All questions

Current developments

i Recent casesShipping

Very recently, the Bombay High Court in Siem Offshore Redri AS v. Altus Uber decided that Section 5(2) of the Admiralty Act, 2017 provides for arrest of any other vessel in the hands of a bareboat charterer in lieu of the vessel against which a maritime claim has been made. Currently the order has been taken up in appeal; however, as of the date of writing, no stay has been granted.

The Bombay High Court recently also determined the time for filing a suit for wrongful arrest as one year from the date of arrest of the vessel. However, where a plaintiff has provided an undertaking to pay damages for wrongful arrest, the one-year limitation period for enforcing such undertaking by way of a counter claim or a notice of motion in the same suit will begin to run from the date the order of arrest is vacated (MV Tongli Yantai v. Great Pacific Navigation (Holdings) Corporation Ltd).

The Kerala High Court in a recent application for detention of a foreign vessel under Section 443 of the MSA ('Power to detain foreign ship that has occasioned damage') held that 'when a foreign vessel is berthed in a port which is within the jurisdiction of another High Court, it cannot be said that the vessel is within the territorial waters of this High Court'. The Court further opined that if the argument advanced by the petitioner is accepted, the High Courts in India will have concurrent jurisdiction to exercise the power under Subsection 1 of Section 443 of the Act. The scheme of Section 443 does not indicate that exercise of concurrent jurisdiction by different High Courts (Anthoniyarpicha v. MV Mayuree Naree).

In 2017, the Bombay High Court in the matter of Pacific Gulf Shipping (Singapore) Pte Ltd v. SRK Chemicals Ltd & Anr (Notice of Motion (L) No. 74 of 2017), held that an admiralty court does not have jurisdiction to arrest cargo on board a ship for an unrelated claim.

In 2016, the Supreme Court of India in the case of CIT v. Trans Asian Shipping Services (P) Ltd, observed that whenever there is a question of a tonnage of ship and the said tonnage is to be determined, it has to be in accordance with the valid certificate indicating its tonnage and it is a compulsory obligation of the taxpayer to produce such a certificate. Nonetheless, the arrangement pertains only to purchase of slots, slot charter and the sharing of the break-bulk vessel. The requirement of producing a certificate does not apply when the entire ship is not chartered. Allowing the benefit of a tonnage tax scheme to the taxpayer, this Supreme Court decision may help the shipping companies to claim the benefit of a tonnage tax scheme for slot charter arrangements.

In 2016, in the case of Union of India v. Sancheti Food Products Ltd, the Supreme Court, within the short compass of facts, justified the award of compensation for damage suffered by the vessels in question. This was because of the following contradicting and conflicting stands that delayed the registration of the vessel: Part XVA of the Act that deals with the registration of 'fishing boats' was brought into the statute book in 1982 (to include seagoing shipping vessels) and was pursuant to the exercise of fresh legislation for the registration of vessels; whereas the Rules of 1960 that governed the parameters of registration were not substituted by this amendment made to the MSA – the relevant statute dealing with registration of vessels.

In 2015, in the case of Petromarine Products Ltd v. Ocean Marine Services Co Ltd, the Supreme Court held that when a suit is filed before court having jurisdiction over the vessel in question and that court passes order for arrest and sale of the vessel pursuant to which sale is effected, vessel and sale proceeds become custodial legis of that court and no subsequent proceedings by any other person interested can be maintained before another court without leave of jurisdictional court (Section 3(15) of the MSA). Because the vessel was berthed at Madras Harbour, the Madras High Court alone had the jurisdiction to enter any claim against the subject vessel as per the aforementioned Section. The arrest of the vessel by the Madras High Court being the first arrest, the vessel and the sale proceeds are custodia legis of the said court.

