With a Budget-funded financial aid scheme for local shipbuilders not improving their prospects and its flagship initiative of turning India into a manufacturing powerhouse wobbling, the National Democratic Alliance (NDA) government has overhauled a cargo support policy extended to Indian fleet owners by giving first preference to ships that are manufactured in India to carry export-import and coastal cargo for state-run firms.
The move has thrown Indian fleet owners into disarray.
Currently, local shipping companies get a right to match the lowest rate offered by a foreign flag ship in tenders issued by state-run firms for hiring ships under the chartering guidelines framed by the director general of shipping. If Indian shipping companies decline, the foreign flag ship that had quoted the lowest rate is allowed to carry the cargo.
Right of first refusal
Henceforth, the right of first refusal (RoFR) will be available to local fleet owners only when the ship being offered for charter by the lowest bidder (L1) is built outside India, provided the bid of the Indian participants is within the 20 per cent range of the lowest bid quoted by a foreign owner as per the purchase preference given to Indian entities.
The RoFR would be exercised if the lowest bidder is a company registered outside India, offering a ship not built in India.
Or, the lowest bidder is a Citizen of India/company or society registered in India/Indian shipping company with a ship registered/flagged in India, offering a ship not built in India.
In such cases, the first priority to exercise the RoFR would be given to bidders who offer Indian-built ships.
“In case, none of the bidders offering Indian built vessels matches the L1 price, then RoFR would be offered to bidders who are either Citizen of India/companies or societies registered in India or offering a vessel flagged in India. In case, none of the bidders eligible to exercise the RoFR matches the L1 quote, then the charter shall be awarded to the lowest bidder,” Dashrath Prasad, Director, Ministry of Shipping, wrote in a February 13 circular.
New chartering norms
The ship chartering guidelines for government agencies/undertakings have been amended to promote the ‘Make in India’ initiative and give a long-term strategic boost to the domestic shipbuilding industry, he added. The new chartering rules come as the Modi government prepares for fresh polls after completing a five-year term in which it threw its weight behind public yards by supporting them with orders and help expand capacities while watching two private yards — Bharati Defence and ABG Shipyard — collapse, rendering hundreds of workers jobless and the infrastructure in shambles.
The recent controversy on unemployment also goaded the Nitin Gadkari-led ministry to take the step in an industry that generates large scale direct employment and many more indirect jobs.
“No Indian ship owner runs an Indian built-ship in the largest category such as Suezmax, Aframax and large gas carriers for which public tenders are typically issued. Currently, Indian yards do not have the capability to build these large category ships. The new chartering rules defies logic,” an executive with a private shipping firm said.