JSW Steel Ltd has raised strong objections to the government?s proposal to allow Indian entities to charter foreign-flagged ships without a license, provided these ships do not operate in Indian waters during the charter period. The steelmaker argues that this move would increase freight costs for steel mills, thereby reducing the global competitiveness of Indian finished steel products.
JSW Steel, one of India's leading steel producers, has urged the Ministry of Ports, Shipping, and Waterways to reconsider the proposal and minimise the licensing process to avoid unnecessary complications. According to industry sources, the metals, mining, and power sectors, which frequently ship large quantities of cargo, are likely to be adversely affected by the government's plan.
Pranab Kumar Jha, Executive Vice President and Head- Shipping, JSW Steel, pointed out that there has been a long-standing exemption from licensing requirements for chartered foreign-flagged vessels, based on a gazette notification from May 27, 1963. This exemption was intended to simplify the shipping process. Jha warned that the proposed changes would introduce unnecessary hurdles, driving up freight costs for steel mills and inflating the price of finished products. This, in turn, would burden domestic customers and weaken the international competitiveness of Indian steel.
Under Section 406 of the Merchant Shipping Act, 1958, both Indian and chartered foreign ships must obtain a license from the Directorate General of Shipping (DG Shipping) to operate. The government?s new proposal seeks to exempt Indian entities from this requirement when chartering foreign ships, provided the vessels do not enter Indian waters during the charter period.
Industry experts argue that the proposed exemption would only benefit Indian entities that charter foreign-flagged vessels for international trade, not those who use these vessels to transport cargo from overseas to Indian ports. A mining industry executive questioned the government's intentions, noting that if a foreign ship enters Indian waters, a license would still be required, which could complicate logistics and lead to delays.
With Indian-registered vessels accounting for less than 1% of the total cargo vessels operating in international waters, Jha emphasised that the proposed notification would reduce the availability of ships for Indian trade. This would lead to inefficient price discovery and increase the per-ton carrying cost, ultimately raising the cost of goods produced in India.
Obtaining approval under Section 406 can take at least two working days, which may deter international ship owners from holding their freight rates or commitments in a volatile market while Indian charterers secure the necessary licenses. Jha argued that the additional licensing process contradicts the government's goal of facilitating ease of business for Indian industries and suggested that the draft notification should be modified to streamline the licensing process.
An industry source noted that while requiring a license for coastal shipping is understandable due to the need to protect Indian tonnage, extending this requirement to international shipping could be counterproductive. The source highlighted the complexities of ship chartering and the potential disruptions that could arise from the need to obtain a license for every foreign-flagged vessel entering Indian waters.
In summary, JSW Steel and industry experts are concerned that the proposed changes will increase costs, reduce competitiveness, and complicate the logistics of shipping cargo to and from India. They are calling for the government to reconsider the proposal and ensure that the licensing process does not hinder the efficiency of the shipping industry. (ET)
