During the winter session of Parliament, four bills pertaining to the maritime industry were listed. These legislations represent a major advancement in the evolution of India’s maritime industry, which is essential for both national security and economic expansion.
Though ships are just as important, discussions about this industry frequently center on the efficiency and logistics of ports, which are unquestionably significant. Regretfully, India falls behind in every aspect of shipping, including flagging, shipbuilding, and ownership. Only 1,526 ships with a combined gross tonnage capacity of about 13 million are owned by India. 487 of these ships are involved in international trade. With 1.2% of the world’s shipping capacity, India is ranked 18th. Further, only 0.77% of the world’s ships are registered under the Indian flag. Additionally, with approximately 0.07% of the worldwide market share, India is hardly present in the shipbuilding industry. With 46.6% of shipbuilding by gross tonnage, China leads the industry. South Korea comes in second with 29.2%, while Japan comes in third with 17.2%.
In addition to costing India $90 billion in shipping-related expenses each year, the shortage of ships poses a serious security danger. The proposed law is a component of a larger effort to address the issue. The Coastal Shipping Bill of 2024 is the first bill. In an area where there hasn’t been unified regulation up to this point, it aims to provide a thorough regulatory framework for coastal trade. Currently, Part XIV of the Merchant Shipping Act of 1958 partially regulates mechanized vessels used in coastal shipping. The Coasting Vessels Act of 1838 applies to non-mechanized vessels. These don’t offer a more comprehensive regulatory framework; they merely deal with their registration.
The new law eliminates the need for Indian-flagged vessels to get a general trading license in order to engage in coastal commerce, hence promoting coastal shipping. Additionally, it gives the Director-General the authority to provide licenses to ships flying foreign flags, taking into account the nationality of the crew, the vessel’s construction requirements, and other pertinent variables. In order to ensure openness in the licensing process, the bill’s proposal to create a national database for coastal shipping is one of its main features. The bill also adds clauses that simplify regulatory compliance and make doing business easier by compounding a variety of offenses. Lastly, it requires that a strategic strategy be created for the long-term expansion of coastal shipping.
Parliament has also received the second bill, the Merchant Shipping Bill, 2024. Its main goal is to greatly simplify ownership and registration regulations, replacing the Merchant Shipping Act of 1958. The extension of eligibility for vessel ownership is one of the major improvements. The new bill allows non-resident Indians (NRIs), overseas citizens of India (OCIs), Indian-registered businesses, and other government-designated entities to own Indian vessels in addition to Indian citizens. The 1958 Act, on the other hand, mandated that ships flying the Indian flag must be fully owned by Indian nationals or by businesses that were incorporated under Indian law, and that their primary place of business must be situated in India.
Under the new law, ships can be purchased with a portion upfront payment and the remaining amount paid over time by registering under the Bare Boat-cum-Demise Charter (BBCD) system. When funding a costly, long-term asset, this is essential. Up until recently, the law demanded full payment up front. The bill also contains provisions to minimize the cost of compliance and facilitate commercial operations, such as enabling vessel registration without the need to travel to Indian ports and bolstering the adjudication procedure. The bill includes clauses that guarantee India complies with its commitments under numerous international agreements. Furthermore, it expands the Union government’s welfare programs to include Indian sailors on ships flying foreign flags, which were not previously covered.
The Indian Carriage of Goods by Sea Act, 1925 will be superseded by the third bill, the Carriage of the Goods by Sea Bill, 2024. Clarifying the legal obligations, liabilities, and rights of shippers and carriers, expediting the dispute resolution process, and guaranteeing more regulatory flexibility through government control are some of its main goals. Bills of lading, which are intricate records of shipping operations, are covered in the final bill. The Indian Bills of Lading Act, 1856, which dates back more than 168 years to the colonial era, will be replaced by the Bills of Lading Bill, 2024.
The modifications envisioned in these measures will significantly enhance the shipping environment. The classification of ships as infrastructure, the establishment of an Indian-owned and India-based Protection and Indemnity entity, the exclusion of vessels from the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, and other measures that have been and will be covered in our previous and upcoming articles in this series must, of course, be added to these. As the industry experiences a significant transformation, keep an eye on this area.
