First foreign vessel of American Eagle Tankers’ could enter the Indian coastal trade shortly
The possibility of American Eagle Tankers (AET), a subsidiary of Malaysia International Shipping Corp being permitted to flag in one of their vessels under the Indian registry has caused resentment within the Indian shipping industry. Though this will be the first foreign direct investment (FDI) into the country’s shipping trade after nine years of the government inviting 100% FDI into the shipping sector, Indian ship owners are averse to the move.
An official of AET who did not want to be named informed that they have applied to the Directorate of Shipping (DGS), Government of India for flagging in six tankers under the Indian registry. They expect their first vessel to get the permission to do so shortly after the directorate considers all the legal implications.
He contended that the claims of the Indian National Shipowners’ Association (INSA) that AET and other foreign operators were likely to use the Indian coastal trade as a “dumping ground” for their single hull vessel was wrong. “Their ships were all young and the first to get flagged in here in India is a 30,000 ton Eagle Meerut, which is just 14 years.”
Single hulls are due for scrapping by 2010. The International Maritime Organisation (IMO) has however, left it to the discretion of each maritime state to permit extension to the phasing out process up to 2015 or till the vessels reaches the age of 25 years (which ever is earlier). Accordingly, the Indian government has allowed single hull to be operated on the coast of India until 2015 or until the vessels reaches 25 years.
A source close to the Shipping Ministry, Government of India stated that there has been a positive response from the ministry and AET will most like be permitted to flag in their vessels shortly.
On making enquiries about the status of the AET application the Director General of Shipping Ms Lakshmi Venkatachalam informed, “The entire issue raised by INSA, along with the Directorate's comments have been referred to the Ministry of Shipping for advice, which is awaited.”
A legal expert pointed out that it does not make sense for the government to have invited 100% FDI into the country and then to ban foreign vessels from flagging in. If such a move were to be made it would send out wrong signals world wide.
“Since AET has formed a subsidiary and got itself registered under the Indian Companies Act, it makes it difficult for the DGS to refuse any request made under section 21 of the Merchant Shipping Act of 1956,” he stated. “Being an Indian entity it becomes legally binding on the DGS to accede to their request. Even a notification were to be issued henceforth, it cannot have any retrospective effect.”
Further he informed that in event of AET were to be refused permission they could move the court as they have a strong case for winning. The government then having to reverse their decision could have far reaching consequences on the trade.