Nirmala Sitharaman calls for developing capabilities and legal systems to have an international arbitration centre for the maritime sector in India

Finance Minister Nirmala Sitharaman has called for developing capabilities and legal systems to establish an international arbitration center for the maritime sector in India. She made the remarks while addressing a session on Maritime Financing, Insurance, and Arbitration at the concluding day of the third Global Maritime India Summit (GMIS) in Mumbai.

Need for an Indian Arbitration Center

Sitharaman emphasized the need to improve and strengthen India's arbitration processes and laws to meet global standards. She said that while many Indians are working in international arbitration centers in London, Singapore, or Dubai, they are assisting senior lawyers and not leading cases. She expressed her desire to see this change and highlighted the importance of developing an arbitration center in India.

Financing, Insurance, and More Options for Shipbuilding

The minister also stressed the need for financing, insurance, arbitration, and the creation of more diverse options to boost India's shipbuilding capacity. She mentioned that India has passed an arbitration bill and established an arbitration center but recognized the need for a full-fledged Indian-owned and India-based Protection and Indemnity (P&I) entity. This, she said, would reduce India's vulnerability to international sanctions and pressures and provide greater strategic flexibility in shipping operations.

Harmonized Master List and Infrastructure Categorization

Sitharaman informed that an expert committee has been constituted to review the Harmonized Master List (HML) and streamline the understanding of infrastructure among all financing and regulatory institutions. The framework being developed by this committee would help update the HML regularly and categorize relevant sectors like infrastructure.

Challenges in the Maritime Sector

The minister acknowledged the challenges faced by the maritime sector globally, including security of supply, disruption of supply, broken value chains, and risks to shipments of major commodities. She highlighted the impact of these challenges on food and energy security, contributing to inflation and hindering economies recovering from the COVID-19 pandemic.

Encouraging Financing for the Maritime Sector

Sitharaman acknowledged that banks are not enthusiastic about funding the maritime sector due to its higher risks. She said she is in talks with public sector banks to adopt a more positive approach to the sector. She also urged private sector lenders to look at shipping and maritime sectors more proactively and encouraged operators to explore fundraising through asset monetization.

Incentives for Ship Leasing in IFSCA

The minister highlighted the incentives offered for ship-leasing entities in the International Financial Services Centres Authority (IFSCA) located in GIFT City. These incentives include a tax holiday for 10 years, no capital gains during tax holding, and stamp duty exemption for five years, among others. Additional exemptions have been granted on income generated through royalty or interest paid on account of the lease of ships to foreign entities and no Capital Gains tax on the transfer of ships by an IFSC unit enjoying 100% tax exemption.

India-Middle East-Europe Economic Corridor

Sitharaman spoke about the India-Middle East-Europe economic corridor, which aims to reach Europe and Central Asia through a maritime plus land route, reducing logistics costs. She also mentioned the creation of a Marine Cargo Pool with the support of the Insurance Regulatory & Development Authority of India (Irdai) and domestic insurance companies to support maritime trade in the aftermath of COVID-19.

Monetization of Government Ports

The minister shared that nine of the 12 government ports have identified 35 projects for monetization, with a potential value of Rs 14,483 crore, as part of the national asset monetization pipeline.

The discussions on maritime financing, insurance, and arbitration at the Global Maritime India Summit highlighted the need for developing an international arbitration center in India, improving financing options for the shipbuilding sector, and addressing challenges in the maritime industry. The initiatives and incentives announced by the government aim to boost the country's maritime sector and position India as a key player in global maritime trade.