of carbon allowances to international ship- ping companies is slated to be used to support the EU’s post COVID-19 recovery.
The actual incidence of impact on Indian shipping would be as follows. If an Indian product tanker on a voyage carrying cargo of petrol from Jamnagar goes to Livorno (Italy), part discharges cargo there and makes a voyage to Rotterdam to discharge the balance cargo. It then sails to Houston (USA) in bal- last/empty ship, loads cargo there for discharge in Singapore. The proposed EU legislation requires the Indian shipping company to pay to the EU au- thorities for the proportionate carbon emissions for its voyage legs from Jamnagar to Livorno to Rotter- dam to Houston.
The EU ETS would apply to non-EU flag ships trad- ing to EU ports, and levy an extraterritorial ‘tax’ on the movement of cargoes on voyages originating thousands of kilometres away from Europe. Thus, besides being a questionable way of financing EU’s post-pandemic economic recovery, the unilateral extension of the ETS to international shipping also impinges on the sovereignty of non-EU states.
The way forward for the government
of India
The Ministry of Commerce needs to recognise the potential problems and increase in costs to Indian shipping and trade as a result of EU’s proposed ar- bitrary legislation. This scheme therefore needs to become part of the permanent agenda in all trade negotiations and related interactions that India has with the European Union.
At the same time, the Ministry of Shipping, which represents the interest of India at the IMO, needs to take up this matter urgently with the international body. The Indian National Shipowners’ Association has submitted a position paper to the Ministry of Shipping to facilitate urgent engagement with IMO.
“Though data has been sourced from various publi- cations like UNCTAD Report, Clarksons Review, The Economist, IPA and Institute of Shipping Economics & Logistics, the views professed in the report and conclusions drawn are those of the INSA secretariat alone”
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