Current Shipping Environment

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NAROTTAM MORARJEE
INSTITUTE OF SHIPPING
MUMBAI
STUDY MATERIAL
CURRENT SHIPPING ENVIRONMENT
FIRST YEAR 2019
REGD. OFFICE
76, Jolly Maker Chambers No.2
Nariman Point, MUMBAI-400021 (INDIA)
Tele: +91-22-22024110 or +91-22-22022495
E-mail: admin@nmis.net
Website: www.nmis.net
NAROTTAM MORARJEE INSTITUTE OF SHIPPING
MUMBAI
.
These study materials are strictly for private circulation among the bonafide students and
members of the Narottam Morarjee Institute of Shipping only.
Any unauthorised use, copying or taking extract of these materials, without the written
permission of the Institute for any purpose other than the prosecution of the Institute's
courses are strictly forbidden.
CURRENT SHIPPING ENRIRONMENT FIRST YEAR
CONTENTS/INDEX
LESSON TOPIC TOTAL PAGE NOS.
NO. PAGES
- INDEX 1 1
- INSTRUCTIONS 2 2-3
- SYLLABUS 2 4-5
1 REGISTRATION OF SHIPS AND OPEN REGISTRIES 4 6–9
2 INTERNATIONAL MARITIME ORGANIZATION (IMO) 23 10 – 32
3 MARITIME ADMINISTRATION 11 33 – 43
4 FLAG STATE CONTROL & POST STATE CONTROL 8 44 – 51
5 SHIP VETTING 7 52 -- 58
6 SHIP MANAGEMENT CONCEPT 6 59 – 64
7 INDIAN PORTS 26 65 – 90
8 CONTAINERISATION IN INDIA 16 91 – 106
9 QUALITY MANAGEMENT IN SHIPPING AND ISM CODE 6 107 – 112
10 SHIPPING ORGANISATIONS: INTERNATIONAL AND INDIAN 17 113 – 129
11 SHIPBUILDING, SHIP REPAIRS & SHIP BREAKING 18 130 – 147
12 TECHNOLOGICAL DEVELOPMENTS IN SEA TRANSPORT 12 148 – 159
13 MARITIME PIRACY, FRAUDS, CONTAINER CRIMES 27 160 – 186
14 OFFSHORE SHIPPING 32 187 – 218
15 LOGISTICS MANAGEMENT 18 219 – 236
ANNEX-1 : JOINT VENTURES, SHIPLPING POOLS AND 16 237 – 252
CONSORTIA
ANNEX-2 : WRECK REMOVAL 3 253 - 255
3 MODEL TEST PAPERS (COLOUR PAGES) 3 256 - 258
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1
MUMBAI
INSTRUCTIONS
This study material material is strictly for private circulation amongst the bonafide students
and members of the Narottam Morarjee Institute of Shipping only.
Any unauthorized use, copying or taking extracts of this material for any purpose in any form
without the written permission of the Institute for any purpose other than the prosecution of
the Institute’s course are strictly forbidden.
This material is merely for guidance. It is a skeleton and gives a bird’s eye-view of the
subject. The student must refer to prescribed text books.
Basic Readings
1. The materials given in this course are calculated to provide exhaustive basic readings on
topics and sub-topics included in the course. Experts in the area have collected the basic
information and thoroughly analysed the same in topics and sub-topics. Lucid/supportive
illustrations have been provided to make the student understand the concept. Relevant
legislative provisions are also included. Care has been taken to communicate basic
information required for clarity and understanding the concept. Efforts have been made
to co-relate the topics and sub-topics for broad understanding and applications of
subjects as and when required during the course or if you are in employment with
shipping concern or related activities, this exercise would certainly reinforce cogitative
process of learning and assist in solving problems.
2. The reader is advised to read a least three time. The first reading, therefore necessarily
has to be very slow and extremely systematic. While so reading the reader has to
understand the implications of those information’s. In second reading the reader has to
critically analyse the material and link the information with other subjects in the 1st year
course. It is advisable to jot down the main points in a separate note book points stated
in the material as well as the comments. A third reading shall be necessary to prepare a
check list if required that can be used afterwards for solving problems like a ready
recokner. The reader is required to purchase the key bare acts that are used by the ship
or port operators to move the shipments and executes the relevant contracts.
Supplementary Reading :
3. Several supplementary readings are suggested in the material. NMI has good stock of
required books and journals etc for the student to refer on regular basis. Supplementary
readings are also required to be read more than once and marginal notes, marking notes,
analytical notes and check list prepared. Any reader requiring any extra readings not
available at the NMIS may request the course coordinator and course coordinator shall
take prompt action on receiving the request.
4. Students are also requested to study a book on “INTRODUCTION TO THE MARITIME