Aviation

In March 2015, in the matter of Awas 39423 Ireland Ltd and Ors v. Directorate General of Civil Aviation and Ors, the Delhi High Court ordered the latter to deregister six of SpiceJet's Boeing 737 planes, following the termination of lease agreements. Babcock and Brown Aircraft Management had also sought the return of six Boeing B737 aircraft and a payment of US$100 million from SpiceJet for unpaid rent and maintenance costs. The court observed that the DGCA was obliged to deregister planes on receiving a request from a leasing company in accordance with the Cape Town Convention.

ii Developments in policy and legislationShipping

The highly ambitious 'Sagarmala' project, which was conceptualised in 2015, aiming to promote port-led direct and indirect development and to provide infrastructure to transport goods along the long coastline and the inland waterways to and from ports, quickly, efficiently and cost-effectively, has now been implemented.

As part of the Sagarmala project, more than 400 projects have been identified for implementation between 2015 and 2035 across the areas of port modernisation and new port development, port connectivity enhancement, port-linked industrialisation and coastal community development. Out of these, 199 focus projects are phased out up to 2019.

Some of the key initiatives already implemented under the Sagarmala project include:

  1. port community system (PCS): PCS is a centralised single window platform, which serves as a message exchange gateway for port community stakeholders. It not only serves the purpose of improving efficiency of ports, but also provides a secure data exchange medium between ports and various related stakeholders. All the 12 major ports have been integrated with PCS;
  2. replacing manual forms with web-based e-forms;
  3. installation of scanners and radio-frequency identification (RFID) for gate automation;
  4. introduction of direct port delivery at select ports as a pilot project, which reduces dwell time of containers and improves cost efficiency; and
  5. automatic issue of delivery orders and launch of single-window interface for facilitating trade.

Shipyards have been accorded 'infrastructure' status, and accordingly, shipbuilders can now avail cheaper long-term financing for Indian shipbuilding and ship repair industry. Additional incentives such as income tax exemption for infrastructure development including ports and a 10-year tax holiday to enterprises engaged in developing ports have also been introduced. A 70 per cent abatement of service tax on coastal shipping brings the fares at par with road and rail. Additionally, central excise duty has been exempted on capital goods, raw materials and spares used for repair of ocean-going vessels. New shipbuilding, breaking and repair policy, in line with the international ship breaking code is expected to significantly increase the size of the shipping industry.

India and South Korea partnered up for the Maritime Summit 2018 held in Mumbai. The launch of the summit was in relation to the development of the shipping industry in India, including a focus on the idea of setting up new ports in India, coastal shipping etc. to promote the industry as well as to take better advantage of India's geographical location. In addition to the promotion of the shipping industry and the various opportunities in the Indian shipping and maritime sector, discussions between India and South Korea to initiate a partnership in relation to LNG development also took place during the 2018 summit.

The India Dry Bulk Cargo Summit has been scheduled for June 2019 in Mumbai. The conference is to focus on the economic development in relation to Dry Bulk Cargoes such as Coal, Iron Ore, Grain, Fertilisers, etc.

Inland waterways

India has a vast riverine system that lies underdeveloped and is underutilised for transportation of cargo. The Indian government has realised the potential of the inland waterways and has directed the Inland Waterways Authority of India (IWAI) to make riverine transportation in India a reality. There is an enormous focus on the development of 'inland waterways', and the IWAI is going full throttle on reviving the inland waterways. The development of these waterways opens up new opportunities for business, such as:

  1. supplying dredgers;
  2. barges and cargo-handling equipment;
  3. construction and management of terminals; and
  4. hydrographic services.

The India and Asian Development Bank (ADB) have signed a US$375 million pact for the first phase of a planned 2,500-km East Coast Economic Corridor. The grant is in addition to US$631 million in loans and grants that was approved by the ADB in September 2016 for the industrial corridor.

The Central Road Fund (Amendment) Bill, 2017 was introduced in the Lok Sabha on 24 July 2017 by the Minister of Road Transport and Highways, Mr Nitin Gadkari. The Bill seeks to amend the Central Road Fund Act, 2000. Under the 2000 Act, the fund can be utilised for various road projects including: (1) national highways; (2) state roads including roads of inter-state and economic importance; and (3) rural roads. The Bill provides that in addition to these the fund will also be used for the development and maintenance of national waterways. The Bill defines national waterways as those that have been declared as 'national waterways' under the National Waterways Act, 2016. Currently, 111 waterways are specified under the 2016 Act as national waterways. The Bill is not currently in force and would only come into force after receiving presidential assent.

