Sitharaman pushes shipping ministry for faster monetisation of select projects

Nirmala Sitharaman calls for developing capabilities, legal systems for international arbitration centre for maritime sector

Finance Minister Nirmala Sitharaman on October 19 urged the The Ministry of Ports, Shipping, and Waterways to speed up the monetisation process of identified projects.

"Out of 12 major ports, nine have at least 31 projects that have been identified and approved for asset monetisation. I would think the ministry should go speedily on these so that those projects can get monetised. That is expected to give around Rs 14,483 crore," Sitharaman said at the Global Maritime India Summit 2023 in Mumbai.

Launched in August 2021, the asset monetisation pipeline of central ministries and public sector entities or the National Monetisation Pipeline (NMP) was developed by the NITI Aayog in consultation with infrastructure line ministries, based on the mandate outlined in the Union Budget 2021-22.

NMP estimates aggregate monetisation potential at Rs 6 lakh crore through core assets of the central government, over a four-year period, from FY2022 to FY2025.

The Finance Minister also said that expansion of the country’s harmonised master list of infrastructure sectors may become quicker going forward, and promised to work with banks to meet the shipping sector’s credit needs.

In this year’s Union Budget, the Minister had announced an expert committee to review the list of sectors granted the infrastructure tag with a view to suggesting a classification and financing framework.

Stating that she was seized of the concern about shipping not being a part of the infrastructure sectors’ list, the Minister said the expert committee constituted to relook at the harmonised master list (HML) would streamline the understanding of infrastructure.

“The framework being developed by this committee would be instrumental in updating the HML from time to time and not wait for another committee.,” the FM said. “But the framework will give the idea of how periodically you can go about changing and categorizing relevant sectors as infrastructure itself. So time won’t be lost, it can be done at a good speed,” she asserted.

She also called for setting up a domestic Protection and Indemnity (P&I) entity to offer insurance for shipowners, aiming to bolster India's resilience against international sanctions and enhance the strategic agility of its shipping operations.

Sitharaman said an India-based P&I body will also provide protection to liabilities of Indian ships operating in coastal regions and inland waterways.

"It will provide a foothold in the specialised segment of protection and indemnity business, currently dominated by few players internationally," the minister said.

She pointed out that India currently lacks representation in this specific market segment and suggested the Ministry of Ports, Shipping and Waterways consider the proposition seriously. “I would think that it (P&I body) is a very important thing which we need to work on."

Shipowners buy P&I insurance to cover the potentially high expenses of any damage they unintentionally do to people, property, and the environment.

These are usually purchased from global players.

In the past, India has struggled to find tankers and vessels, and insurance to ship crude and petroleum products from Russia amid global trade sanctions on the country. This came at a time when India resorted to higher purcahses of Russian crude shipment amid rising oil prices.

Sitharaman said India also needs to develop capabilities and legal systems to set up an international arbitration centre for the maritime sector.

India's problems, often unique to its jurisdiction, 'are less put forward' in the international arbitration courts, Sitharaman said. “The way we link with (maritime) arbitration needs to improve so we can improve standards of arbitration".

The FM also spoke about the IFSCA located in GIFT City which notified ‘ship lease’ as a financial product, and provided a framework for enabling ship finance and operating leases through the ‘Framework for Ship Leasing’.

Various tax incentives and exemptions are offered for ship-leasing entities in the IFSC, including tax holiday for 10 years, no capital gains during tax holding, stamp duty exemption for five years, etc.

Additional exemptions have been granted on income generated by way of royalty or interest paid on account of lease of ship to foreign entities and ‘no Capital Gains tax’ on transfer of ship by a IFSC Unit enjoying 100 percent tax exemption.