Considering India’s burgeoning import of transport services, which touched a whopping $109 billion in 2022, there is a proposal to form a new shipping company having a fleet of 1,000 vessels. It is aimed at fulfilling the country’s ever-growing need for shipping services due expanding foreign trade, supply-chain uncertainty, promotion of self-reliance amid growing international standing as the fifth largest economy and, most importantly, the need to reduce the ever-escalating import bill on transport services which is becoming unsustainable.
There’s certainly the need for a ‘self-reliant initiative’ to ensure the country’s external engagements remain free from over-dependence, ensuring geostrategic autonomy in the unfolding brittle, anxious, non-linear and incomprehensible (BANI) environment. The proposal can be implemented along with associated reforms to make India an attractive centre for shipping fleet services.
Advantage GIFT City
A new shipping entity is proposed to be collaboratively formed at GIFT City. It will involve stakes from energy, mineral and fertilizer public sector undertakings which import in large quantities. For such bulk and standard cargo, these PSUs will have long term charter party contracts, thus enabling the new shipping entity attract prospective investors from developed countries. Catalytically, the shipping company will lease vessels on operating, financial/capital and sale and leaseback basis, thus cutting the operational costs of these ships to India’s state-owned enterprises engaged in bulk cargo trade. These PSUs in turn will take vessels on 15-year lease instead of voyage, bareboat and trip-time charter or contract of affreightment as practised now.
It is pertinent to have sovereignty over our shipping fleet amidst mounting challenges, shortages in oil tankers, prolonged gestation periods due to blockages of trade routes, economic sanctions, and the weaponization of international payment and insurance services. Hence, collaboration among various public and private stakeholders is a must to address these challenges, fostering resilience and stability in India’s maritime operations.
GIFT City has geostrategic advantages with proximity to major shipping lanes and access to advanced ports and shipyards. This makes it a prospective logistical powerhouse, enabling efficient operations for ship chartering and shipbuilding companies. Also, its streamlined regulatory processes and attractive tax benefits provide a one-stop solutions for financial services. Being a tax-free zone away from clutches of regulatory red-tape, it is an ideal place for such an entity. Moreover, shipping services being a capital intensive business, such entity can easily get funding, insurance, and risk management solutions tailored to its needs.
For liner operations, this shipping company may have to foster an ecosystem of shipbuilding as ships engaged in container transport are different. Considering the ease in intermodal transshipment and evolving container traffic from IMEC (India-Middle East-Europe Economic Corridor) route, it makes sense for India to own more container vessels to offer seamless connectivity from Indian ports to Jebel Ali port, Dubai, an important internode. Policymakers must envision India’s liner shipping company to cater to our ever-expanding external engagements, prospectively as a third largest economy of the world in the near future.
Foster the ecosystem
In addition to an enabling ecosystem for shipping services, there is a need to amend and adapt the national laws with regard to Convention on Limitation of Liability for Maritime Claims (LLMC), International Convention on Maritime Liens and Mortgages (MLM) and International Convention on Arrest of Ships (Arrest Convention) to nurture a business-friendly environment for shipping operations. Likewise, arbitration as a medium of dispute resolution must be encouraged and, correspondingly, measure must be taken to strengthen it in the light of pursued reforms.
Secondly, significant investment is needed for modernising the port infrastructure, such as deepening harbours, upgrading container-handling capacity, strengthening intermodal connectivity to hinterland and international ports, and developing soft infrastructure through IT and trained manpower.
Thirdly, as trade does not operate in silos, it is important to develop an ecosystem of maritime financial services such as insurance, financing and advisory beyond GIFT City as well.
Fourth, attractive policies that offer competitive registration fees and streamlined processes must be rolled out, to attract foreign-owned ships for maritime operations from India.
Fifthly, there must be a focus on quality of ship safety, ease of operations, compliance of labour and environmental standards to attract not only the responsible ship-owners but also the hedge and sovereign wealth funds looking to invest in shipping sector. We should be open to partnering with other countries, for instance the UAE, Russia, and Saudi Arabia, for investments.
Finally, a segmental approach, initially of owning and leasing a vast fleet of foreign vessels to fulfil requirements in the bulk shipping sector, must be leveraged. In the long run, policy support and focus must be on nurturing an ecosystem for ship manufacturing so as to emerge as low-cost destination similar to China and South Korea. A strong liner shipping fleet specific to India’s cargo profile, container mix, services operation and geographic requirements is needed.
India’s dream of a 1,000-ship fleet and reduced reliance on foreign vessels can be propelled by GIFT City’s unique advantages. Sovereignty of shipping fleet not only protects our economic interests but also enhances geopolitical influence and ensures national security in an increasingly complex global landscape.
The writer is Professor and Head, IIFT, New Delhi. Views are personal