Given our first piece on the maritime reforms that India must deliver on, published here on our website on 15 December 2010 (see link) and a quick look at the proposed reform (in broad terms) one is almost tempted to assume that they are listening. A closer examination of the proposed reform, however, suggests otherwise.

For those who are interested in the full scope of the proposed reform they can access that official Ministry statement here.

Broadly, the reform has focussed on areas where we have had a history of State control (various PPP projects in the port and infrastructure sectors) while building on the existing strengths of the Indian maritime sector (reputation as a supplier of qualified seafarers) and, as with every political announcement (anywhere), contains references to large numbers which unfortunately lack details (investment of Rs 165,000 Crores in the entire sector by 2020).

Firstly the welcome aspects of the reform:

1. first ever attempt to have a joined-up policy at a national level to connect coastal shipping, river based transportation, road transportation and making these reforms an intrinsic part of the growth in the port and infrastructure sectors;
2. a genuine effort to lay the ground works for the reforms in the insurance sector (creation of an Indian P&I club) and the legal sector by introduction of Indian Admiralty Act and the concepts of ombudsman/tribunals for shipping matters;
3. creating and nurturing domestic talent and hopefully in time carving a niche position through IMU as a centre for innovation in the maritime sector;
4. a genuine attempt to regulate the vast industry through regulators, marine accidents investigation cell and through Shipping Trade Practices Act;
5. ambitious plans to increase tonnage from 10 million tonnes to 40 million tonnes; and
6. creation of a freight exchange.

Before we highlight the flaws and gaps in the proposed reforms, it is imperative that we explain why we have elected to emphasise those aspects of reform which have been tucked away in the tail-end of the reform paper with no details.

Large parts of the proposed “reform” on closer examination are extensions of existing policies and existing strengths of India. There is nothing wrong with that however but building on the existing platforms is not “reform”. It’s called tinkering.

It is clear from the scope of the Agenda that India is at least being bold and proactive in leading that change in the domestic market rather than being just reactive as has been the case for a long time now. The policy-makers and the Ministry should now have the faith in the private enterprise of the Indian Maritime Inc. (a loose collective phrase for the private sector in the maritime industry) and not just rely on the State led reform and investments, which, although is peppered with good intentions, also stifles delivery of creative private enterprise and a much required pace in rate of growth in the domestic tonnage.

If the Government aspires to move the Indian Maritime Inc. to the next stage it must deliver on the underlying reforms which will create a self-sustaining growth and innovation in the industry without the crutches of State support. To the doubters who believe that Indian Maritime Inc. cannot deliver through private enterprise without the State subsidies and investments, India has delivered exactly that in the financial sector by creating a robust regulator and at the same time taken small steps to facilitate the domestic growth in the sector. In order to achieve that, India must deliver on those key sub-sectors of law, finance, insurance, regulatory and creating and nurturing innovation and innovators.

Taking each of those sub-sectors in turn:

