The Indian government is taking significant steps to transform its maritime sector through the Merchant Shipping Bill, 2024, which aims to modernize the country’s shipping infrastructure and enhance its role in global maritime trade. The Bill, which seeks to replace the outdated Merchant Shipping Act, 1958, introduces several reforms to address the evolving needs of the industry, with a focus on expanding the scope of ship ownership, simplifying registration processes, and attracting investment into the sector.
Defining an Indian Vessel
Under the new Bill, a vessel can be considered Indian if it is owned by a range of entities. This includes Indian citizens, non-resident Indians (NRIs), overseas citizens of India (OCIs), or companies and bodies established under any central act that have their registered office or principal place of business in India. The government also holds the power to notify additional entities or individuals who can own Indian vessels. This expansion is designed to increase the flexibility of ownership structures, enabling a more inclusive and dynamic approach to ship registration.
The rules for registration will be formulated to specify the exact proportion of ownership required for vessels to be registered under the Indian flag. This flexibility will accommodate a wider range of ownership arrangements, including those by NRIs, OCIs, and Limited Liability Partnerships (LLPs). Such provisions are expected to attract foreign investments and boost the presence of Indian-owned vessels globally.
Streamlining Ship Registration and Ownership
A notable reform in the Bill is its potential to ease the nationality norms for ship registration. Currently, only vessels with full Indian ownership can register under the Indian flag. However, the Bill proposes a shift towards allowing vessels that are “substantially owned” by Indian entities or those with significant involvement from NRIs and OCIs to register in India. This relaxation is aimed at enhancing the country’s fleet size, reducing dependency on foreign ships, and strengthening its maritime presence.
Given that ownership requirements were previously stipulated in the Act, changes to these provisions required legislative intervention. By including rule-making powers within the Bill, the Ministry of Ports, Shipping, and Waterways can more flexibly adapt ownership rules, expanding the scope of eligible entities for registration as needed.
BBCD Financing and Ship Registration
A critical aspect of the Bill is its stance on Bareboat-cum-Demise Charter (BBCD) financing for ship acquisition. BBCD allows for the purchase of a vessel through a financing model where only a portion of the total cost is paid upfront, and the balance is settled through instalments over three to five years. Under the current framework, vessels purchased via BBCD can only be registered under the Indian flag after the final instalment is paid to the overseas owner.
However, the new Bill aims to change this by allowing vessels acquired through BBCD to be registered under the Indian flag even before the final instalment is settled. This reform is designed to simplify the acquisition process and encourage more ship owners to register under India’s flag earlier in the financing cycle.
Key Reforms and Objectives
The Merchant Shipping Bill, 2024, is designed with a focus on both expanding eligibility criteria for ship ownership and simplifying compliance procedures. One of the primary goals of the Bill is to create an environment that encourages investment in India’s maritime sector. By expanding the eligibility criteria for ship ownership and facilitating easier registration, the government hopes to boost India’s share in global shipping.
Additionally, the Bill seeks to promote ease of doing business by reducing the compliance burden on ship owners. This includes provisions for electronic registration, digital agreements, records, and payments. Moreover, the Bill introduces provisions for an electronic database to streamline inspections and create an efficient risk-based port state control mechanism. These changes are expected to improve operational efficiency and reduce bureaucratic hurdles, making India a more attractive destination for ship owners and investors.
Aiming for Growth in Global Shipping
India currently controls only 1.4% of global tonnage, ranking 18th in the world in terms of ship ownership. This share is significantly smaller than India’s share of global export-import (EXIM) trade, which stands at around 11%. The government envisions a rise in this figure to 30% by 2047, and the Merchant Shipping Bill, 2024, is expected to play a key role in achieving this goal.
Finance Minister Nirmala Sitharaman, in her Budget speech to Parliament in July 2023, outlined the government’s commitment to driving reforms in ship ownership, leasing, and flagging. These initiatives aim to increase the Indian fleet’s share of global trade, thus cutting dependence on foreign vessels to transport export-import cargo. The Bill reflects these ambitions, aiming to strengthen the Indian maritime industry and create more jobs in the sector.
To conclude, The Merchant Shipping Bill, 2024 is a forward-thinking piece of legislation that holds the potential to reshape the Indian shipping industry. By offering greater flexibility in ownership and registration, simplifying compliance processes, and encouraging investments, the Bill will help India expand its maritime capacity. These reforms are not just about increasing the number of ships flying the Indian flag but also about positioning India as a competitive player in global shipping, capable of handling an increasing share of the world’s maritime trade.
As India strives to strengthen its maritime presence, the Merchant Shipping Bill, 2024, is a crucial step toward revitalizing the nation’s shipping industry, enhancing its role in global commerce, and securing the economic future of its maritime sector.