In 2018, the inland waterways Jal Marg Vikas Project, which was approved by the Cabinet Committee on Economic Affairs, was implemented with the investment and assistance of the World Bank to create the first waterway stretch, the National Water 1 (NW1). The completion of the project is expected to be in March 2023. This project is in relation to a fairway covering major districts along the Ganga River in India, which would enable better commercial navigation in a cost effective and environment friendly manner.

The National Institution for Transforming India (NITI Aayog) has made recommendations to streamline the regulatory structure in relation to the Inland Waterways. The recommendations are in relation to maintaining and developing deeper stretches of river for year-round navigation, as well as to relax restrictions for vessels in relation to river–sea movement. In addition, the recommendations also include better facilitation with regard to the movement of goods to neighbouring countries.

Port-led developments

In March 2018, a revised Model Concession Agreement was approved to make port projects more investor-friendly and make investment climate in the sector more attractive. In terms of maritime cargo handled in the country, major ports registered a growth of 4.77 per cent during FY18 at 680 million tonnes.

Project UNNATI has been started by the government of India to identify the opportunity areas for improvement in the operations of major ports. Under the project, 116 initiatives were identified out of which 89 initiatives have been implemented as of August 2018.

The Ministry of Shipping has initiated 'Project Green Ports', which focuses on sustained growth from an environmental perspective. It aims to install 160.64 megawatts of solar and wind-based power systems at all the major ports across the country.

To improve port–rail connectivity, the Ministry of Shipping set up the Indian Port Railway Corporation Limited (IPRCL) to link all ports to the railway network across the country. The IPRCL is currently conducting a feasibility study for implementation of seven projects connecting various ports. The projects are deemed to be implemented by relevant central ministries, state governments, ports and other agencies through public–private partnerships. Around 20 projects were taken up for consideration across eight major ports, out of which 11 projects total US$1.13 billion.

India has also moved towards using technology and other digital platforms to simplify processes. Transfer of conventional activities to digital platforms, use of technology for moving cargo and simplification of processes have been done to promote business and facilitate ease of doing business. Steps taken include the following:

  1. RFID system installed in 11 major ports to enhance security, remove bottlenecks for seamless movement of traffic across Port gates. The RFID system automatically identifies the trucks and drivers without the need to stop at the port gates for manual checking.
  2. DMICDC's logistics databank system for tracking and tracing movement of EXIM containers in the major ports, thereby enabling the consigners and consignees to track the movement of the containers from portal.
  3. Direct port delivery and direct port entry enable direct movement of containers from factories or port without intermediate handling requirements, thus saving costs and time.
  4. Installation of drive-through container scanners to save time at major ports.
  5. Reducing paperwork through issuance of e-delivery orders, e-invoice and e-payment across all the major ports. Digitisation of processes has considerably reduced the processing time.
  6. Upgradation of the centralised, web-based PCS to provide global visibility and access to the central database to all its stakeholders through internet-based interfaces.
Aviation

The civil aviation industry in India has emerged as one of the fastest growing industries in the country during the last three years. India is currently considered the third largest domestic civil aviation market in the world and is expected to overtake the UK to become the third largest air passenger market by 2024. India's passenger traffic grew at 16.52 per cent year on year to reach 308.75 million in FY18.

Recently, the FDI regulations have been relaxed to permit foreign airlines to invest up to 49 per cent in the paid-up capital of Air India. Such investment should however be subject to, among others, the condition that the investment should be made under the government approval route and the 49 per cent limit will subsume FDI and Foreign Institutional Investor's or Foreign Portfolio Investor's investment.