INDUSTRY – Focus on India” by Capt. H. Subramanian.
Problems and Responses:
5. After reading the whole module which is divided into several topics and sub topics, the
reader has to solve the problems specified at the end of each lesson. While solving the
problems the reader is advised to use checklist, the notes and supplementary material or
the relevant bare acts. This would provide confidence to the reader and also in taking the
examination in an structured way and would ensure positive results. After completing the
exercise, the reader is directed to send the same to the course coordinator for evaluation.
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The candidates are advised to complete these assignments before he appear for final
examination.
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SYLLABUS
ASSOCIATESHIP/ POST GRADUATE DIPLOMA
IN SHIPPING MANAGEMENT -- FIRST YEAR
Lesson CURRENT SHIPPING ENVIRONMENT
No.
1. Registration of ships and Open Registries: National identity of a vessel with ref to Ref to UNCLOS, 1982 and
its requirements; Registration of Indian ships; Open registries; Advantages & Disadvantages of Open registries.
Flag of the ship.
2. International Maritime Organization : Background; IMO & its organizational set up and functions;
Committees & Sub-committees; Safety, Maritime pollution; Codes& conventions;
3. Maritime Administration : Introduction; General principles of maritime administration; Membership of IMO
& participation; Enforcement/implementation of International instruments; Indian Maritime Administration;
Administrative frame work; Ref. to Merchant Shipping Act (MSA1958); Functions of - D.G. Shipping, MMD,
Shipping Masters, Director Seamen’s Employment offices, Seamen’s Welfare office; Training institutes – IMU.
Shipping Policies ( Ship building/repairs, development, FROR, Costal shipping, Inland waterways etc.)
4. Flag State Control and Port State Control : Introduction; General obligations of Flag States; Provision for
Port State Control; Legal framework; Responsibility of recognized organizations acting on behalf of the
Administration; Casualty & incident investigation. MOUs.
5. Ship Vetting : Introduction; Vetting procedure; Ship inspection report exchange;
6. Ship Management Concept: Background; What is ship management?; Manning (Crewing); Technical &
Commercial Management; Legal functions of the Ship Manager, How are the Ship Managers paid?; How a ship
manager is selected?. Safe Manning Certificate and Maritime Labour Convention (MLC2006).
7. Indian Ports: History, Classification (Major and Non-major), Infrastructure, Hinterland & Management of
Indian Ports; Port Privatization, Port acts; Port Development & Connectivity; Port projects; Public Private
Partnership policy (PPP). Traffic scenario & capacity utilization of major ports; Sagarmala project, Inland water
ways. Recent developments.
8. Containerization in India : Beginning & Development; Intermodal system; ICDs/CFSs; CONCOR; Private
container train operators (CTO); cargo consolidation; private sector participation; .Hub & Spoke service at
CONCOR. Bay plan
9. Quality Management in Shipping and ISM Code : Introduction; Quality Management; ISO 9000; Shipping
industry; International Safety management code (ISM Code) – Preamble, Applicability & Requirement;
Description; Certification; Self-assessment and TMSA for tankers.
10. Shipping Organisations: International and Indian: ICS; INMARSAT; ILO; ITU; WMO; IHO, WHO;
International Shipping Federation; ICC; ITF; Salvage association with ref. to wreck removal convention; IPA,
INSA; AISC; IPPTA; ICC Shipping Association; CSLA; FEDSAI.
11. Shipbuilding, Ship repairs & Ship breaking : World shipbuilding scene; Indian Shipyards – Public & Private
sector; HSL, CSL, GRSE; Problem associated with Indian shipbuilding industry, INSA; Ship repair yards in
India; Facilities at ports; Ship-breaking – introduction, Reference to Recycling Convention; international and
Indian scene.
12. Technological Development in Sea Transport :Introduction; Economies of scale; Change in ship sizes;
Container vessels – impacts; Issues impacting ports; Effect on shipping as a whole. Northern sea route, Polar
code
13. Maritime Piracy, Frauds, Container crimes : Role of IMB, Introduction, Types of frauds; Means of
avoiding frauds; IMB & its objectives & services; Container crimes & Precautions – Pilferage; Trading fraud,
Empty container fraud, documentary/bunkering/charter party/trading/marine insurance frauds, blackmail, whole
container theft; Stowaways in containers. Piracy Definition; Regional variations in Pirate attacks; Piracy
reporting centre; Absence of effective law; Environmental aspects; IMO guidelines to Ship owners/ Seafarers on
preventing & suppressing piracy & armed robbery against ships; Precautions & actions to be taken by ship’s
personnel; Best Management Practices; SUA and UNCLOS; International Ship & Port Facility Code, (ISPS
Code) – objectives & key elements; Certification to ships and ports.
14. Offshore Shipping: Introduction, Various stages of Offshore oil exploration; Various types of supply vessels,
Indian offshore scenario; various stakeholders; coordination.
15. Logistics: History, Concept, Purpose and Functions of Logistics, Evolution of Integrated logistics, Definition of
Logistics; Understanding of Transportation, Warehousing, CWC, Inventory Management, Material Handling;
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Introduction to Supply Chain Management; 3PL; 4PL.
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CURRENT SHIPPING ENVIRONMENT FIRST YEAR
LESSON 1
REGISTRATION OF SHIPS AND OPEN REGISTRIES
1.0 REGISTRATION OF SHIPS:
1.1 Under the Geneva Convention on the High Sea (1958) and also the United Nations
Convention on the Law of the Sea, 1982 (UNCLOS1982) "Each state shall fix the conditions
for the granting of its nationality to ships, for registration of ships in its territory and for the
right to fly its flag." The ships after registration acquire nationality of the country of
registration.
2.0 REGISTRATION OF INDIAN SHIPS:
2.1 The ship is a property. Being a property, it becomes necessary to keep a record and
to achieve this purpose, the Register of Indian ships has been created. This is used as an
evidence to fly the flag of the state as well as of the right of ownership and mortgages, in just
the same way as in the case with the registration of title to land or car.
2.2 Ownership of merchant ships is usually divided into share holdings, that of Indian
ships being divided into ten shares. Sea going ships fitted with mechanical means of
propulsion of 15 tons net and above howsoever employed and those of less than 15 tons net
employed otherwise than solely on the coasts of India qualify for registration under Part V of
the Merchant Shipping Act, 1958. Ships so registerable are required to be registered only at
ports designated as ports of registry.
2.3 Register books are open for inspection against payment of a fixed fee. Thus,
anybody who desires to deal with the owner of a ship can satisfy himself about the property
or encumbrances. Obviously the Register should therefore record meticulously all details of
the vessel as well as its owners.
2.4 When a ship is registered as an Indian ship, it has an entitlement to all privileges
under the Merchant Shipping Act, 1958. However, an owner cannot avoid payment of duties
and taxes on such ships by failing to register his ship. Actually, one of the primary purposes
of registration is to enforce payment of dues.
2.5 Registration is also an important factor towards giving evidence as proof of title. In
India registration of ships is done in the ports of Mumbai, Kolkata, Chennai, Kochi,
Murmagoa and such other ports in India as notified by the Government under the Merchant
Shipping Act, 1958. The port at which an Indian ship is registered is deemed to be her port
of registry and the port to which the ship belongs. The Principal Officers (PO) of the
Mercantile Marine Department (MMD) of Mumbai, Kolkata and Chennai are the Registrars of
Indian ships at those ports.
2.6 Under the "Law of the Flag" a vessel and its crew are subject to the laws of country
whose flag (nationality) the ship is flying and the conduct of the affairs on board is governed
by the law of that country. The members of the crew are not in any way controlled by the
laws of the country of which they are subjects.
2.7 As per Merchant Shipping Act (MSA) all Indian ship owners have to register their
ships ONLY in India. However, GoI has relaxed these rules from April 2015. Now Indian ship
owners are permitted to register their ships anywhere in the world by fulfilling two conditions.
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1. They must maintain the Indian tonnage as on date.
2. Their foreign registered tonnage should not exceed Indian registered tonnage.
This will benefit Indian ship owners owning foreign flag ships in following way.
 No need to open Subsidiary outside India to manage foreign flag vessels.
 Can avail Tax exemptions as well as cheaper interest loans to acquire foreign
flag tonnage.
 Level playing field with competitors abroad.
 Expand their operations and business on foreign shores.
3.0 OPEN REGISTRY OR FLAGS OF CONVENIENCE:
3.1 As mentioned in above para 1.0, under the Convention on the High Sea (1958) and
also UNCLOS1982, "Each state shall fix the conditions for the granting of its nationality to
ships, for registration of ships in its territory and for the right to fly its flag." The ships after
registration acquire nationality of the country of registration.
3.2 The Convention also states that there must be a genuine link between the state and
the ship but this seems to be open to vague interpretation.
3.3 In practice, Open Registry or FOC is a system whereby a country allows ships to be
registered there and fly the country's flag without the real owner having any definite
connection with the country of registration.
3.4 Internationally "Flag of Convenience" is now considered a derogatory terms. Instead

“Open Registries” is a more acceptable term for registry, as they are usually called in order
to give a semblance of respectability to the ships, have today become one of the most
serious problems of international maritime transport.
3.5 Many countries tend to allow and actually encourage the registration of foreign-
owned ships. This becomes a source of revenue. This practice started in 1020s, but
became widespread only after the Second World War particularly when Liberia joined the
group of Flags of Convenience countries in the late 1940s.
3.6 There exist numerous criteria applied to the Open Registries:-
(i) It allows foreign nations to own, operate or control ships registered under its
flag.
(ii) The registration and de-registration procedures are easy.
(iii) Revenues from shipping operations are not taxed at all or are taxed at
minimum rates.
(iv) Registration and tonnage fees are very low.
(v) Host government cannot use the registered tonnage for its own needs.
(vi) Ships can be manned by foreign crew.
3.7 So it is seen that countries which offer their maritime flag registration to owners from
another country are considered Flag of Convenience (FOC) countries. FOC countries
traditionally offer easy registration, low or non-existent taxes, and no practical restrictions on
the nationality of the crew. By transferring a ship from a genuine national register to an FOC
register, an owner avoids taxation, safety regulations in some flags are not strictly followed
and (most important for the ITF) from trade union organizations.
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3.8 The International Transport Workers Federation (ITF) recognizes that any ship which
is owned in a different country from the flag state is an FOC and treats it appropriately.
3.9 Nowadays, countries wanting to attract their shipowners back into their fold have
begun starting "Second Registers". These "Second Registers" are meant to attract
shipowners with low taxation and easy registration procedures. Examples of these second
registers are NIS (Norwegian International Ship-Register) and DIS (Denmark International
Ship-Register).
3.10 Some of the leading FOC countries are: Panama, Liberia, Bahamas, Bermuda,
Cyprus, Malta, Marshal Island, etc.
3.11 SOME OF THE ADVANTAGES ARE:
1. Easy procedure for registration.

