JSW Steel Ltd has raised strong objections to the government’s proposal to allow Indian entities to charter foreign-flagged vessels without a permit, provided that the vessels do not sail in Indian waters during the charter period. The steelmaker claims that the move would increase freight costs for steel mills, thereby reducing the global competitiveness of Indian finished steel products.

JSW Steel, one of India's leading steel producers, has urged the Ministry of Ports, Shipping and Waterways to reconsider the proposal and minimize the licensing process to avoid unnecessary complications. Industry sources said the metals, mining and energy sectors, which often transport large volumes of cargo, are likely to be adversely affected by the government's plan.

Pranab Kumar Jha, Executive Vice President and Head- Shipping, JSW Steel, pointed out that there has long been an exemption from licensing requirements for chartered foreign-flagged vessels, based on a Gazette notification dated May 27, 1963. This exemption was intended to simplify the shipping process. Jha warned that the proposed amendments would introduce unnecessary hurdles, increase freight charges for steel plants and push up the price of finished products. This, in turn, would burden domestic customers and weaken the international competitiveness of Indian steel.

Under Section 406 of the Merchant Shipping Act, 1958, both Indian and chartered foreign vessels are required to obtain a permit from the Directorate General of Shipping (DG Shipping) to operate. The new government proposal seeks to exempt Indian entities from this requirement while chartering foreign vessels, provided the vessels do not enter Indian waters during the charter period.

Industry experts argue that the proposed exemption would only benefit Indian entities that charter foreign-flagged vessels for international trade, not those that use these vessels to transport cargo from overseas to Indian ports. A mining industry executive questioned the government’s intentions, noting that if a foreign vessel enters Indian waters, a permit would still be required, which could complicate logistics and lead to delays.

With Indian-registered vessels accounting for less than 1% of the total number of cargo vessels plying international waters, Jha stressed that the proposed notification would reduce the availability of vessels for Indian trade. This would lead to inefficient pricing and increase the cost per tonne of carriage, ultimately increasing the cost of goods manufactured in India.

Obtaining approval under Section 406 can take at least two business days, which could prevent international ship owners from maintaining their freight rates or commitments in a volatile market while Indian charterers secure the necessary licenses. Jha argued that the additional licensing process is contrary to the government’s goal of facilitating ease of doing business for Indian industries and suggested that the draft notification should be amended to streamline the licensing process.

An industry source noted that while requiring a licence for coastal shipping is understandable given the need to protect Indian tonnage, extending this requirement to international shipping could be counterproductive. The source highlighted the complexity of chartering vessels and the potential disruption that could be created by the need to obtain a licence for every foreign-flagged vessel entering Indian waters.

In summary, JSW Steel and industry experts are concerned that the proposed changes will increase costs, reduce competitiveness and complicate the logistics of shipping cargo to and from India. They urge the government to reconsider the proposal and ensure that the licensing process does not hamper the efficiency of the shipping industry.