The recent report titled ‘Ship Acquisition, Financing and Leasing’ (SAFAL) submitted by the Committee for Development of Avenues for Ship Acquisition, Financing and Leasing to the International Financial Services Centres Authority (IFSCA) has brought to light various key factors about the shipping industry in India. This article provides an overview of the committee’s formation, its objectives, observations and the importance of the shipping sector for India.
Committee for Development of Avenues for Ship Acquisition, Financing and Leasing
Formed by the IFSCA in June 2021, the committee comprises representatives from the Government of India, Gujarat Maritime Board, industry and finance experts, and academicians. Its primary objective is to enable cost-effective and competitive delivery of shipping services on ships owned and leased from India-offshore IFSC, to bring it at par with overseas competitors.
Observations and Proposed Changes by the Committee
Despite having a large coastline, growing domestic market, international seaborne trade, deep-rooted maritime traditions, and skilled seafarers, India continues to have a smaller share in the international shipping sector. The committee highlighted the necessary changes required to enhance India’s position in international shipping. These changes encompass legal and regulatory domains, direct and indirect taxes, ship finance, and ease of doing business, based on global best practices.
The committee also saw an opportunity for imparting a brand value to Indian-flagged vessels. They proposed a strategy to secure a share in global cross trades, promote decarbonization and greening of blue oceans, and leverage India-IFSC Maritime for achieving the Maritime India Vision 2030.
Maritime India Vision 2030
Maritime India Vision 2030 is a ten-year blueprint for the maritime sector released by the Prime Minister of India at the Maritime India Summit in November 2020. Its primary aim is to boost waterway transport, promote the shipbuilding industry and encourage cruise tourism in India.
The Significance of the Shipping Sector for India
Nearly half of India’s border is covered by sea, with a coastline of around 7,517 km and 217 ports in total. India is strategically located on the world’s shipping routes, making it a significant player in maritime transport. Around 95% of India’s goods trade by volume and 70% by value is conducted through maritime transport.
On an annual basis, India pays about $75 billion seaborne freight to foreign shipping companies, signifying a substantial exposure to maritime freight rate. Thus, India has immense potential to increase its investment in the shipping industry.
Government Initiatives Related to Shipping Industry
The government has taken specific measures to boost the shipping industry in India. The Right of First Refusal (ROFR) criteria has been revised to promote tonnage under Indian flag and ship-building in India. A subsidy support of Rs.1624 crore over five years has been approved for Indian shipping companies participating in global tenders.
The Ship Building Financial Assistance Policy (2016-2026) was introduced in December 2015 to grant financial assistance to Indian Shipyards.
Role of International Financial Services Centre (IFSC)
IFSCs play a crucial role in bringing back the financial services and transactions, currently carried out in offshore financial centres, to India. They provide Indian corporates with easier access to global financial markets, and to complement and promote further development of financial markets in India. The first IFSC in India has been set up at the Gujarat International Finance Tec-City (GIFT City) in Gandhinagar.