Less than a year after it introduced age norms for ships, both Indian registered and foreign flagged, from calling at the country’s ports to load and unload cargo, the Directorate General of Shipping has decided to undertake a sweeping review of its order with a holistic approach, encompassing the entire maritime sector.
The Directorate General of Shipping, India’s maritime administration, has called price offers to pick a consultant to carry out the study.
The 24 February 2023 order issued by the D G Shipping on ‘Age Norms and Other Qualitative Parameters with Respect to Vessels’ set an age limit of 25 years for oil tankers, bulk carriers, and general cargo vessels, triggering concerns among stakeholders. This led the administration to partly amend the order on 1 July 2023.
The age norms were designed to encourage a younger fleet to improve safety, meet global rules on ship emissions and protect the marine environment from pollution during mishaps.
“Recognizing the absence of a thorough cost-benefit analysis or statistical data, as required for a significant policy initiative by the Administration, the Committee (read internal committee of D G Shipping) acknowledges the necessity of validating the Order. This validation should be accomplished through a comprehensive study conducted by a third-party professional agency. The study should examine the technical, social, and economic impacts of the Order on the country’s mercantile marine activities over the next three years of its implementation. It is imperative that the study’s terms of reference encompass a holistic approach, encompassing the maritime sector in its entirety. This entails duly considering the concerns not only of ship owners/operators but also shipbuilders, repairers, ancillary sectors and including ship recyclers,” D G Shipping said while inviting price proposals for the study.
The consultant picked for the task should “review the DG Shipping Order on age norm thoroughly, understanding its provisions, intentions, and implications on shipping industry as whole and suggest modifications, if any”.
The objective of the study, according to India’s shipping regulator, is to “assess the potential benefits and drawbacks of implementing age restrictions on Indian tonnage as envisaged” last year and to “evaluate the economic, safety, environmental, and operational implications of the proposed Order”.
The study should identify potential challenges and opportunities for ship owners, shipyards, repairers, and recyclers within the context of the proposed policy and provide evidence-based recommendations on related policy decisions and suggest amendments required, if any, to the Order, such as modifying the age at which ships can exit service, implementing quality standards, or granting exemptions to specific categories of ships like River-Sea Vessels (RSV) or Indian Coastal Vessels (ICV).
“The output of the study would determine whether the Order is capable of serving the interest of the Indian shipping industry as a whole. It should undertake an analysis of existing fiscal policies on the competitiveness of vessels flying the Indian flag as compared to foreign flags and put forth potential strategies for enhancing the tonnage registered under the national flag,” the D G Shipping wrote in the tender.
This aspect of the study, as part of the review of the age norms order, is surprising as the International Financial Services Centres Authority (IFSCA) has started wooing shipping companies to set up ship leasing units in the GIFT City, offering a host of tax incentives and exemptions, such as tax holiday for ten years, no capital gains during tax holiday, stamp duty exemption for five years and no capital gains on transfer of ships by a IFSC unit enjoying 100 percent tax exemption. Additional exemptions have also been granted on income generated by way of royalty or interest paid on account of leasing of ships.
The consultant hired by D G Shipping should “examine how the proposed order on age restriction may intersect with existing and upcoming international regulations related to green shipping and emission reduction including those from the International Maritime Organization (IMO)”.
The consultant’s scope of work includes developing a “data bank to assess the age profile of various types of vessels in India and those operating in other countries and evaluate the potential impact of the proposed policy on maritime safety and the environment, including aspects such as vessel integrity, accident rates, emissions reduction, and pollution prevention”.
Besides, it should “examine the impact of the proposed age restriction policy on the adoption of green shipping technologies and practices, such as the use of alternative fuels, energy-efficient designs, and emission reduction measures and analyse the potential role of age restrictions in incentivizing ship owners to invest in environmentally friendly technologies and strategies”.
The consultant will have to “assess the potential economic impact of the proposed policy on ship owners, shipyards, repairers, and recyclers and analyse the financial feasibility of complying with the Order, considering potential investments, operational costs, and revenue implications”.
It should also “examine the operational and technical challenges that may arise from complying with age restrictions, including vessel availability, technology upgrades, and maintenance requirements”.
The review exercise should “examine the impact of likely scrapping of few old vessels on India’s overall seaborne trade and whether the Indian shipyards are capable of meeting the new construction orders and the period required for stabilising the vessel requirement”.
The study should “ensure that the structure of DG Shipping Order on age norm complies with all relevant laws, regulations, and industry standards etc and meets all legal provisions, applicable in India”. The age norms should also be evaluated against international benchmarks or similar norms, if any”.
The consultant’s brief includes suggesting “possible and practical qualitative norms” for “continuation of vessel under the (Indian) registry”.
The study should evaluate the “economic viability of retrofitting older vessels with green technologies to comply with both age restrictions and emissions reduction requirements and analyse potential challenges and required incentives for ship owners to invest in retrofitting and upgrading their existing fleet”.
The consultant should “advise” DG Shipping “on the socio-economic effects of ship-owners and seafarers employed on vessels that may move away from the current trade and how to “compensate” them.
The study should undertake a “a comparative analysis of Indian tonnage against that of other major maritime nations and assess the strengths and weaknesses of Indian tonnage in terms of fleet size, vessel types, technical standards, competitiveness, and market share”.
It should “analyse the factors contributing to the relatively slow growth rate of Indian tonnage in the global maritime industry and identify commercial, technical, regulatory, and operational challenges that have hindered the expansion of Indian national tonnage”.
Technical challenges and limitations faced by Indian shipyards, repair facilities, and maritime infrastructure that may impact the growth of national tonnage should be studied to identify operational barriers, such as inefficient logistics, administrative bottlenecks, and procedural complexities, affecting shipowners’ decisions to register vessels under the Indian flag.
Another key aspect of the study is to “evaluate regulatory and policy constraints that may have discouraged ship owners from flagging their vessels under the Indian flag and identify areas where regulatory reforms, incentives, and streamlined processes could encourage greater participation in Indian national tonnage”.
Based on the analysis, the consultant should “provide evidence-based recommendations on the suitability and potential amendments to the proposed order on age restriction, outlining potential measures to mitigate challenges and enhance the positive impacts on stakeholders”.
Taking cue from the study on green shipping initiatives, GHG ratings, and alternate fuel requirements, the consultant should recommend steps to “integrate environmental considerations into the proposed age restriction policy and propose strategies to promote the adoption of cleaner and more energy-efficient technologies within the context of the age restriction policy”.
Besides, it should suggest “potential strategies for enhancing the tonnage registered under the national flag, highlighting the policies, whether fiscal or regulatory compliance, which needs to be addressed”. It should propose “effective incentive mechanisms that can attract ship-owners to register vessels under the Indian flag and recommend strategies to promote investment in shipbuilding, ship repair, and maritime infrastructure to support the growth of Indian national tonnage”.
