Shipment of Govt. Controlled Cargo

With its vast coastline of over 5560 kms., 12 major ports and several intermediate and minor ports, shipping occupies an important position in the country’s trade and commerce. The Second World War demonstrated in unmistakable terms the need for harnessing the transport resources of a country to meet the situation created by a war. It was, therefore, necessary to have some control over Indian ships.

In the early 1990s, Indian shipping lines carried one-third of the country’s cargo. Two decades later, their share has slumped to barely one-tenth, reflecting the poor growth of a sector that is pivotal for the country’s economic progress.

While the volume of cargo grew six-fold over the past 20 years, the domestic shipping fleet expanded at a snail’s pace, just by one-and-a-half times. As a result, 90 per cent of India’s sea-borne cargo is handled by overseas carriers, causing a huge drain on foreign exchange in the form of freight payment.

Indian exporters and importers shelled out an estimated $50 billion last fiscal to foreign shipping lines, and the outgo would be higher this year even as the Government burns midnight oil to rein in the current account deficit that hit a record 4.8 per cent of GDP last year.

A major part of this freight outgo is on account of oil imports. Out of the 172 million tonnes of crude imported last year, Indian tankers carried only 16 per cent – a steep fall from 66 per cent in 1994 when the oil cargo was reserved for Indian bottoms.

It is a pity that a country, which has a cherished tradition of shipping and seafaring and is endowed with more than 7,500 km of coastline, dotted with 13 major ports and over 180 non-major ports, depends on foreign lines to carry bulk of its strategic oil cargo.

In the past two decades, the capacity of Indian merchant fleet expanded by four million gross tonnes (gt) — from 6.2 million gt in 1994 to 10.2 million gt as on March 2013. (Of the 1,164 vessels with an average age of 17 years, only 358 vessels of 9.16 million gt are engaged in international trade.) Its share in the global tonnage fell from 1.4 per cent to one per cent. It only shows that despite having a long-term assured cargo, India has not been able to keep up with the growth in world tonnage.

The Government’s shipping policy vows to increase the share of national carriers in handling the country’s cargo. That this is not happening should be a matter of national concern and a sad commentary on the officialdom in charge.

Cargo Support

One thing that has remained unchanged is the shipowners’ demand for cargo support.

India followed a policy of import on free-on-board and export on cost-insurance-freight basis, to ensure that Indian ships carry the country’s cargo. However in the late 1980s, export cargo was exempted from this policy.

For import cargo, Indian lines continue to enjoy the first right of refusal. Transchart, the centralised agency in the Shipping Ministry, implements this for Government-owned cargo. However, over a period, the volume of Transchart cargo dwindled as many public sector undertakings opted out of the scheme.

Till 2002, oil cargo was reserved for Shipping Corporation of India on a cost-plus freight basis. This was discontinued following the dismantling of the administrative price mechanism for petroleum products. Oil companies are now free to make their own arrangements.

Indian ship owners are now seeking a 30 per cent reservation on all cargo though they do not have the capacity to carry half of it.

The basic objectives of India’s shipping policy since independence have been:

1. To reduce the dependence of external sea borne trade on foreign shipping services;
2. To safeguard the imports of essential supplies especially POL, for the national economy;
3. To reserve 100% coastal trade for national flag vessels;
4. To ensure adequate provision of shipping services to meet the requirements of the national trade;
5. To improve the balance of payments position through import substitution and export of shipping services; and
6. To develop merchant fleet, to act as a second line of defense to protect India’s maritime interest and preserve its channels of communication.

To safeguard the basic policy objectives of Indian shipping, it is necessary to have some control over Indian shipping. Under the Indian law, the provisions relating to control of Indian ships are enumerated in Part XIV of the Merchant Shipping Act. The control over Indian Ships is exercised both by legislation as well as by executive orders.

The present position of the control of Indian ships is exercised as under: –

1. The licensing system envisages that an Indian ship or a ship chartered by a citizen of India or a company is not permitted to be taken to sea from a port or place in India except under a license granted by the Director General of Shipping or any officer authorized by Government in this behalf.
2. The coasting trade of India is exclusively reserved for Indian ships and for this purpose a ship chartered by a citizen of India or a company which satisfied the requirements laid down in section 21 of the M. S. Act, 1958 will be deemed to be an Indian ship. A foreign ship is not allowed to ply in the coasting trade of India except under a license granted by an officer authorized to issue it.
3. The categories of licenses, the form in which they are to be preferred by parties, conditions, subject to which they may be issued and their validity period, where applicable are all laid down in the M. S. (Forms of Licenses) rules. The categories of licenses contemplated are:

• General License;
• A license for the whole or any part of the coasting trade of India; or
• A license for a specific period or voyage.

4. The Director General of Shipping may, if the circumstances of the case so require, in his discretion, revoke or modify a license granted to a party subject however to the condition that the party in whose favor a license may have been so issued is given a reasonable opportunity to represent against such revocation or modification as the case may be.
5. Licenses, which cease to be valid, are to be made over or cause them to be made over, within a reasonable time, to the Director General Of Shipping for cancellation.
6. A duty has been cast on the Customs Collectors not to grant port clearance to ships which are required to take out licenses under Part XIV of the M. S. Act, 1958.
7. In the case of an Indian ship or a ship chartered by a citizen of India or a company, Director General of Shipping has powers to give directions with respect to all or any of the following matters:

The ports or places, whether in or outside India, to which, and the routes by which, the ship shall proceed for any particular purpose;

• The diversion of any ship from one route to another for any particular purpose;
• The classes of passengers or cargo which may be carried in the ship; and
• The order of priority in which passengers or cargo may be taken on or put off the ship at any port or place whether in or outside India.