For the Indian shipping industry, the new regulations could be a game-changer

Moreover, ship-sharing agreements between container lines operating in India must include a 5% provision for the movement of domestic cargo ships, according to draft rules issued by the Directorate General of Shipping.

The new rules are aimed at boosting the operations of Indian container lines on global routes and helping domestic non-vessel operating carriers (NVOCCs) find more space on international carrier lines for their customers’ cargo.

NVOCCs typically do not own or operate ships, but act as a point of contact with other cargo carriers for companies looking to ship their goods.

“The changes, first introduced by India, have been proposed in the draft notification issued by the Directorate General of Shipping to promote fair competition, enhance transparency and ensure better representation of Indian shipping lines and NVOCCs in the global container trade, while balancing the interests of all stakeholders in the maritime sector,” said an official of DG Shipping, who is privy to the situation.

The official said the proposed changes would help boost India’s container lines, which account for less than 1% of the country’s trade basket. The rest of India’s trade is handled by foreign-owned or foreign-flagged ships.

Read also | Shipping can gain support for the shipbuilding industry and ship owners

The biggest beneficiary of the new regulations would be the state-owned company Shipping Corp. of India, or SCI, India’s largest container operator, as it proposes to purchase and rent eight large container ships over the next few months.

SCI currently owns about 65 ships – mostly oil tankers and dry bulk carriers – and will benefit from new rules requiring 5% reservations in domestic cargo ship traffic.

“The project will be finalized after seeking comments from stakeholders from the Ministry of Shipping in consultation with the Ministry of Corporate Affairs by the end of the month,” said the above-mentioned official. “The changes would be effective for a period of three years with a further review to increase mandatory Indian content thereafter.”

The new conditions would have to be met if a container line applied for an exemption from Art. 3 of the Competition Act, which prohibits anti-competitive agreements. To promote international trade, since 2012, India has been granting Section 3 exemption without any conditions to container liners in blocks of three years. The new conditions are proposed to apply until October 2027.

The official said Europe and the U.S. have stricter anti-competitive rules for container lines.

The Ministry of Ports, Shipping and Waterways and DG Shipping did not immediately respond to the Mint’s inquiries.

Read also | India is eyeing port investment deals with world shipping power Greece

An impulse for the domestic shipbuilding industry

“This is an excellent move that would facilitate the growth of Indian container lines, especially the smaller ones that have stagnated since 2018.” – said Anil Devli, director general of the Indian National Shipowners Association.

“The move will also enable the country to build its own fleet of container ships, which will also prevent exporters from experiencing delays in deliveries due to lack of adequate space on overseas (container) lines and exorbitant freight charges at a time of global geopolitical event.”

The negligible presence of India’s container fleet hampers domestic exports due to limited space on international lines, while countries like China, which have a large container fleet, easily manage trade by using their own ships and chartering European container lines, he added.

Read also | India is bracing for economic tensions as the conflict in West Asia escalates

DG Shipping’s move is expected to boost shipping container production in India. The Mint announced a proposed move to introduce a production-linked incentive (PLI) program for containers to increase domestic production and reduce dependence on imports from countries such as China.

The container shipping industry is dominated by global carriers such as Mediterranean Shipping Company, Maersk, CMA CGM, COSCO Shipping Lines and Hapag-Lloyd AG.

Indian shipping lines are not present in global container traffic, and only a few dozen small container ships operate in the country. According to government data, India’s total overseas fleet size is less than 500 units.

According to the shipping ministry, India’s major ports handled about 170 million tonnes of containers and 11.4 million 20-foot equivalent units – an industry standard – of container traffic in 2023, up about 10% from the previous year. However, of the more than 22,000 cargo ships that sailed from India’s major ports last year, only about 450 were Indian-registered ships.

`