The Coastal Shipping Bill 2024: Neglecting Seafarers' Interests
Jacob Clint
ON December 2, 2024, Sarbananda Sonowal, the Minister of Ports, Shipping and Waterways, presented the Coastal Shipping Bill 2024 in the Lok Sabha. The bill aims to promote coastal trade using Indian-flagged vessels owned and operated by Indian citizens for commercial needs. The bill also grants the director-general the authority to issue licenses, taking into account factors such as the crew's citizenship and the vessel's building requirements and aims to create employment opportunities for Indian seafarers and promote the growth of shipbuilding in India. However, the bill does not address the mandatory requirement for seafarers to be employed on these coastal ships.
With a coastline of around 7,500 km and proximity to key global shipping routes, coastal shipping offers a cheaper mode of transport. However, India’s maritime sector lacks regulatory uniformity. The non-mechanised vessels are governed by the Coasting Vessel Act, 1838, which does not address the modern needs of the sector.
The Coastal Shipping Bill, 2024 proposes to remove the requirement for Indian-flagged vessels to acquire a general trading license to operate in coastal waters, once it is approved by Parliament. This move eliminates licensing requirements for Indian vessels engaged in coastal trade. The bill, derived from Part XIV of the Merchant Shipping Act, 1958, also introduces statutory licensing conditions for foreign vessels, streamlining procedural aspects of coastal shipping.
The bill includes provisions on crew manning for foreign vessels, such as mandating a number of Indian seafarers. India contributes significantly to the global seafarer workforce, with many CDC (Continuous Discharge Certificate) holders awaiting suitable employment. The bill’s provisions also enable the operation of coastal vessels in inland waterways and the establishment of a coastal shipping database.
However, the bill misses a key opportunity: it fails to address the financial and tax burdens that domestic vessel owners and operators face. To ensure the long-term viability of India's coastal shipping industry, the bill should include relief provisions to ease cash flow concerns for Indian operators and promote a more competitive environment.
The bill should prioritise the promotion of Indian shipping through financial support, enhancing service reliability, and fostering competition to improve freight rates. Current regulatory frameworks have created an uncompetitive environment for Indian shipping companies. High operational and capital costs for Indian-flagged vessels, compounded by domestic fiscal policies, make them less competitive compared to foreign vessels. This has led to Indian operators losing market share and a growing dependence on foreign vessels for cargo transport – a trend further exacerbated by policies under the Modi government.
Shipping is a vital, perennial service, but the Coastal Shipping Bill must address key issues to ensure the sector’s growth. Global shipping faces numerous challenges, including decarbonisation, meeting regulatory deadlines, and the path to digitalisation. These critical issues must be incorporated into the bill to guide strategic planning and ensure India’s shipping sector remains competitive.
For India, the primary challenge lies in resolving domestic policies that hinder the competitiveness of Indian shipping. The sector grapples with structural issues that make importing shipping services more expensive than providing them domestically. While investment is essential to revitalising Indian shipping, progress will be slow unless these structural challenges are properly addressed.
The Coastal Shipping Bill holds significant potential for job creation. By mandating the employment of Indian seafarers on Indian-flagged vessels, the bill can drive growth in the sector, especially if government imports are directed to Indian ships. This would not only create jobs for seafarers but also stimulate employment in related industries such as stevedoring, cargo handling, banking, insurance, ship repairs, management, and crewing services. The bill should focus on harnessing this potential to boost overall employment in the maritime sector.
COASTAL
SHIPPING
The key challenge for the Coastal Shipping Bill is to capture the existing demand currently directed towards foreign ships and redirect it to Indian vessels. Achieving this would lead to substantial growth in the sector. To do so, Indian shipping must be made more competitive by rationalising taxes and providing effective funding mechanisms. While Indian shipping operates under domestic laws, its competitive environment is global, which creates a mismatch that needs to be addressed.
Critical policy changes are necessary. For instance, converting cargo to Indian-flagged ships should be mandatory for Indian cargo, as is the case in several developed nations. Additionally, Indian shipping must be made competitive by simplifying tax structures and creating better funding options.
India should fully leverage its cost-effective coastal transport system. Despite flying the Indian flag, employing Indian crew, and contributing taxes, Indian ships do not receive any price preference for transporting Indian cargo over foreign-flagged vessels. To counter this, the Ministry of Ports, Shipping, and Waterways should propose reserving at least 50 per cent of Indian cargo for Indian ships, as this would be the only direct benefit for Indian vessels.
Currently, high taxation and inefficient funding mechanisms increase operational costs for Indian ships compared to foreign competitors. Furthermore, Indian public sector undertakings have often denied long-term employment opportunities to Indian vessels due to policies of Modi government, undermining the potential for sustained growth. In fact, Indian ships are sometimes excluded from shipping contracts due to minor delays, while foreign ships are favoured.
Finally, the bill should ensure operational parity between Indian and foreign ships by removing restrictive provisions and regulations. Indian ships should be allowed to employ Indian crews without additional constraints, and be exempted from GST on coastal cargo transport. Additionally, Indian crew members working on Indian ships should be exempt from income taxes, ensuring they receive the same treatment as their foreign counterparts.
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