The first Global Aviation Summit 2019 was held by the Ministry of Civil Aviation in collaboration with the Federation of Indian Chambers and Commerce Industry on 15–16 January 2019 in Mumbai, Maharashtra. The Summit focused on the celebration of 'Flying for All' and to provide a platform to the aviation fraternity to showcase the challenges of the sector in the newly developing growth spots, as well as to understand how the technology-driven innovations will change air travel in the future.

iii Trends and outlook for the futureShipping

The government of India aims to make the country the first in the world to operate all 12 major domestic government ports on renewable energy. The government plans to install almost 200 MW wind and solar power generation capacity by 2019 at the ports. The energy capacity could be ramped up to 500 MW in future years.

Increasing investments and cargo traffic points towards a healthy outlook for the Indian ports sector. Providers of services such as operation and maintenance, pilotage and harbouring and marine assets such as barges and dredgers are benefiting from these investments.

Coastal shipping is being encouraged by the government as it is expected to drastically reduce the cost of logistics. Coastal shipping has been growing faster than overseas trade shipping and is expected to continue its growth voyage over the next five years. As per government data, Indian ports handled 234 million tonnes of coastal trade cargo in 2017–18, recording a growth of 16 per cent over the previous year. The coastal trade cargo has grown at an average of 14.2 per cent annually between 2014 and 2018. Benefits offered to coastal shipping currently are:

  1. reduced GST on bunker oil for vessels used for coastal trade;
  2. 40 per cent discount on cargo and vessel related charges;
  3. 80 per cent discount given on vessel and cargo related charges for two years to Ro-Ro vessels used for transportation of vehicles;
  4. priority berthing of coastal ships without any charge with the introduction of green channel clearance for faster evacuation of coastal cargo at major ports;
  5. allowing the reimbursement of freight subsidy on primary movement of subsidised urea; and
  6. development of coastal shipping is dependent on last-mile connectivity for efficient movement of cargo from ports to the industrial units. Measures being taken under Sagarmala project are expected to address these issues.

The cruise industry is expected to generate both employment and foreign exchange if the right infrastructure is provided to this sector. The government has introduced the following steps to attract cruise ships to Indian shores:

  1. port charges have been reduced to US$0.35 per Gross Registered Tonnage for first 12 hours of stay, and these charges will stay until 3 November 2020;
  2. foreign flag cruise ships carrying passengers can call at Indian ports without obtaining a licence from the DGS until 5 February 2024; and
  3. cruises with Indian ports as their home port will not be levied charges for priority, ousting and shifting.

As a result, the number of cruise vessels visiting the five major ports (Mumbai, Goa, Mangalore, Cochin and Chennai) has increased by 75 per cent in 2017–18 versus 2014–15. The number of cruise passengers has increased from INR 82,600 in 2013–14 to INR 190,000 in 2017–18.

Aviation

In a recent International Air Transport Association report, India has been appraised for being the world's fastest growing domestic aviation market. As per the report, India is expected to be the third largest aviation market by 2025, in volume. It has been predicted that the Indian market would be catering for nearly 478 million passengers by 2036, which would bring the sector into its booming stage. Such trajectory growth has mostly been fuelled by favourable government policies and initiatives such as UDAN and NextGen Airports for Bhasat (NABH) Nirman, which aim to connect 56 unserved airports and 31 unserved helipads. However, in contrast to such encouraging predictions, the Centre for Asia Pacific Aviation has predicted a consolidated industry loss of approximately US$460 million in financial year 2019. Some of the major airlines in India such as Indigo and Jet Airways have been found to be struggling in debt reduction and have reported losses in multiple quarters of the financial year. Various airlines have also been delaying accepting possession of new fleet and have reported higher interest payments for such rescheduling.

India's aviation industry is largely untapped, with huge growth opportunities, considering that air transport is still expensive for the majority of the country's population, of which nearly 40 per cent is the upwardly mobile middle class. The industry stakeholders should engage and collaborate with policy makers to implement efficient and rational decisions that would boost India's civil aviation industry. With the right policies and relentless focus on quality, cost and passenger interest, India would be well placed to achieve its vision of becoming the third-largest aviation market by 2025.