- Scope of Applicability and Licensing Requirements (Sections 1 and 3)
The Coastal Shipping Bill (CSB) is primarily designed to regulate foreign-flagged vessels, regardless of the owner’s domicile, engaged in coastal trade. Indian-flagged vessels are excluded from its purview except for specific reporting requirements.
However, Sections 1 and 3 are drafted in a convoluted manner, leading to unnecessary confusion:
- Section 1: States that the CSB applies to every vessel other than Indian vessels engaged in coastal trade.
- Section 3: States that no vessel other than an Indian vessel shall engage in coastal trade except under a license.
Key Issues:
- The overlapping and ambiguous language creates interpretative challenges.
- If the intent is to regulate foreign-flagged vessels (including foreign-chartered vessels), this should be explicitly stated. Similarly, Indian-flagged vessels should be categorically excluded from licensing requirements.
Corrective Suggestions:
Replace the circuitous language with straightforward provisions, such as:
- “This Act applies exclusively to foreign-flagged vessels, including foreign-flagged vessels chartered into India, engaged in coastal trade.”
- “Indian-flagged vessels are exempt from this Act but must comply with the specified reporting requirements.”
This approach avoids repetitive references to Indian-flagged vessels and provides clarity on the applicability of the provisions of the CSB.
- License Application and Scope (Sections 4 and 6) for Coastal Trading.
The discretionary powers granted to the Director General of Shipping (DG Shipping) while issuing license and reporting requirements hinder operational efficiency and create bureaucratic bottlenecks.
Key Issues:
- Prior to issuing a license, DG Shipping as the discretion to evaluate availability of vessels in the same route, license granted to vessels in the same route, cost efficiency of transport, etc. This intrudes into commercial decisions best left to shipowners and charterers.
- Section 6’s requirement for vessels to report port visits for every voyage is redundant given modern port operator systems and the upcoming national coastal shipping database.
Recommendations:
- Licensing Flexibility: Introduce general licenses valid for all major and minor ports, allowing shipowners to respond swiftly to market demands without the need for frequent license modifications.
- Streamlined Reporting: Eliminate repetitive voyage reporting requirements. Port and jetty operators already possess this information, and digital integration with a centralized database would suffice.
- Restrictions on Foreign-Chartered Vessels (Section 11) for Non-Coastal Trading
The requirement of a license for chartered foreign-flagged vessels to take a vessel from a port in India or outside India, coupled with the exemption for Overseas Citizens of India (OCI), appears arbitrary.
From the face of it, these provisions seem to apply to Offshore supply vessels, oil rigs, and platforms operating within India’s Exclusive Economic Zone (EEZ).
Key Issues:
- Exempting OCIs for charters outside India lacks practical justification, as chartering vessels is primarily a commercial activity, not an individual one. OCI are not Indian citizens. They can be left outside the purview of the CSB.OCI can be treated as foreign nationals.
- Offshore supply vessels, oil rigs, and platforms operating within India’s Exclusive Economic Zone (EEZ) require tailored carve-outs rather than broad application under section 11 of the CSB.
Recommendations:
A. Remove OCI Exemption: Rationalize this provision to ensure consistency and applicability across commercial entities.
B. Specific Carve-Outs: Draft separate provisions for offshore operations to address their unique requirements and operational contexts.
- Penalty Regime (Sections 15–26)
The penalties under the CSB are disproportionately harsh and risk deterring participation in coastal trade.
Key Issues:
- Fines of up to USD 18,000 (INR 15,00,000/-) or six months imprisonment (or both) for offenses are excessive.
- In some cases, the penalties and fines extend to 2 times /4 times the value of the fees/payments/commission received by the charterer/owners for the voyage. Imagine being made to pay 2 times/4 times the value of the charter hire as penalties. This is draconian and predatory.
- The CSB also imposes penalty and fines on the agents.
Recommendations:
A. Proportionality: Align penalties with the severity of the offense. Penalties should reflect actual damages or a reasonable multiplier of economic impact.
B. Restrict Scope: Avoid targeting vessel agents unnecessarily, as this could disincentivize ancillary service providers from engaging in coastal trade.
- Conclusion
While CSB is a step in the right direction, the CSB also reflects a limited perspective on commercial shipping, with an undue focus on flag and regulation. Ships under flags of convenience (FOC) call on Indian ports daily to load and discharge cargo without the need for additional licensing, relying instead on compliance with international standards such as classification and flag state certificates, insurance and other compliance. The same can apply for coastal vessels where the costal trading license is record keeping system as opposed to an inquisitive licensing system that CSB seeks to put in place.
Suggestions for Improvement:
- Shift the regulatory focus from the flag of the vessel to operational efficiency and compliance with global maritime standards.
- Foster ease of doing business by:
- Introducing a transparent and structured tax regime for shipowners.
- Facilitating ownership of foreign-flagged vessels by Indian entities under a favourable tax environment.
- Simplifying processes for setting up ship owning in India.
Strategic Vision:
India’s aspirations to become a serious player in shipping require investment in shipbuilding for Naval defense and commercial shipbuilding. The fixation on flag, an anachronistic concept rooted in outdated geopolitical concerns, must give way to modern priorities. The focus should be on enabling commerce, not obstructing it with regulation.