2. Low taxation.
3. Flexibility to operate with multi-national crew.
4. Procedures for amendment/change in ownership simplified.
5. Convenient route for poor countries to raise foreign currency.
6. No strong trade unions to put obstacles in way of shipowers.
7. Greater operational freedom due to fewer government imposed restrictions.
8. Reduction in operating costs, specially manning.
9. Owing to less operating costs gives owners a trading advantage over non-
FOC owners.
3.12 SOME OF THE DISADVANTAGES ARE:
1. In some flags there are low safety standards & no effective machinery to
enforce international safety regulations.
2. Prone to frequent inspections at various ports by PSC and ITF
3. May encounter difficulties in recovering claims.
4. The casualty record of FOC countries is higher than world average.
5. Mono-lingual cheap crews of a single foreign nationality may not be able to
communicate effectively with officers during moments of grave crisis.
6. Investigations carried out by FOC countries into casualties are out sourced
are not thorough and rigorous as they should be.
7. Loss of support from their own governments for subsidies and finance at
cheaper rates of interest.
8. Cannot trade in certain parts of the world for fear of industrial action by ITF.
4.0 To get a glimpse of the FOC registries; a table has been appended showing first 35
most favored registry points. Panama now has the largest registry in the world, followed by
Marshall Islands, Liberia, Malta and Bahamas. In 2018, almost three quarters of the world's
fleet was registered under a flag of a country other than its own.
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Table of flags of convenience and statistics of registered ships
(2018 data)
Antigua and Barbuda 853 Bahamas 1,418 Barbados 121

Belize 764 Bermuda 160 Bolivia 04
Cayman Islands 165 Cyprus 1,020
Cambodia 364
Comoros 218 Curaçao 82 Equatorial Guinea 38
Faroe Islands 100 France 555 Georgia 82
Germany 629 Gibraltar 250 Honduras 550
Jamaica 43 Lebanon 55 Liberia 3,321
Madeira 576 Malta 2,205 Marshall Islands 3,419
Mauritius 28 Moldova 151 Mongolia 265
Myanmar 95 North Korea 274 Panama 7,914

Saint Vincent and the Grenadines 889 São Tomé and Príncipe 15 Sri Lanka 87
Tonga 33 Vanuatu 405
oooooo
SELF-EXAMINATION QUESTIONS
1. Why is registration of a ship important? Briefly describe how ships can be registered
in India.
2. "Flag of Convenience vessels have become one of the most serious problems of
international maritime transport." Discuss.
3. Why do some countries encourage registration of foreign-owned vessels?
4. What are the characteristics of an FOC country?
5. Tabulate the advantages and disadvantages of FOC countries.
6. What in your opinion can be done to discourage ships from registering in an FOC
country?
7. Why Open Registry ships are targeted by PSC and ITF?
RECOMMENDED FOR FURTHER READING:
1. Sea Transport -- P.M. Alderton, 4th Ed., 1995.

2. Sea Trading Vol. I & III -- W. V. Packard, 1st Ed., 1985.
3. Economics of Shipping Practice & Management -- A. E. Branch, 2nd Ed., 1986.
4. Elements of Shipping -- A. E. Branch, 7th Ed., 1996.
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LESSON 2
INTERNATIONAL MARITIME ORGANIZATION
1.0 Background & objectives:
1.1 As a specialized agency of the United Nations, IMO is the global standard-setting authority
for the safety, security and environmental performance of international shipping. Its main role is to
create a regulatory framework for the shipping industry that is fair and effective, universally adopted
and universally implemented.
1.2 In other words, its role is to create a level playing-field so that ship operators cannot address
their financial issues by simply cutting corners and compromising on safety, security and
environmental performance. This approach also encourages innovation and efficiency.
1.3 Shipping is a truly international industry, and it can only operate effectively if the regulations
and standards are themselves agreed, adopted and implemented on an international basis. IMO is
the forum at which this process takes place.
1.4 International shipping transports about 90 per cent of global trade by volume and 70% by
value to peoples and communities all over the world. Shipping is the most efficient and cost-
effective method of international transportation for most goods; it provides a dependable, low-cost
means of transporting goods globally, facilitating commerce and helping to create prosperity among
nations and peoples.
1.5 The development in shipping, especially technological and economical in the early part of
this century led to an increase in number and types of ship moving internationally. A need was felt to
have an international body in place for controlling the shipping with respect to safety. An
organization called Inter-Governmental Maritime Consultative Organization (IMCO) was therefore
established by a Convention adopted in Geneva in a conference convened by the United Nations in
1948. IMCO however started its operation in January 1959. IMCO changed its name to IMO in 1982.
The purpose of the IMO included, encouraging the general adoption of the highest practical
standards in matters concerning maritime safety and efficiency of navigation.
1.6 Today the world relies on a safe, secure and efficient international shipping industry – and
this is provided by the regulatory framework developed and maintained by IMO. IMO measures
cover all aspects of international shipping – including ship design, construction, equipment,
manning, operation and disposal – to ensure that this vital sector for remains safe, environmentally
sound, energy efficient and secure.
1.7 Shipping is an essential component of any programme for future sustainable economic
growth. Through IMO, the Organization’s Member States, civil society and the shipping industry are
already working together to ensure a continued and strengthened contribution towards a green
economy and growth in a sustainable manner. The promotion of sustainable shipping and
sustainable maritime development is one of the major priorities of IMO in the coming years.
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1.8 Energy efficiency, new technology and innovation, maritime education and training,
maritime security, maritime traffic management and the development of the maritime
infrastructure: the development and implementation, through IMO, of global standards covering
these and other issues will underpin IMO's commitment to provide the institutional framework
necessary for a green and sustainable global maritime transportation system.
1.9 The objectives of IMO are now epitomized in its slogan “Safer and Secure Shipping and
Cleaner Oceans”. The IMO creates and adopts conventions which are ratified by the countries. A
convention usually only comes into force after a notified period subject to a certain number of states
representing a certain percentage of the world fleet ratify it; e.g. SOLAS entered into force …..
months after 25 countries whose combined fleet represented 50% of the world tonnage adopted it.
1.10 Specially this chapter is little long as it gives a truly 360 view of the different conventions
and regulations that makes the maritime business safer & more secure than ever.
2.0 Structure of IMO:
2.1 Briefly the present structure of the IMO is shown in the diagram is attached (Ref: Annex-I).
The new structure came into effect from 2013. IMO’s Maritime Safety Committee (MSC) has agreed
to a restructuring of IMO’s Sub-Committees, in order to deal more effectively with the technical and
operational issues covered by IMO regulations, as part of a review and reform process initiated by
the present Secretary-General.
2.2 The Assembly is the highest Governing Body of the IMO. It consists of all Member States and
it meets once every two years in regular sessions. The Assembly is responsible for approving the
work program, voting the budget and electing the Council. It may also meet in extraordinary
sessions. The Secretariat consists of some 300 international civil servants headed by a Secretary-
General.
2.3 Council - In between Assembly sessions a Council, consisting of 40 Member States elected by
the Assembly. Council is elected by the Assembly for two-year terms beginning after each regular
session of the Assembly. The Council is the Executive Organ of IMO and is responsible, under the
Assembly, for supervising the work of the Organization. Between sessions of the Assembly the Council
performs all the functions of the Assembly, except the function of making recommendations to
Governments on maritime safety and pollution prevention which is reserved for the Assembly by
Article 15(j) of the Convention.
2.3.1 Other functions of the Council are to:
(a) Coordinate the activities of the organs of the Organization;

