Concept of IFSC should be extended to benefit shipping industry: Report

A Committee for Development of Avenues for Ship Acquisition, Financing and Leasing observed that India, despite having a large coastline, growing domestic market and international seaborne trade, deep-rooted maritime traditions, and skilled seafarers, continues to have a smaller share in the international shipping sector, thus becoming a net importer of shipping services, especially ship finance.

New Delhi:A Committee for Development of Avenues for Ship Acquisition, Financing and Leasing observed the concept of IFSC (Indian Financial System Code) should be "naturally extended" to SAFAL (Ship Acquisition, Financing and Leasing) products and services, including ancillaries.

The Committee, constituted by International Financial Services Centres Authority (IFSCA), under the chairpersonship of Vandana Aggarwal with representatives from the Government of India, Gujarat Maritime Board, industry and finance experts, and academicians, submitted its report titled SAFAL (Ship Acquisition, Financing and Leasing) to IFSCA on 28 October 2021.

The Committee observed that India, despite having a large coastline, growing domestic market and international seaborne trade, deep-rooted maritime traditions, and skilled seafarers, continues to have a smaller share in the international shipping sector, thus becoming a net importer of shipping services, especially ship finance.

The extension of the services of IFSCA may also entail notifying vessel leasing or operating lease of any equipment as a ‘financial product’ to enable ship leasing entities to set up a unit in IFSC. It has proposed the introduction of a new category of ‘Indian IFSC-controlled tonnage’ with global benchmarking of regulation, tonnage tax and other tax and seafarer regimes, besides overcoming pricing and other limitations of the existing ROFR regime for the import of bulk cargoes. Direct and indirect tax changes have been proposed based on the competitive gaps identified through the financial models developed for India-IFSC.

The Committee carried out a 360-degree examination of the existing legal and regulatory regime in IFSC in India for ship acquisition, financing, and leasing, comparing it with those of global top-ranking marine hubs. It developed financial models to gauge the gap in costs, including capital and operating costs and tax costs, of doing this business in IFSC and these hubs. It has identified bottlenecks to the realization of India’s shipping sector’s growth story.

"It held extensive stakeholder consultations towards working out the changes required for seeding a robust Ship Acquisition, Financing And Leasing regime at India-IFSC. To this end, it also holistically considered the supportive links of shipbuilding, flagging, operating, and repairs and recycling in the shipping value chain. The focus remained on enabling cost-effective and competitive delivery of shipping services on ships owned and leased from India-offshore IFSC which is on par with overseas competitors," an official statement by the committee read.

The report, according to the committee, has provided useful recommendations for realizing the true transformational potential of India’s shipping industry.

"It finds that the time is opportune for imparting a brand value to Indian-flagged vessels. This can be done by carving out a share in global cross trades, securing gainful transactions for India’s marketplace, promoting decarbonization and greening of the blue oceans, and leveraging India-IFSC Maritime for achieving the Maritime India Vision 2030 and beyond."