Asia/Pacific News
Bunker Players to Benefit from Proposed Indian Shipping Rule Change
In a move that would benefit not only Indian shipping firms, but the country's bunker and shipbuilding markets, India's government has proposed the implementation of a new rule that would require state-owned importers of oil, coal, steel, and fertiliser to route at least 50 percent of their cargoes through local shippers, Reuters reports.
The proposed regulation, which would see importers sign five-year contracts with local shipping firms, is said to be part of a larger plan by Prime Minister Narendra Modi to boost India's shipping sector, and could be a reality in as little as a month from now.
With India having paid around $57 billion to foreign shipping firms from 2013-2014, the move is expected to bring a considerable amount of business back to Indian shipping firms, including the Shipping Corporation of India (SCI), Mercator Limited, the Great Eastern Shipping Company Ltd. (GESC), and Essar Shipping Ports & Logistics Limited (Essar Shipping).
"There is no incentive in the present shipping environment to buy vessels ... a grant of a 5-year commitment will be good for the industry and provide a comfort level to the lenders," said A.K. Gupta, SCI's chairman.
Shares of the Indian firms are said to have risen by as much as 12 precent on the news.
"As more Indian ships start participating in the regular carriage of Indian imports, other ancillary industries such as bunkering, ship repair and even ship building will grow," said Anil Devli, Chief Executive of the Indian National Shipowners' Association (INSA).
A source from the Indian Oil Corporation (IOC), commenting on the possible new rules, said, "as of now, the (Indian) fleet is not enough to meet our requirements, but the shipping ministry has said companies will raise funds on the back of 5-year contracts to buy more vessels."
Meanwhile, as domestic industry is expected to grow, international companies, which are said to have been seeing significant growth in business from India over the past several years due to international firms' lower rates and quicker turnaround times, are expected to lose out.
"Any increase in the reservation of cargo for national fleets is a cause of concern because it reduces the volume of cargo available for free traders, such as many Greek or Hong Kong shipowners," said Arthur Bowring, managing director at the Hong Kong Shipowners' Association.
In July, India's Ministry of Finance announced plans to reduce the customs duty on bunker fuels in order to support economic growth.