(b) Consider the draft work programme and budget estimates of the Organization and submit
them to the Assembly;
(c) Receive reports and proposals of the Committees and other organs and submit them to the
Assembly and Member States, with comments and recommendations as appropriate;
(d) Appoint the Secretary-General, subject to the approval of the Assembly;
(e) Enter into agreements or arrangements concerning the relationship of the Organization
with other organizations, subject to approval by the Assembly.
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2.3.2 Current Council members: (2018)
Category (a): 10 States with the largest interest in providing international shipping services:
Norway, Panama, Republic of Korea, Russian Federation, United Kingdom, United States.
Category (b): 10 other States with the largest interest in international seaborne trade:
Germany, India, Australia, France, Canada, Spain, Brazil, Sweden, Netherlands and UAE.
Category (c): 20 States not elected under (a) or (b) above which have special interests in
maritime transport or navigation, and whose election to the Council will ensure the
representation of all major geographic areas of the world:
Australia, Bahamas, Belgium, Chile, Cyprus, Denmark, Egypt, Indonesia, Jamaica, Kenya,
Liberia, Malaysia, Malta, Mexico, Morocco, Philippines, Singapore, South Africa, Thailand,
Turkey.
2.4 To become a member of the IMO, a state ratifies a multilateral treaty known as the
Convention on the International Maritime Organization. The IMO started with 21 members in 1959
and as of 2018, there are 174 member states of the IMO and three associate members. The first
state to ratify the convention was the United Kingdom in 1949. The most recent member to join was
Armenia and Nauru, which became an IMO member in 2018. Associate members are: Faroe Islands,
Hong Kong and Macao.
2.5 UN member states that are not members of IMO are generally landlocked countries,
including: Afghanistan, Andorra, Belarus, Bhutan, Botswana, Burkina Faso, Burundi, Central African
Republic, Chad, Kyrgyzstan, Laos, Lesotho, Liechtenstein, Mali, Federated States of Micronesia,
Niger, Rwanda, South Sudan, Swaziland, Tajikistan, and Uzbekistan.
2.6 Secretariat: The day-to-day operations are controlled by the secretariat which is headed by
the Secretary General. Mr. Kitak Lim from Korea was elected Secretary-General of the Organization
by the session of the IMO Council in 2015 for a four-year period beginning 1 January 2016. The
election was endorsed by the IMO's Assembly at its session later 2015.
3.0 Technical Committees:

The technical work of the International Maritime Organization is carried out by a series of
Committees. This includes
 The Marine Environment Protection Committee (MEPC)

 The Legal Committee
 The Technical Cooperation Committee, for capacity building
 The Facilitation Committee, to simplify the documentation and formalities required in
international shipping.
3.1 Maritime Safety Committee:
3.1.1 This committee is regulated in the Article 28(a) of the Convention on the IMO:
ARTICLE 28 :
(a) The Maritime Safety Committee shall consider any matter within the scope of the
Organization concerned with aids to navigation, construction and equipment of vessels,
manning from a safety standpoint, rules for the prevention of collisions, handling of
dangerous cargoes, maritime safety procedures and requirements, hydrographic
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information, log-books and navigational records, marine casualty investigation, salvage and
rescue, and any other matters directly affecting maritime safety.
(b) The Maritime Safety Committee shall provide machinery for performing any duties
assigned to it by this Convention, the Assembly or the Council, or any duty within the scope
of this Article which may be assigned to it by or under any other international instrument
and accepted by the Organization.
(c) Having regard to the provisions of Article 25, the Maritime Safety Committee, upon
request by the Assembly or the Council or, if it deems such action useful in the interests of
its own work, shall maintain such close relationship with other bodies as may further the
purposes of the Organization.
3.1.2 The Maritime Safety Committee is the most senior of these and is the main Technical
Committee; it oversees the work of its nine sub-committees and initiates new topics. One broad
topic it deals with is the effect of the human element on casualties; this work has been put to all of
the sub-committees, but meanwhile, the Maritime Safety Committee has developed a code for the
management of ships which will ensure that agreed operational procedures are in place and
followed by the ship and shore-side staff.
3.1.3 Following sub-committees provide assistance to the MSC which has been depicted in the
chart above. Interestingly many of the old allocations have been revised and new activities have
been included in the 7 – new subcommittees. Details may be seen here:
1) Sub-Committee on Human Element, Training and Watch keeping (HTW): to address

issues relating to human element training and watch keeping, including minimum
international standards for training and certification of seafarers and fishing vessel
personnel; and technical and operational issues related to maritime safety, security, and
environmental protection, to encourage a safety culture in all ship operations; safe
manning; the review, updating and revision of IMO model courses; and promotion and
implementation of the Organization's human element strategy.
2) Sub-Committee on Implementation of IMO Instruments (III): to address the effective

and consistent global implementation and enforcement of IMO instruments concerning
maritime safety and security and the protection of the marine environment, including:
comprehensive review of the rights and obligations of States emanating from the IMO
treaty instruments; assessment, monitoring and review of the current level of
implementation of IMO instruments by States in their capacity as flag, port and coastal
States and countries training and certifying officers and crews; identification of the
reasons for the difficulties in implementing provisions of relevant IMO instruments;
consideration of proposals to assist States in implementing and complying with IMO
instruments; analyses of investigations reports into marine casualties and incidents;
review of IMO standards on maritime safety and security and the protection of the
marine environment, to maintain an updated and harmonized guidance on survey and
certification related requirements; and promotion of global harmonization of port State
control activities.
3) Sub-Committee on Navigation, Communications and Search and Rescue (NCSR): to

consider technical and operational matters related to the obligations of Governments
and operational measures related to safety of navigation, including hydrographic and
meteorological services, ships' routeing, ship reporting systems, aids to navigation,
radio-navigation systems, vessel traffic services, and pilotage; operational requirements
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and guidelines relating to navigational safety and associated issues, such as regulations
for the prevention of collisions and groundings, bridge procedures, voyage planning,
avoidance of dangerous situations, places of refuge including maritime assistance
services and relevant aspects of maritime security; carriage requirements, performance
standards and operational guidelines for the use of ship-borne navigational equipment
and other navigational requirements; obligations of Governments and operational
measures related to the Global Maritime Distress and Safety System (GMDSS),
development and maintenance of the global search and rescue (SAR) Plan and the Long
Range Identification and Tracking (LRIT) system; operational requirements and
guidelines relating to radio communications and search and rescue, and, in co-operation
with the International Civil Aviation Organization (ICAO), the harmonization of
aeronautical and maritime search and rescue procedures; carriage requirements,
performance standards and operational guidelines for the use of ship-borne radio-
communications and search and rescue equipment; and liaison with the International
Telecommunication Union (ITU) on maritime mobile radio-communication matters.
4) Sub-Committee on Pollution Prevention and Response (PPR): to consider technical and

operational matters related to: prevention and control of pollution of the marine
environment from ships and other related maritime operations; safe and
environmentally sound recycling of ships; evaluation of safety and pollution hazards of
liquid substances in bulk transported by ships; control and management of harmful
aquatic organisms in ships' ballast water and sediments, and bio-fouling; and pollution
preparedness, response and cooperation for oil and hazardous and noxious substances.
5) Sub-Committee on Ship Design and Construction (SDC): to consider technical and