1. Law – the reform paper proposes a mish-mash of names which lack clarity as to how all these will gel together. Ombudsman, tribunals, Admiralty courts are words which serve different purposes in a judicial system. In addition, these new layers will have to work with the existing judicial structure (High Courts and the Supreme Court) and also the fast growing alternatives of arbitration and mediation in India. It is imperative that the details must address all aspects of dispute resolution with the ultimate aim of facilitating a more expedient judicial system, which taps into the existing expertise of senior judges, lawyers and senior mariners in India and is not a drain on the existing infrastructure;
2. Finance – a reform in the shipping finance sector forms the bedrock to support the aspiration of increasing the tonnage (and with it the clout) of the Indian Maritime Inc. The current indicators (less than successful tonnage tax reform) paint a worrying picture and when the Government speaks of “policy intervention” in this area one hopes it is not more government led initiatives for expansion of or investment in SCI, which is already a robust entity, but a genuine reform which gives confidence to private domestic investors and foreign investors about investing in the sector and which in turn will result in greater private enterprise, necessary to create a self-sustaining model. The proposed reform fails to highlight the details, which, as with everything else, are vital in measuring the practicality of these measures. However, if they are serious, these reforms should include reforms necessary for increasing participation of the private equity and specialist funds in the sector, tax reforms and creation of an incentive-led structure (tying up with other sub-sectors through shipbuilding subsidies and insurance rebates) which invites new participants into India;
3. Regulatory – India today has an opportunity to create a regulatory structure which starts with a clean slate. The proposed reform however alludes to creation of port regulators only while leaving the current structure, led by D G Shipping, untouched. Whilst D G Shipping has its share of critics, by and large, it has served the Indian Maritime Inc. well over the decades. Irrespective, to create a credible presence in the global maritime industry, the policy-makers in the Ministry must not shy away from creating a robust, independent and a leading template in the form of an Indian Regulator whose powers should encompass all aspects of the shipping industry. It should build on the existing talent of senior academics, lawyers, industry experts, financiers and civil servants to deliver a model which relies on its own independent set of ccreditation, compliance and vetting system for those who wish to operate in India and which must be robust, independent and at the same time a facilitator for the industry;
4. Insurance – the proposed reform simply states creation of an Indian P&I club. It is unclear how the Indian P&I club will fit in (if at all) with the existing institutions, in particular the International Club, what model it will adopt (mutual or otherwise), how will the reinsurance market work and whether it will operate independent of the other insurance sectors in India. Whilst we support the thought behind this proposal wholeheartedly, a lot needs to be clarified before one can be enthusiastic about it; and
5. Innovations and innovators – without a doubt these aspirations will just remain aspirations unless we are able to nurture and provide credible platforms for innovators, who in turn will propel the growth towards the 10-years goals. However, India needs to be wary about adopting the policy of “replacing the old with the new”. It has never worked and never will. Innovation is the only solution. IMU is ideally placed to take lead and must not shy away from introducing model courses which taps into the expertise of those who have graduated through the Indian institutions historically and in the process becoming a leading innovation centre in the country. A hipping career must include not just time served at sea but also an integrated model with the shore-based opportunities whereby two should work seamlessly.

We welcome the proposed reforms but we remain wary due to lack of details. India had its first maritime training institution commissioned in 1927 (T.S. Dufferin) to train seafarers. One can’t help but note that the only achievement India has had in those 80 plus years is a favourable reputation in the manning sector. We have lost a lot of time and opportunities in the past. Now at least we have started to dream, a credible and deliverable dream. Let’s deliver on it!

However, a quick look at IITB’s website (see link) for the list of donors suggests that it was the not the largest and by no means the only donation. Further, this is by no means a programme of IITB only. Each IIT runs its own programme of organised donation. For example, IITC (Chennai) is running a project to raise Rs 100Cr to fund expansion and innovation.

Why are these donations so important? Do they reflect that the institutes will not be able to perform on their own merit and with the government support that they enjoy at the moment? Far from it. There are two purposes these programmes serve:

1. bringing together the alumni with the institute, its current students and the faculty. Without doubt IITs have been the biggest exporters of talent of India to the world. An alumnus’ desire to remain part of the fraternity he started his career with, reflects the merit of the institute and the faculty (and its ethics) which created that institute. With a spread almost global of the IIT graduates it is inevitable that the “bringing together” will involve not just an odd lunch or a dinner at the campus but an active interaction between the alumni, the students and the faculty through these donations and interactive seminars; and

2. whilst the faculty have and will always take the lead in understanding what is best for the students at the institute (as they are closest to the market, the academic tier and the management that run the institute), it appears there is a subtle recognition on the part of the IIT faculty that this is a changing world and in order to maintain the reputation it has painstakingly created and nurtured, it has to change with the times. That touch with the reality in the wider world and what is expected in the form of innovation comes from the alumni who recognise and realise what needs to change or be modified in order to sustain that reputation. A quick review of the purpose behind the Rs 4.5 Crore confirms this. The art of maintaining the alumni network and benefitting from it is a two way process and the subtle art of it is not lost on the alumni and the faculty (including the management) of IIT.

IIT and IIM have always led the way in creating a network and delivering results from it. In the Indian maritime sector, the strong network of those who passed out from MERI is a credible and resounding example of such success.

It is important that other aspiring institutes in India recognised the merits of these programmes as these programmes not only benefits the institutes which are the recipient of the largess but also the alumni who benefit from the reputation of the alma mater in the wider market year on year.

