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India: Government to notify rules on ownership proportion for ship registration under new law

The new Merchant Shipping Bill drafted by the Central government has not specified the ownership pattern of entities who are allowed to register ships in India but this will be decided by rules prescribed after the bill is passed by Parliament and signed into law.

The Merchant Shipping Bill, 2020, defines an Indian vessel as one that is owned by a citizen of India, a Non-Resident Indian, an Overseas Citizen of India, a company or a body established under any Central Act which has its registered office or principal place of business in India, or any such other person or body as the Central government notify.

However, the proportion of ownership for registration purposes will be prescribed in the rules.
Expanding the scope

This is expected to widen the eligibility criteria for ownership of vessels that can be registered in India, unlike in the exiting Merchant Shipping Act, 1958, which stipulates that only a ship that is wholly-owned by an Indian citizen, company or society can be registered under the Indian flag.

Since the ownership requirement is written into the Act, it was not possible to expand the scope of entities that are allowed to register ships in India without going to Parliament and amending the law. “Therefore, as there were restrictions, we couldn’t go beyond that,” said an official at the Ministry of Ports, Shipping and Waterways.

By prescribing rule-making powers for ship registration, the Ministry is seeking flexibility in ownership structure so that it can expand the scope whenever it wants, the official said.

“This will ease the ship registration process and increase the tonnage (capacity) under the Indian flag,” he stated.
BBCD inclusion

BusinessLine reported on October 20 that the government is weighing a plan to ease nationality norms for registration of ships by allowing vessels that are “substantially owned” by Indian entities and those owned by NRIs, OCIs and Limited Liability Partnerships (LLPs) to register under the Indian flag.

A foreign vessel chartered on a so-called bare boat charter cum-demise (BBCD) contract by an Indian charterer may also be registered under the proposed law subject to certain conditions.

BBCD is a form of financing for ship acquisition, whereby the purchase is typically done by paying one-fourth of the total cost of the vessel as down payment while the balance is paid in instalments over the demise period, typically ranging from three- five years.

Currently, a BBCD ship is allowed be converted to an Indian flag ship only when the last instalment is paid to the overseas owner. Till then, it flies the flag of the jurisdiction where it is registered.

The Ministry may allow ships acquired through the BBCD route to be registered even before the last instalment is paid.
Source: The Hindu Business Line

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