operational matters related to: design, construction, subdivision and stability, buoyancy,
sea-keeping and arrangements, including evacuation matters, of all types of ships,
vessels, craft and mobile units covered by IMO instruments; testing and approval of
construction and materials; load line matters; tonnage measurement matters; safety of
fishing vessels and fishermen; and survey and certification.
6) Sub-Committee on Ship Systems and Equipment (SSE): to consider technical and

operational matters related to: systems and equipment, including machinery and
electrical installations, of all types of ships, vessels, craft and mobile units covered by
IMO instruments; testing and approval of systems and equipment; life-saving
equipment, appliances and arrangements; fire protection systems; and analyses of
casualty and incident records relating to ship systems and equipment.
7) Sub-Committee on Carriage of Cargoes and Containers (CCC): to consider technical and

operational matters related to: effective implementation of the relevant conventions,
codes and other instruments, mandatory or recommendatory, as appropriate, dealing
with cargo operations, which include packaged dangerous goods, solid bulk cargoes,
bulk gas cargoes, and containers; evaluation of safety and pollution hazards of packaged
dangerous goods, solid bulk cargoes and gas cargoes; survey and certification of ships
carrying hazardous cargoes; further enhancement of the safety and security culture, and
environmental consciousness in all cargo and container operations; and co-operation
with other relevant UN bodies, IGOs and NGOs on international standards related to
containers and to cargo operations.
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3.2 Marine Environment Protection Committee (MEPC):
3.2.1 The MEPC, which consists of all Member States, is empowered to consider any matter within
the scope of the Organization concerned with prevention and control of pollution from ships. In
particular it is concerned with the adoption and amendment of conventions and other regulations
and measures to ensure their enforcement.
3.2.2 The MEPC was first established as a subsidiary body of the Assembly and raised to full
constitutional status in 1985.
3.3 Technical Co-operation Committee:
3.3.1 This committee is responsible for various projects, internationally or regionally, where co-
ordination between member states may be necessary. The technical co-operation program for 1994
– 96 amounted to more than 40 m US $. The World Maritime University at Malmo, Sweden is part of
this committee’s responsibility.
3.4 Legal Committee:
3.4.1 The Legal Committee is empowered to deal with any legal matters within the scope of the
Organization. The Committee consists of all Member States of IMO. It was established in 1967 as a
subsidiary body to deal with legal questions which arose in the aftermath of the Torrey
Canyon disaster.
3.4.2 The Legal Committee is also empowered to perform any duties within its scope which may
be assigned by or under any other international instrument and accepted by the Organization.
3.5 Facilitation Committee:
3.5.1 The Facilitation Committee was established as a subsidiary body of the Council in May 1972,
and became fully institutionalized in December 2008 as a result of an amendment to the IMO
Convention. It consists of all the Member States of the Organization and deals with IMO’s work in
eliminating unnecessary formalities and “red tape” in international shipping by implementing all
aspects of the Convention on Facilitation of International Maritime Traffic 1965 and any matter
within the scope of the Organization concerned with the facilitation of international maritime traffic.
In particular in recent years the Committee's work, in accordance with the wishes of the Assembly,
has been to ensure that the right balance is struck between maritime security and the facilitation of
international maritime trade.
4.0 IMO Budget:
4.1 The funding system for IMO is unique as the money is pooled in by its 174 member states in
proportion to the size of their merchant fleet. Therefore the bigger share is contributed by Panama
and Liberia. The USA, which pays normally the highest contribution to the budget of other UN
agencies, pays only about 4% in IMO budget.
4.2 The IMO Assembly adopts the Organization’s budget for the next biennium ( two years
budget). (Budget for 2017 was £45,835,000). Contributions to the IMO budget are based on a
formula which is different from that used in other United Nations agencies: the amount paid by each
Member State depends primarily on the tonnage of its merchant fleet. Panama is the highest
contributor. The Organization's ten largest contributors to assessed contributions in 2017 are
shown below.
15
Sr. Country Name Contribution GBP % of total
No. assessment
1 Panama 4,896,058 16.26%
2 Liberia 2,943,744 9.77
3 Marshall Islands 2,803,537 9.32
4 Singapore 1,829,757 6.07
5 Malta 1,482,972 4.92
6 Bahamas 1,322,304 4.39
7 United Kingdom 1,237,591 4.11
8 China 1,236,270 4.10
9 Greece 942,964 3.13
10 United States of America 831,412 2.76
Total 19,526,609 64.82
5.0 CODES & CONVENTIONS:
5.1 The IMO also develops Codes, which are normally recommendatory, unless it is made
mandatory under the provision of a Convention. The most important code is the International
Maritime Dangerous Goods (IMDG) Code regarding the transportation of dangerous goods. The wide
acceptance and legitimacy of IMO’s mandate, in accordance with international law, is evidenced by
the participation of 171 sovereign States representing all regions of the world. At the same time all
Members are entitled to participate at meetings of IMO bodies in charge of the elaboration and
adoption of recommendations containing safety, security and antipollution rules and standards.
These rules and standards are normally adopted by consensus; and - all States, irrespective of
whether they are Members of IMO & are invited to participate at IMO conferences for adopting new
IMO conventions. At present, about 80-85% (depending on the treaty) has become Parties to such
conventions.
5.2 The most important instruments developed and continuously upgraded and amended are
the Conventions. These are broadly related to maritime safety, prevention of marine pollution,
liability and compensation and other matters. Some important conventions are briefly described
below and we have provided a full list of the conventions at the end of the chapter.
6.0 Adopting a convention:
6.1 This is the part of the process with which IMO as an Organization is most closely involved.
IMO has six main bodies concerned with the adoption or implementation of conventions. The
Assembly and Council are the main organs, and the committees involved are the Maritime Safety
Committee, Marine Environment Protection Committee, Legal Committee and the Facilitation
Committee. Developments in shipping and other related industries are discussed by Member States
in these bodies, and the need for a new convention or amendments to existing conventions can be
raised in any of them.
7.0 The important ones:
7.1 These are explained slightly in detail as understanding of these critical conventions will
enable the learner to check and assist compliances for ships in and near ports and also take care of
identification and rectification of errors & omissions if sudden need arise (though it remains in many
cases an unique responsibility of the ship/ship-owner).
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8.0 “Maritime Safety”:
8.1 International Convention for the Safety of Life at Sea 1974 – SOLAS 1974 – in force from 25th
May 1980
The SOLAS Convention is the most important international treaty regarding the safety of
merchant ships. This was adopted in 1960, called SOLAS 60 and a new convention was
adopted in 1974 called SOLAS 74.
The main objective of SOLAS is to specify minimum standard for the construction,
equipment and operation of ships, compatible with their safety. It is divided in 12 chapters.
The amendments to this Convention are adopted by tacit acceptance procedures and thus
allow for the continuous upgrading of the Convention. Some of the salient parts include the
requirement of inert gas system for tankers, grain loading requirements for bulk carriers,
GMDSS requirements for radio communication, RORO passenger ships safety requirements
and most recently the International Safety Management (ISM Code) requirements.
Maritime security is an integral part of IMO's responsibilities. A comprehensive security

