Age Restriction on Ships- Norms, Purpose & Criticisms
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This year, the D G Shipping issued a notification to introduce age restriction norms for ships of different categories. While the norms are being promoted as a ‘pro-environment’ move, there are concerns that it would create more problems that it would solve.
Recent Developments:
In February, the Director General of Shipping (India’s maritime regulator that works as an attached office of Shipping Ministry) issued an important notification. Its major highlights are as follows:
- Imposition of age restriction on ships- both Indian and foreign flag vessels that need license from the Directorate General of Shipping under the Sections 406 and 407 of the 1958 Merchant Shipping Act.
- According to Section 406: “no India ship and no other ship chartered by a citizen of India or a company or a cooperative society shall be taken to sea from a port or place within or outside India except under a license granted by the Director General under this section”.
- According to Section 407: “no ship other than an Indian ship or a ship chartered by a citizen of India or a company or a cooperative society shall engage in the coasting trade of India except under a license granted by the Director General under this section”.
- These two are also known as ‘cabotage rules’.
- The age restrictions and other qualitative parameters will cover foreign flag vessels requiring a license under cabotage rules for operating within the India’s EEZ.
- The vessels’ age will be determined from the ‘Date of Delivery’ mentioned in the Cargo Ship Safety Construction Certificate or other Statutory Certificate issued under the IMO (International Maritime Organisation) Convention/Code.
- For different categories of vessels, different age norms have been set- ranging from 25 years to 40 years:
- Vessels- including general cargo vessels, oil tankers and bulk carriers- that are 25 years and older are banned from calling Indian ports for loading and unloading cargo.
- Offshore fleets, tugs involved in long tow, anchor handling tugs, non-self-propelled ocean-going cargo carrying barges, etc. are to have an age cap of 25 years.
- Offshore fleet equipped with DP 2 (Dynamic Positioning 2) that are >25 years old would be permitted to function up to 30 years.
- A limit of 30 years or less has been set for gas/chemical carriers, cement carriers, fully cellular container vessels, harbour tugs, dredgers and other specialized vessels like those used for:
- Diving support
- Pipe laying
- Geo-technical purposes
- Seismic survey
- Well simulation
- Accommodation barge
- Notably, these age restrictions won’t be applicable to passenger vessels, FPSOs, FSRUs and drilling/production units certified under MODU/ISPS Code.
- Also, existing vessel (i.e. those already registered under the Indian flag on or before the issuance of the order and those for which a Memorandum of Agreement to acquire had been entered into and the buyer has deposited minimum 10% of the vessel’s purchase price on or before the order date) affected by the age restrictions would be allowed to function for up to 3 years from order date.
- Second-hand ships, aged 20 years and above, can’t be acquired by Indian entities. These vessels can’t be registered under Indian flag.
- When a ship reaches its prescribed age limit for operation, its general trading license will be withdrawn.
What is the purpose?
- The D G Shipping expects to improve the quality tonnage by introducing these age restriction norms for vessels. Quality of tonnage is important to ensure safety of life at sea and also of the ships.
- Modernization of the fleet is essential to ensure quality tonnage. However, while the average age of the world fleet is declining, Indian tonnage is witnessing an increasing trend in its average fleet age.
- Also, to achieve the emission reduction targets set by the International Maritime Organization, shipping needs to move away from fossil fuels towards alternate fuels. Here, age norms could help phase out old fossil fuel ships and enable the introduction of low carbon, energy efficient ships.
- The new norms are expected to supplement the 2021 government scheme to improve Indian tonnage:
- The government introduced a subsidy scheme for Indian flag ships transporting state-owned cargo like fertilizers, LPG, crude oil and coal.
- Under this scheme, Indian fleet owners can get 5-15% more on charter rates on vessels registered in India after 1st February, 2021.
- However, the lack of age restrictions has allowed charterers to choose older vessels available at ‘better rates’ to realize lower transportation costs.
Why is there criticism?
- Earlier, older ships were subject to more frequent checkups and tighter inspection by Indian Register of Shipping. With the new norms, older vessels are altogether done away with.
- While a similar set of norms are used for vehicles too, it must be noted that ships aren’t the same as these vehicles.
- Expensiveness- average cost of fabricating even the smallest class of cargo vessel, the new mini bulk carrier, is between 25 crore INR and 30 crore INR.
- Funding- shipping industry has been a historically challenging sector to get funds for.
- Availability- unlike vehicles, ships aren’t available in showrooms. They are to be commissioned from the few shipyards in India, leading to an undersupply issue.
- Very few shipyard facilities- most of the public shipyards are focused on fabricating large defence vessels. The few private yards have their share of troubles. Eg: ABG Shipyard and Bharati Shipyard, two of the largest private shipyards went bankrupt in 2010s.
- Inadequate skilled manpower
- The recent notification is expected to affect 90% of the mini bulk carriers in India. Given the multiple challenges, most of these are unlikely to be replaced.
- This would mean fewer ships available to transport cargo. This would lead to migration to rail and road logistics.
- Hence, the age restriction norms, instead of boosting quality tonnage, would defeat our objective to cutting down emissions. This is because shipping produces lower carbon emissions compared to road and rail transport. While 90% of the global goods transport is by sea, shipping accounts for merely 2.9% of the global emissions.
- Also, the restrictions could have an inflationary effect on input cost of commodities. This is because road and rail logistics become more expensive over longer distances, compared to coastal shipping.
What is the way ahead?
- The government has been undertakings several measures to boosting the shipping sector-
- Providing viability gap funding
- Assigning ‘infrastructure status’ to the shipping sector
- Providing priority berthing for coastal ships at major ports
- Concessional wharfage rates for coastal ships, etc.
- However, the industry continues to suffer several challenges, of which environmental non-compliance is simply one.
- Rather than outright purging the existing tonnage, a more practical approach would be to impose stricter environmental standards in shipping.
- This approach would be especially effective given the recent development of engineering solutions that enable the integration of fuels like green hydrogen and green ammonia, even in older vessels.
Conclusion:
The Shipping Ministry has been putting in a lot of efforts to boost the shipping sector, which currently has a number of issues impeding it- such as capital-intensiveness, lack of skilled human resource, environmental concerns, etc. There are concerns that the new age restriction norms for the vessels could bring down all the efforts in a single swoop, while trying to go after a single aspect of the challenge. There is a need for a balanced approach.
Practice Question for Mains:
Comment on the pros and cons of the new age restriction norms for vessels introduced by the Directorate General of Shipping. What is the way ahead? (250 words)
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