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Indian ship owners can hire foreigners

After aviation, shipping will be the second transport sector to allow expatriates to work, reports P Manoj.

india Updated: Jan 12, 2007 13:35 IST
P Manoj

Indian ship owners have managed to convince the government to let them hire foreign nationals to overcome the shortage of qualified senior officers on ships.

Following this approval, shipping will be the second transport sector, after aviation, where the government has allowed expatriates to work. Foreign nationals are allowed to fly aircraft in India.

The government has decided in principle to allow shipping companies to hire two foreign nationals as officers on board an Indian ship provided that either the master or the chief officer of the vessel is an Indian national. Currently, only Indians holding continuous discharge certificate (CDC) or seamens' passport, issued by the maritime regulator Director General of Shipping, are allowed to work on Indian ships.

As one long-term solution to the manpower shortage being faced by the industry, the shipping ministry is also raising the training requirements of companies that have opted for the tonnage tax, a tax based on the weight of ships. Under the Tonnage Tax Act, a shipping company is required to train one officer for every 10 complement (officers and crew) on board an Indian ship.

At a meeting called by shipping minister TR Baalu and attended by Director General of Shipping, Nautical Advisor and industry representatives earlier this week (January 9), the government also decided to hike the training commitments of shipping firms to three officers for every 20 complement on board an Indian ship under safe manning requirements.

The complement on board an Indian ship varies from 12 to 24. It will also be made mandatory now for Indian seafarers holding the certificate of competency (CoC) or qualification certificate issued by the maritime regulator to work with an Indian shipping company for a minimum of three years.

The Indian maritime regulator is soon expected to formally issue orders to give effect to the above decisions, according to a shipping ministry official who did not want to be named.

Not all of the proposed changes are going down well with the industry. While shippers are happy with the decision to allow hiring of foreign nationals, they are unhappy about the call for additional training commitments.

SS Kulkarni, secretary general of Indian National Shipowners' Association, says that the additional training requirements will be difficult to implement. "There is no space on ships to accommodate more trainee officers," he says.

Allowing shippers to hire foreign nationals could also help shipping companies compete better for talent. "Hiring of foreign nationals will definitely help us and it will also have a psychological impact," says S Hajara, chairman and managing director of India's largest shipping line, Shipping Corporation of India. "Indian officers will know that Indian shipping companies will have the flexibility to hire foreign nationals."

It is unclear if opening Indian ships for foreign nationals will have a significant impact on ability of shippers to retain Indian officers. Under Indian income tax laws, Indians working on Indian ships in Indian territorial waters for 182 days or more in a year are considered Indian tax residents and liable to pay tax on income.

However, Indians working on foreign flag ships are exempted from this stipulation mainly due to lack of administrative machinery of the tax department for calculating resident days for those working on foreign flag ships. As a result, ships operating under non-Indian flags have been able to attract Indian officers with essentially tax-free salaries.

Meanwhile, the Finance Ministry has already rejected an industry demand to treat Indians working aboard Indian ships on par with those on foreign ships and giving them non-resident status under the Income Tax Act. This would have substantially reduced the attractiveness of working on foreign ships.

As a result, the relaxation of hiring rules is a short-term fix, say shipping officials. "What is needed is a long-term strategy to tackle the situation," says Rajat Dutta, general manager at India's largest private shipping line, Great Eastern Shipping Ltd.

The shortage of officers is also having an impact on growth plans for some companies in the shipping industry. "The shortage of quality manpower has not only made it difficult to operate ships but has also put the ship acquisition plan of companies in jeopardy," says Yudhishthir D Khatau, managing director of Varun Shipping.

E-mail P Manoj: P.Manoj@hindustantimes.com