regime for international shipping entered into force on 1 July 2004. The mandatory security
measures, adopted in December 2002, include a number of amendments to the 1974 Safety
of Life at Sea Convention (SOLAS), the most far-reaching of which enshrines the new
International Ship and Port Facility Security Code (ISPS Code), which contains detailed
security-related requirements for Governments, port authorities and shipping companies in
a mandatory section (Part A), together with a series of guidelines about how to meet these
requirements in a second, non-mandatory section (Part B).
8.2 International Convention on Load Lines, 1966 – LOAD LINES 1966 – in force from 1st July
1968
This Convention deals with measures for ensuring the watertight integrity of the ship’s hull
below the freeboard. It provides for suitably marking of the load lines marks on amid ships
on each side of the ship. It also has requirements for hatchways, watertight doors, freeboard
etc.
8.3 Convention on the International Regulation for Preventing Collision at Sea 1972 – COLREG
1972 – in force from 15th July 1977 :
This provides guidance for vessels to proceed in appropriate traffic lanes, keeping clear of
traffic separation line or zones. It defines the type of navigational lights and their shapes and
signals. It aims at providing a regulatory system so that collision at sea could be avoided.
8.4 International Convention for Safe Containers, 1972 – SAFE CONTAINER 1972 – 6th September
1977:
The increasing use of transport by containers necessitated the need for maintaining high
level of safety of human life in the transportation and handling of these containers and also
to provide uniform international safety regulations applicable to all modes of surface
transport. This Convention sets out procedures for approval of the containers and their
maintenance etc. Various tests to which a container has to be subjected are also described
in the Convention and those are certified in the form of a CSC plate.
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8.5 Convention on the International Maritime Satellite Organization, 1976 – INMARSAT – in
force from 16th July 1979:
This Convention deals with matters relating to maritime radio communications. It helped
setting up of an organization called INMARSAT.
8.6 International Convention on Standards of Training, Certification and Watch keeping for
Seafarers, 1978 as amended in 1995 and 2010 – STCW 78/95/2010 – in force from 28th April 1984:
The 1978 STCW Convention was the first to establish basic requirements on training,
certification and watch keeping for seafarers on an international level. Previously the
standards of training, certification and watch keeping of officers and ratings were
established by individual governments, usually without reference to practices in other
countries. As a result standards and procedures varied widely, even though shipping is
extremely international of nature.
The Convention prescribes minimum standards relating to training, certification and watch
keeping for seafarers which countries are obliged to meet or exceed.
The Convention did not deal with manning levels: IMO provisions in this area are covered by
regulation 14 of Chapter V of the International Convention for the Safety of Life at
Sea (SOLAS), 1974, whose requirements are backed up by resolution A.890 (21) Principles of
safe manning, adopted by the IMO Assembly in 1999, which replaced an earlier resolution
A.481 (XII) adopted in 1981.
One especially important feature of the Convention is that it applies to ships of non-
party States when visiting ports of States which are Parties to the Convention. Article X
requires Parties to apply the control measures to ships of all flags to the extent necessary to
ensure that no more favorable treatment is given to ships entitled to fly the flag of a State
which is not a Party than is given to ships entitled to fly the flag of a State that is a Party.
The difficulties which could arise for ships of States; which are not Parties to the Convention
are the reason why the Convention has received such wide acceptance. By 2014, the STCW
Convention had 158 Parties, representing 98.8 per cent of world shipping tonnage.
8.7 International Convention on Maritime Search and Rescue, 1979 – SAR 1979 – in force from
22nd June 1985:
This Convention aims at facilitating co-operation between governments and between those
participating in search and rescue operations at sea by establishing an international search
and rescue plan. This further encourages regional agreements, pooling of resources,
training, establishing common procedures in SAR.
9.0 The Group of conventions that deals with the “Maritime Pollution” :
9.1 International Convention for the Prevention of Pollution from Ship, 1973, as modified by the
Protocol of 1978 relating thereto –MARPOL 73/78 – in force from 2nd October 1983:
This is the most important IMO instrument on pollution prevention. The original convention,
MARPOL 73 was developed in 1973; however it did not come in force till 1978 as sufficient
number of countries did not ratify it. A protocol with some changes was adopted in 1978
and came in force subsequently. This is called MARPOL 73/78.
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This Convention covers all aspects of pollution from ships, except the disposal of waste into
the sea by dumping. The Convention outlines requirements for the construction of vessels
with respect to pollution prevention, the equipment to be fitted, operating procedures,
reporting system and actions to be taken in case of pollution incidents.
The Convention is divided in FIVE Annexes. Out of these Annex I and II are compulsory and
others are optional. They are briefly described below:-
Annex I – Prevention of pollution by Oil. - In force from 2nd Oct. 1983. This covers both,
operational pollution from oil tankers and other ships as well as accidental pollution from
ships.
Annex II – Control of pollution by noxious liquid substances. - In force from 6th April 1987:
This deals with the requirement of chemical tankers or other vessels carrying liquid
chemicals.
Annex III – Prevention of pollution by harmful substance carried in packaged form, or in

freight container or portable tank or road and rail tank wagon. - In force from 1st July 1992.
This deals with chemical and other harmful cargoes carried as package or in container. It lists
the requirement of packing, marking, labeling, storage, documentation, quantity limitation
of such cargoes.
Annex IV – Prevention of pollution by sewage
Annex IV contains a set of regulations regarding the discharge of sewage into the sea
from ships, including regulations regarding the ships' equipment and s systems for the
control of sewage discharge, the provision of facilities at ports and terminals for the
reception of sewage, and requirements for survey and certification. It also includes a
model International Sewage Pollution Prevention Certificate to be issued by national
shipping administrations to ships under their jurisdiction.
MEPC at its sixty-first session in autumn 2010 recognized that the Revised Guidelines on
Implementation of Effluent Standards and Performance Tests for Sewage Treatment
Plants , which were adopted in October 2006 and which apply to sewage treatment plants
installed onboard on or after 1 January 2010, would need updating in view of the new
Annex IV requirements mentioned above.
Annex V – Prevention of pollution by garbage. - In force from 31st Dec. 1988.

