Indian lines can own foreign flag ships directly

Indian shipping companies will soon be able to directly own and operate foreign flag vessels.

Currently, they can charter and operate foreign vessels with special permission but can own them only through a foreign subsidiary.

Will help shipowners The Shipping Ministry has finalised guidelines allowing Indian companies to register their ships under foreign flags. This follows the Union Budget announcement about the Government decision to create a new category of fleet called ‘1 Indian controlled tonnage’. The guidelines will be announced shortly, said an official.

The policy change will allow domestic shipowners to register their vessels in tax-friendly countries and at the same time operate them from India.

A major advantage of this will be that while the shipping lines can take freight income from such vessels directly on their books of accounts, these vessels will not be subject to the Indian-flag restrictions. These vessels will also be eligible for availing tonnage tax benefits subject to a capacity ceiling.

The policy relaxation is expected to discourage Indian shipping companies from acquiring ships through their overseas subsidiaries. The disadvantage of the subsidiary route is that Indian companies will not be able to repatriate their entire profit. They also have to follow local regulations.

However, shipping lines will be allowed to flag out only those ships which are acquired after a cut of date, say April 1, 2014. In other words, shipping companies will not be allowed to register their exiting fleet under a foreign flag, said an official involved in drafting the guidelines. Also, at least 50 per cent of the crew on ships under a foreign flag should be Indian. This should be subject to the flag state regulations.

Atul Agarwal, President of the Indian National Shipowners Association (INSA), which has been seeking the policy change, said the new norms will help Indian lines grow globally and enable them to raise funds overseas at lower rates.

‘A big boost’ The new policy will be a big boost for Indian companies which are subject to heavy tax burden, said S Hajra, former Chairman of Shipping Corporation of India.

Ideally, he said, the Government should make Indian flag more tax-friendly, flexible and attractive to help increase its own tonnage.

In the long run, this will help Indian fleet to carry a larger share of the country’s own cargo.

Currently, their share is less than 10 per cent.