A general introduction to maritime law and practice in India
All the questions
Shipping Industry Business Presentation
India has untapped potential to leverage its 7,517 kilometers of coastline spanning nine states and four union territories and has sought to utilize it with a push towards an export-led development model. India’s merchandise trade has grown at a rate more than twice the growth rate of world merchandise exports over the past decade. With 12 major ports and 205 notified minor ports facilitating maritime trade, more than 95% of India’s merchandise trade by volume and around 70% by value passes through maritime transport. In recent years, the Indian government has made a concerted effort to switch to clean fuel with subsidies provided to encourage the consumption of liquefied natural gas, which has led to an increasing number of gas carriers calling at Indian ports. India exports bulk raw materials such as bauxite and iron ore to countries like China, while it depends on imported coal from countries like Indonesia, Australia and Africa of the South for its thermal power stations, which account for most of the energy produced in India. . While there had been an effort to support domestic coal production, the growing demand for steel is likely to increase the demand for coking coal from countries like Australia. The majority of Indian petrochemical companies that import crude oil from Africa and the Middle East are state-owned.
In line with its objective to encourage private participation and foreign investment in the maritime sector, in its speech on the 2021 budget2, the government has focused on its goal of capitalizing on India’s advantageous geographical location. The government has thus announced that seven projects worth about Rs. outsource the management of their operational services to private actors. In addition, a program to promote the flagging of merchant vessels in India by providing subsidies to Indian shipping companies through global tenders launched by ministries and CPSEs has been announced. The speech also pointed out that in line with India’s enactment of the Ship Recycling Act 2019 and adherence to the Hong Kong International Convention, around 90 ship recycling yards in Alang, Gujarat, have obtained the HKC Compliant Certificate as the government strives to bring in more vessels. to India from Europe and Japan and aiming to double the recycling capacity of around 4.5 million Light Displacement Tons (LDT) by 2024. Furthermore, with the aim of providing a better framework for the development, maintenance and management of aids to navigation in India, the Marine Aids to Navigation Act 2021 came into force on 31st March 2022, This Act inter alia repeals the Lighthouse Act 1927, old 90 years old. The Marine Aids to Navigation Act 2021 aims to promote the ease of doing business by incorporating global best practices, technological developments and India’s international obligations in the field of marine aids to navigation. In accordance with the Shipping Act 2021, Marine Aids to Navigation fees will be levied and collected for every vessel arriving or departing from any port in India at the rate specified by the Central Government from time to time. The Central Government of India may exempt certain vessels totally or partially from these duties. These vessels include:
- any government ship that does not carry cargo or passengers for cargo or tariffs; Where
- any other ships, classes of ships or ships making specified voyages.
There is, however, a commonly held view that to achieve the ambitious goal of having a 5% share in global exports and to move up the ranks in the ease of doing business, India needs to recalibrate the legal regime. and current regulations governing its maritime ecosystem. . While the paradigm shift in politics over the past few years reflects this need to strengthen maritime regulations to tie in with India’s overarching goal of becoming a viable investment destination, much progress is still needed to reach this goal.
General overview of the legislative framework
Shipping in India is centrally regulated and exclusively controlled by the Government of India through the Ministry of Marine (MoS). The MoS has set up a semi-autonomous statutory body – the Directorate General of Shipping (DG Shipping) – whose powers are circumscribed by the Indian Merchant Shipping Act (MSA) 1958 to deal with all matters relating to maritime policy and legislation, the implementation of various international conventions and other mandatory regulations of the International Maritime Organization. The MSA is general framework legislation which deals with merchant shipping and empowers DG Shipping to enact delegated legislation, such as circulars and notices, to regulate all matters relating to shipping. The Mercantile Maritime Department is an organization under the control of DG Shipping which deals with the registration of ships flying the Indian flag, the inspection of ships and the application of international regulations, such as the SOLAS convention and the load line conventions.
The MoS has a charter wing (Transchart) to negotiate the transport of government-owned and government-controlled cargoes, and regularly finalizes long-term charter parties and charter contracts for various government-owned entities India, such as the Steel Authority of India. , Rashtriya Ispat Nigam Ltd and the Department of Fertilizers. Transchart arranges shipment at internationally competitive freight rates while giving preference and support to Indian flagged vessels without any difference in freight rates subject to a 1% service charge.
While India allows 100% foreign direct investment automatically in the shipping industry, very few global players have sought to invest and register their vessels in India. Typically, foreign investors set up ad hoc structures which in turn own Indian flagged ships just to take advantage of India’s cabotage policy.
Generally, an Indian shipping company will have to pay corporation tax at the rate of 33.3%, unless it has opted for the tonnage tax system, which is between 1 and 2% of its income. An Indian shipping company could opt for the tonnage tax system by adhering to certain guidelines set by the government, such as training Indian seafarers and making financial arrangements for ownership of new vessels. India’s indirect tax regime has undergone a radical overhaul with the implementation of the Goods and Services Taxation Regime (the new taxation structure is destination-based consumption tax as opposed to origin-based taxation principle under the previous regime). The Government of India has issued an amendment through its notifications3 indicating that the export of services by means of the transport of goods by ship will be exempt from the tax on goods and services, starting from January 25, 2018 with a “sunset clause” until September 30, 2021 (this is i.e. the exemption will automatically end after this fixed period, unless further extended).
i Maritime India Vision 2030
The MoS has embarked on an aggressive development of the maritime landscape in India, including introducing the Maritime India Vision-2030, a 10-year master plan to overhaul the Indian maritime sector.4 The following key themes outlined in the policy have been identified:
- develop a first-class port infrastructure;
- drive end-to-end logistics efficiency and cost competitiveness;
- improving logistics efficiency through technology and innovation;
- strengthen the policy and institutional framework to support all stakeholders;
- increase the global share in the construction, repair and recycling of ships;
- improving the movement of goods and passengers on inland waterways;
- promote the ocean, coastal and river cruise sector;
- enhance India’s global stature and maritime cooperation;
- world leader in the safe, sustainable and green maritime sector; and
- to become a leading maritime nation with world-class education, research and training.
The Government of India has also launched a dedicated portal to invite and facilitate investment in the maritime sector in India which details all investment opportunities under the initiative.5