Garbage from ships can be just as deadly to marine life as oil or chemicals. The greatest
danger comes from plastic, which can float for years. Fish and marine mammals can in
some cases mistake plastics for food and they can also become trapped in plastic ropes,
nets, bags and other items - even such innocuous items as the plastic rings used to hold
cans together.
For a long while, many people believed that the oceans could absorb anything that was
thrown into them, but this attitude has changed along with greater awareness of the
environment. Many items can be degraded by the seas - but this process can take months or
years. This annex deals with different types of garbage and specifies the distance from land
and the manner in which these may be disposed of.
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Annex VI - Although air pollution from ships does not have the direct cause and effect
associated with, for example, an oil spill incident, it causes a cumulative effect that
contributes to the overall air quality problems encountered by populations in many areas,
and also affects the natural environment, such as tough acid rain.
MARPOL Annex VI, first adopted in 1997, limits the main air pollutants contained in ships
exhaust gas, including sulphur oxides (SOx) and nitrous oxides (NOx), and prohibits deliberate
emissions of ozone depleting substances (ODS). MARPOL Annex VI also regulates shipboard
incineration, and the emissions of volatile organic compounds (VOC) from tankers.
Following entry into force of MARPOL Annex VI on 19 May 2005, the Marine Environment
Protection Committee (MEPC), at its 53rd session (July 2005), agreed to revise MARPOL
Annex VI with the aim of significantly strengthening the emission limits in light of
technological improvements and implementation experience. As a result of three years
examination, MEPC 58 (October 2008) adopted the revised MARPOL Annex VI and the
associated NOx Technical Code 2008, which entered into force on 1 July 2010.
9.2 International Convention Relating to Intervention on the High Seas in case of Oil Pollution
Casualties, 1969 – INTERVENTION 1969 – in force from 6th May 1975
The Convention affirms the right of a Coastal State to take such measures on the high seas
as may be necessary to prevent, mitigate or eliminate danger to its coastline or related
interests from pollution by oil or the threat thereof, following upon a maritime casualty. The
coastal State is, however, empowered to take only such action as is necessary, and after due
consultations with appropriate interests including, in particular, the flag State or States of
the ship or ships involved, the owners of the ships or cargoes in question and, where
circumstances permit, independent experts appointed for this purpose. The Convention
applies to all seagoing vessels except warships or other vessels owned or operated by a State
and used on Government non-commercial service.
The 1969 Intervention Convention applied to casualties involving pollution by oil. In view of
the increasing quantity of other substances, mainly chemical, carried by ships, some of
which would, if released, may cause serious hazard to the marine environment, the 1969
Brussels Conference recognized the need to extend the Convention to cover substances
other than oil.
The 1973 London Conference on Marine Pollution therefore adopted the Protocol relating to
Intervention on the High Seas in Cases of Marine Pollution by Substances other than Oil. The
1973 Protocol entered into force in 1983 and was amended in 1996 and 2002 to update the
list of substances attached to it.
9.3 Convention on the prevent of Marine Pollution by Dumping of Wastes and other Matters,
1972 – London Dumping 1972 – in force from 30th August 1975
The "Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other
Matter 1972", the "London Convention" for short, is one of the first global conventions to
protect the marine environment from human activities and has been in force since 1975. Its
objective is to promote the effective control of all sources of marine pollution and to take all
practicable steps to prevent pollution of the sea by dumping of wastes and other matter.
20
In 1996, the "London Protocol" was agreed to further modernize the Convention and,
eventually, replace it. Under the Protocol all dumping is prohibited, except for possibly
acceptable wastes on the so-called "reverse list". The Convention on the Prevention of
Marine Pollution by Dumping of Wastes and Other Matter 1972, commonly called the
"London Convention" or "LC '72" and also abbreviated as Marine Dumping, is an agreement
to control pollution of the sea by dumping and to encourage regional agreements
supplementary to the Convention.
It covers the deliberate disposal at sea of wastes or other matter from vessels, aircraft, and
platforms. It does not cover discharges from land-based sources such as pipes and outfalls,
wastes generated incidental to normal operation of vessels, or placement of materials for
purposes other than mere disposal, providing such disposal is not contrary to aims of the
Convention. It entered into force in 1975. As of 2013, there were 87 Parties to the
Convention.
It will be interesting to note here that when a Port Authority is trying to achieve ISO 14000
certification – the auditors look forward to the exact process of cleaning the quays and the
disposal of water – to ensure that the waste materials like coal/ sulphur or fertilizer is not
simply washed into the sea; though not directly linked with LC 72.
9.4 International Convention on Oil Pollution Preparedness Response and Co-operation, 1990 –
OPRC 1990 – in force from 13th May 1995
The Protocol on Preparedness, Response and Co-operation to pollution Incidents by (HNS)

Hazardous and Noxious Substances, 2000 (OPRC-HNS Protocol) follows the principles of the
International Convention on Oil Pollution Preparedness, Response and Co-operation, 1990
(OPRC) and was formally adopted by States already Party to the OPRC Convention at a
Diplomatic Conference held at IMO headquarters in London in March 2000.
Entry into force happens from twelve months after ratification by not less than fifteen
States, which are State parties to the OPRC Convention. The fifteenth state ratified the
OPRC-HNS Protocol on 14 June 2006. The Protocol will therefore enter into force on 14 June
2007.
Like the OPRC Convention, the HNS Protocol aims to provide a global framework for
international co-operation in combating major incidents or threats of marine pollution.
Parties to the HNS Protocol will be required to establish measures for dealing with pollution
incidents, either nationally or in co-operation with other countries. Ships will be required to
carry a shipboard pollution emergency plan to deal specifically with incidents involving HNS.
For the purposes of the HNS Protocol, a Hazardous and Noxious Substance is defined as any
substance other than oil which, if introduced into the marine environment is likely to create
hazards to human health, to harm living resources and marine life, to damage amenities or
to interfere with other legitimate uses of the sea.
The HNS Protocol will ensure that ships carrying hazardous and noxious substances are
covered by preparedness and response regimes similar to those already in existence for oil
incidents. In 1996, IMO adopted the International Convention on Liability and Compensation
for Damage in Connection with the Carriage of Hazardous and Noxious Substances (HNS) by
sea, which provides for a compensation and liability regime for incidents involving these
substances (it has not yet entered into force).
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10.0 “Liability and Compensation”:
10.1 International Convention on Civil Liability for Oil Pollution Damage, 1969 – CLC 1969 – in
force from 19th June 1975 :
This is a very important Convention as it ensures adequate compensation is available to

person who has suffered oil pollution damage resulting from marine causality involving oil
tanker. The liability of the ship-owner is strict, except in some cases, and he can limit his
liability up to a level defined in the Convention. The ship must have insurance or other
financial security in sums equivalent to owner’s total liability. In cases where the ship owner
is deemed guilty of fault for an instance of oil pollution the convention does not cap liability.
When the ship-owner is not at fault, the convention caps liability at between 3
million special drawing rights (SDR) for a ship of 5,000 GT to 59.7 million SDR for ships over
140,000 GT. These limits translate to around US$3.8 million to US$76.5 million, although
SDR exchange rates fluctuate daily.
The international compensation regime for oil pollution was originally set up some four
decades ago by the 1969 Civil Liability Convention (1969 CLC) and the 1971 Fund
Convention. The 1969 CLC entered into force in 1975.
The main features of the Convention are the same as those of the 1992 CLC, but there are
differences on specific points. Most importantly, under the 1969 CLC, the limit of the
shipowner's liability is much lower than under the 1992 CLC (up to a maximum of 14 million
SDR).
The 1992 Civil Liability Convention (1992 CLC) governs the liability of shipowners for oil pollution
damage. Now most countries have opted for CLC 1992. Under this Convention, the registered
shipowner has strict liability for pollution damage caused by the escape or discharge of persistent oil
from his ship. This means that he is liable even in the absence of fault on his part. He is exempt from
liability only if he proves that:
 the damage resulted from an act of war, hostilities, civil war, insurrection or a natural
phenomenon of an exceptional, inevitable and irresistible character, or
 the damage was wholly caused by an act or omission done with the intent to cause damage
by a third party, or
 the damage was wholly caused by the negligence or other wrongful act of any Government
or other authority responsible for the maintenance of lights or other navigational aids, in the
exercise of that function.
The shipowner is normally entitled to limit his liability to an amount determined by the size of the
ship.
22
SHIP'S TONNAGE CLC LIMIT
Ship not exceeding 5 000 units of gross tonnage SDR 4 510 000 *
Ship between 5 000 and 140 000 units of gross SDR 4 510 000 plus SDR 631 for each additional unit of
tonnage tonnage
Ship 140 000 units of gross tonnage or over SDR 89 770 000
The International Oil Pollution Compensation Fund, 1971 (1971 Fund) was set up under the
1971 Fund Convention, when the latter entered into force in 1978. The 1971 Fund
Convention ceased to be in force on 24 May 2002 and consequently does not apply to
incidents occurring after that date. The maximum amount of compensation payable by the
1971 Fund per incident was 60 million SDR, including the amount paid under the 1969 CLC.
At the October 2014 session of the 1971 Fund Administrative Council, 1971 Fund Member
States voted to wind up the 1971 Fund with effect from 31 December 2014. Consequently
the 1971 Fund ceased to exist as of that date.
10.2 International Convention on the Establishment of an International Fund for Compensation