If you would like to share your thoughts on the article above, do write to us on mail@tsdrc.com.

Whilst that figure in itself can be a topic for discussion and detailed analyses, it was what Mr Hajara is reported to have said in respect of the Indian shipping industry, which draws our attention.

To give a brief background, Indian tonnage tax came into force on 1 April 2004. It was hoped (and realistic forecasts were offered by the pundits at the time) that the introduction of this long lobbied tax alternative to the Indian shipowners will transform the Indian tonnage and as a result bring the industry to the next stage.

Ex Director General of Shipping, Mr M P Pinto, had rightly argued in his article dated 18 July 2005 (see link) the transformation the tonnage tax regime will bring to the Indian maritime industry – from innovation to jobs, of course the increase in tonnage and hence the clout of India on the international platform, as a much desired and needed benefit.

However, six years on since the implementation, the Indian tonnage has regressed to 0.96% of the global tonnage today. Of the entire Indian tonnage, SCI commands a respectful 35% . That is not to say the tonnage has not increased. Since December 2004, the tonnage has increased from just over 8 million tonnes to recently crossing 10 million tonnes. However, the implementation has not resulted in the desired entry of the new players which would have brought in the desired innovation, an increase in the diversity of the shipowners and a more rapid increase in the tonnage.
To restart the floundering impetus to the Indian maritime sector, the Indian Ministry is now looking at reforming the present structure further.

To its credit, INSA (Indian National Shipowners Association) has been tirelessly working with the Ministry for some time in respect of these reforms. However, if the proposed reform of the Indian tonnage tax regime is simply going to be a minor tinkering then it is perhaps best not to implement anything at all.

Whilst it will be worthwhile to retain selected elements of the present structure which work constructively today, it will be better if the Ministry and the advisers reviewed the entire setup which form the Indian maritime sector. This includes, but not limited to,:
- a much needed reform of the regulatory structure resulting in a single regulator, which should have over-arching powers over all segments of the maritime sector, greater responsibility and autonomy to regulate the maritime and associated sector;
- a reform of the judiciary for handling maritime dispute, preferably through the establishment of dedicated admiralty courts across the country, which should over time develop a fair and credible admiralty expertise;
- liberalisation of the banking and lending rules to the shipping industry;
- creating structures which invite participation of the private equity and private investors on favourable terms; and
- most important of all identify and encourage the innovators to become entrepreneurs in India that will drive the growth today and tomorrow.

A tinkering with tax system or the judiciary or the banking rules or the FDI rules alone will not deliver the required. It has to be a cohesive and joined-up reform of all of these facets which will work together as one to present an attractive option. The more business-friendly India becomes (with a fair, transparent, more expedient and neutral regulatory body and judiciary) in this sector, the greater are the chances that it will self-sustain itself in the years to come. It goes without saying that a higher share of the global tonnage will have its ancillary benefits for India.

We have come a long way since the Independence and the recent reforms over the past decade bear a testament of the good intentions of those working behind the scenes to deliver a credible template. But we need to move to the next stage if we wish to catch up and hopefully create in India a credible alternative for domestic and international players and a credible alternative jurisdiction which all parties can trust and rely upon. In this respect a few audacious changes will be highly welcome.

In the Guild’s own words:

“The Guild essentially has been created to provide counsel, guidance and solace to seafarers and their families when provisions for their care in employment fail, by educating them on their rights and opportunities available to them. It will also serve as a nerve centre for counselling in times of distress and emergencies as also for co-ordinating Seafarer welfare activities. The need has arisen due to the limitations and failures of the systems and procedures that exist in International and National Shipping Conventions and Rules.”

In its short span since its launch the Guild has gained support from individuals across the globe and from seafaring and non-seafaring population alike.

So next time you are at sea and for any unfortunate reason you should find yourself in need of some counselling, do not hesitate to contact the people behind the Guild. Full details are available at www.marinerswelfareguild.com.

This is a voluntary group and the Guild welcomes interests from individuals who can complement the service it provides, on a pro bono basis. Should you find that you have some spare time in hand and a talent to share, the Guild will be delighted to hear from you at contact@marinerswelfareguild.com. Alternatively you can show your support by registering your details on the website.