India’s Coastal Trade Bill Aims to Boost Shipbuilding

The Indian government, led by Prime Minister Narendra Modi, is set to introduce significant reforms aimed at revitalizing the local shipbuilding industry. The Coastal Shipping Bill, which has already passed in the Lok Sabha and is awaiting approval in the Rajya Sabha, seeks to streamline regulations for foreign-flagged vessels participating in India’s coastal and export-import trade. This initiative is part of a broader strategy to elevate India into the top five shipbuilding nations by 2047.

Key Provisions of the Coastal Shipping Bill

The Coastal Shipping Bill introduces a licensing requirement for foreign-flagged vessels wishing to engage in coastal trade and export-import activities in India. Currently, both Indian and foreign flagged mechanically propelled vessels must obtain a license from the Directorate General of Shipping (DGS) to operate. Once the Bill is enacted, Indian flagged vessels will be exempt from this requirement, while foreign flagged vessels will need to comply with specific licensing conditions.

These conditions may include nationality requirements for the crew and stipulations that a portion of the vessel must be built in India. The government believes that these measures will not only enhance competition and efficiency in the shipping sector but also promote employment for Indian seafarers. Sarbananda Sonowal, the Minister of Ports, Shipping and Waterways, emphasized that the Bill aims to foster shipbuilding in India and create job opportunities for local seafarers.

However, industry experts have raised concerns about the practicality of these regulations. Some argue that requiring foreign vessels to be built in India could hinder the import of necessary cargo, as the current shipbuilding capacity in India is limited. Critics suggest that the government needs to consider the realities of the shipping industry and the existing infrastructure before implementing such stringent requirements.

Future Plans for Shipbuilding and Financial Support

In addition to the Coastal Shipping Bill, the Union Cabinet is expected to review a new shipbuilding policy that includes a ship recycling credit note scheme and financial assistance for local shipyards. The proposed financial support aims to incentivize the construction of various types of vessels, with assistance rates ranging from 15% for standard ships to 25% for environmentally friendly vessels.

Updated suite of IG-recommended Letter of Indemnity wordings

The ship recycling credit note scheme would provide fleet owners with a credit note equivalent to 40% of the scrap value of a ship dismantled in India, which could be used to offset the cost of building a new vessel at an Indian yard. Furthermore, a Maritime Development Fund (MDF) with a corpus of ₹25,000 crore is set to be established to facilitate long-term financing for the maritime industry.

Despite holding only 0.06% of the global shipbuilding market and ranking 20th in the industry, India aims to break into the top 10 by 2030 and the top 5 by 2047. The government’s initiatives reflect a commitment to enhancing the country’s shipbuilding capabilities and fostering a robust maritime economy.

 

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