Govt of India plans new shipping firms to expand fleet

NEW DELHI : The Government of India plans to set up a new shipping company to expand its fleet by at least 1,000 ships in the next decade, to gain revenue from trade. The yet-to-be-named firm will be jointly owned by state-run companies in the oil, gas and fertiliser industries.

The South Asian nation is spending billions of dollars to refurbish infrastructure in its race to become a world-class manufacturer with Prime Minister Shri Narendra Modi, who won a third term this week, aiming for it to be a developed nation by 2047.

The new firm will be based at GIFT IFSC, in Gujarat which aims to compete with hubs such as Singapore, based on privision of incentives and a streamlined regulatory environment. It would draw seed capital from a maritime development fund of roughly Rs 30,000 crore (USD 3.6 billion) the government plans to set up in a tie-up with major port authorities.

“Current estimates show freight costs will rise to $400 billion as we boost our exports and imports by 2047,” said one of the sources, who has direct knowledge of the matter.

Indian companies paid freight costs of $85 billion in the financial year 2019/20, of which $75 billion was paid for use of foreign vessels, the source added.

The turn to foreign carriers comes as India’s shipping fleet has not kept pace with its surge in trade, including imports of energy and exports of refined oil products.

In January, India’s oil and shipping ministries agreed that all state-run oil companies and the planned company will work together. In May, the two ministries formed a joint working group of government and industry officials to devise a roadmap, and draw on the expertise of the Shipping Corporation of India in tanker acquisition and ownership, operations and other key areas. 

India has a fleet of about 1,500 large vessels including tankers, gas carriers, container ships and dry bulk carriers. The aim is to reduce freight outgoings to foreign firms by at least a third by 2047.

On May 16, the two ministries formed a joint working group of government and industry officials to devise a roadmap, the document showed.

To secure low-cost, long-term loans for financing ship-building, the two ministries want state-run companies to sign 15-year charter deals with the new firm.

That represents a shift from the current practice of booking specific voyages or one- or two-year charters.

“In return the state-run companies can also become stakeholders in the new ship owning and leasing entity,” the source added.

The plan is to consolidate the government-side cargo demand from other ministries, mainly the energy and fertiliser cargoes.