The Hindu Business Line : LNG transportation — Shipping Ministry to counter move to relax charter norms

With the Indian shipping industry understandably unhappy over this move, the Shipping Ministry has now initiated a move to thwart any attempt to relax the existing LNG vessels chartering policy.

Mumbai , July 14

THE Shipping Ministry has initiated a last-ditch attempt to scupper the move by the Ministries of Commerce and Petroleum & Natural Gas to provide flexibility to LNG importers to choose ships of their choice.

The Ministry feels that this freedom to LNG importers could lead to the Indian shipping industry being elbowed aside so as to make way for foreign ships to bring LNG to India. This could also stump the country's efforts to develop its own LNG fleet.

The Shipping Ministry has been on a collision course with the Commerce Ministry ever since it launched efforts to water down the existing guidelines for chartering of LNG vessels so as to give more freedom to foreign vessel owners to transport LNG to India.

At a meeting convened by the Prime Minister on June 16, it was decided that the Department of Commerce would move a note for the Cabinet on "providing flexibility to LNG purchasers on the choice of carriers in consultation with the Ministries of Power and Petroleum & Natural Gas and the Department of Shipping."

The sources said the Department of Commerce is in the final stages of preparing the note, which is to be submitted before the Cabinet Committee for Economic Affairs soon.

With the Indian shipping industry understandably unhappy over this move, as it would mean giving foreign ship owners a head start in the area of LNG transportation to India, the Shipping Ministry has now initiated a move to thwart any attempt to relax the existing LNG vessels chartering policy.

Sources said the Ministry has sought the views of Indian ship owners on this issue, after which it intends to prepare its own note to be submitted to the Cabinet.

The Ministry has asked the shipping companies for "detailed justification with supporting data" on the issues of guidelines issued by DG (Shipping), condition of mandatory Indian flag for LNG imports and international experience.

As per the DG (Shipping) norms issued on July 5, 2004, no licence can be granted for any chartered LNG vessels unless the vessel is an Indian flag vessel or an Indian company having not less than 26 per cent of the ownership of the company operating the vessel.

However, the LNG importer may be permitted to fix vessels on spot basis, provided the total cargo carried does not exceed 10 per cent of its total annual imports.

The Department of Commerce is also in favour of allowing LNG imports on c.i.f (cost, insurance, freight) basis, which gives freedom to the exporter to choose vessels, instead of f.o.b. (free-on-board) basis, where the importer has the choice of vessel.

The Shipping Ministry has countered this view, pointing out that today most new contracts for LNG transportation the world over were on f.o.b. basis, since buyers see this as giving them more control over the landed price and allowing them to trade surplus LNG cargoes.

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