for Oil Pollution Damage, FUND 1992 – in force from 16th October 1978 :
This was developed after the CLC 69 Convention. Some times the amount available under
that Convention was not sufficient to compensate for oil pollution damage. Further at times
the ship-owner may not have insurance or he may not be in a position to provide such funds.
This Convention allows for creation of a fund by the cargo receiver on the basis of the
quantity of oil cargo received by them per year. This fund provides compensation only if
funds under CLC are not available or are not sufficient.
Some details: The 1992 Fund Convention, which is supplementary to the 1992 CLC,
establishes a regime for compensating victims when compensation under the 1992 CLC is
not available or is inadequate. The International Oil Pollution Compensation Fund, 1992
(1992 Fund) was set up under the 1992 Fund Convention.
The 1992 Fund pays compensation when:
 the damage exceeds the limit of the shipowner’s liability under the 1992 CLC, or
 the shipowner is exempt from liability under the 1992 CLC, or
 the shipowner is financially incapable of meeting his obligations in full under the 1992;
CLC and the insurance is insufficient to pay valid compensation claims.
The maximum compensation payable by the 1992 Fund is 203 million SDR for incidents
occurring on or after 1 November 2003, irrespective of the size of the ship. For incidents
occurring before that date, the maximum amount payable is 135 million SDR. These
maximum amounts include the sums actually paid by the shipowner under the 1992 CLC.
23
The 1992 Fund is financed by contributions levied on any person who has received in one
calendar year more than 150 000 tonnes of crude oil and/or heavy fuel oil (contributing oil)
in a Member State of the 1992 Fund.
10.3 Athens Convention relating to the Carrying Passengers and their luggage by sea, 1974
ATHENS 1974 – in force from 28th April 1987.
This deals with the liability of a carrier for loss/damage suffered by a passenger. This could
be due to death/injury as well loss/damage to his luggage.
10.4 Convention on Limitation of liability for Maritime Claims, 1976 – LLMC 1976 – in force from
1st December 1986
The Convention describes the limits of liability of a ship-owner for personal injury claims as
well as property claims. This would include claims arising from damage to other ships,
property of ports etc. The Convention also provides the condition under which such
limitation will not be available.
11.0 “Other Matters” :
11.1 Convention on Facilitation of International Maritime Traffic, 1965 – FAL 1965 – in force from
5th March 1967
This aims at preventing unnecessary delays in maritime traffic by providing uniformity in

formalities and other procedures. The Convention was adopted by the International
Conference on Facilitation of Maritime Travel and Transport on 9 April 1965. It entered into
force on 5 March 1967. The number of Contracting Governments to the Convention is 115,
the combined merchant fleets of which amount to approximately 90.77 % of the world's
fleet by tonnage (according to the figures provided by IHS-Fairplay, effective as of 31
December 2010). There are 58 Member States of the IMO which had not yet acceded to the
Convention.
11.2 International Convention on Tonnage Measurement of Ships, 1969 – TONNAGE 1969 – in

force from 18th July 1982
This deals with a universal tonnage measurement system. It defines and lists methods for
calculating gross and net registered tonnage.
11.3 International Convention on Salvage, 1989 – SALVAGE 1989 – in force from 14th July 1996
This is a modification of an old convention, which deals with the salvage of a vessel. The new
Convention provides for awarding the salvor in preventing or minimizing damage to the
environment even if the salvage is not successful.
11.4 Nairobi International Convention on the Removal of Wrecks:
11.4.1 The Nairobi International Convention on the Removal of Wrecks, 2007, was adopted by an
international conference held in Kenya on 18th May, 2007 and entered into force on 14.04.2015. The
Convention provides the legal basis by providing a set of uniform international rules for States to
remove, or have removed, shipwrecks located even beyond the territorial sea that may have the
potential to affect adversely the safety of lives, goods and property at sea, as well as the marine
24
environment. The treaty also covers any prevention, mitigation or elimination of hazards created by
any object lost at sea from a ship (e.g. lost containers).
11.4.2 Although the incidence of marine casualties has decreased dramatically in recent years,
(thanks to the work of IMO, State Governments and the industry) the number of abandoned wrecks,
estimated at almost thirteen hundred worldwide. These problems are three-fold: first, and
depending on its location, a wreck may constitute a hazard to navigation, potentially endangering
other vessels and their crews; second, and of equal concern, depending on the nature of the cargo,
is the potential for a wreck to cause substantial damage to the marine and coastal environments;
and third, in an age where goods and services are becoming increasingly expensive, is the issue of
the costs involved in the marking and removal of hazardous wrecks. The convention attempts to
resolve all of these and other, related, issues.
11.4.3 The Convention makes shipowners financially liable and require them to take out insurance
or provide other financial security to cover the costs of wreck removal. The flag State must provide
certificate of compliance. It also provides affected States with a right of direct action against
insurers.
11.4.4 Articles in the Convention cover:
 reporting and locating ships and wrecks - covering the reporting of casualties to the nearest
coastal State; warnings to mariners and coastal States about the wreck; and action by the
coastal State to locate the ship or wreck;
 criteria for determining the hazard posed by wrecks, including depth of water above the
wreck, proximity of shipping routes, traffic density and frequency, type of traffic and
vulnerability of port facilities. Environmental criteria such as damage likely to result from the
release into the marine environment of cargo or oil are also included;
 measures to facilitate the removal of wrecks, including rights and obligations to remove
hazardous ships and wrecks - which sets out when the shipowner is responsible for removing
the wreck and when a State may intervene;
 liability of the owner for the costs of locating, marking and removing ships and wrecks - the
registered shipowner is required to maintain compulsory insurance or other financial
security to cover liability under the convention; and
 settlement of disputes.
11.5 International Convention on the Control of Harmful Anti-fouling Systems on Ships.

(Anti-fouling Systems):
11.5.1 Anti-fouling paints are used to coat the bottoms of ships to prevent sealife such as algae and
molluscs attaching themselves to the hull – thereby slowing down the ship and increasing fuel
consumption.
11.5.2 The new Convention defines “anti-fouling systems” as “a coating, paint, surface treatment,
surface or device that is used on a ship to control or prevent attachment of unwanted organisms”.
In the early days of sailing ships, lime and later arsenic were used to coat ships' hulls, until the
modern chemicals industry developed effective anti-fouling paints using metallic compounds.
11.5.3 These compounds slowly "leach" into the sea water, killing barnacles and other marine life
that have attached to the ship. But the studies have shown that these compounds persist in the
water, killing sealife, harming the environment and possibly entering the food chain. One of the
most effective anti-fouling paints, developed in the 1960s, contains the organotin tributylin (TBT),
which has been proven to cause deformations in oysters and sex changes in whelks.
25
11.5.4 The Convention on Ships, which was adopted on 5 October 2001 and entered into force on
17th September 2008, will prohibit the use of harmful organotin compounds in anti-fouling paints
used on ships and will establish a mechanism to prevent the potential future use of other harmful
substances in anti-fouling systems.
11.6 The Hong Kong International Convention for the Safe and Environmentally Sound
Recycling of Ships:
11.6.1 The Hong Kong Convention) is aimed at ensuring that ships, when being recycled after
reaching the end of their operational lives, do not pose any unnecessary risk to human health and
safety or to the environment. The Convention was adopted on 15th of May 2009 and entered into
force after 24 months after ratification by 15 states, representing 40% of the world merchant
shipping by GRT, combined maximum annual ship recycling volume not less than 3% of their
combined tonnage.
11.6.2 Regulations in the new Convention cover: the design, construction, operation and
preparation of ships so as to facilitate safe and environmentally sound recycling, without
compromising the safety and operational efficiency of ships; the operation of ship recycling facilities
in a safe and environmentally sound manner; and the establishment of an appropriate enforcement
mechanism for ship recycling, incorporating certification and reporting requirements. Some high
lights are as under:
 Ships will be required to carry ship specific inventory of hazardous materials. An

appendix to the Convention provides a list of hazardous materials,
 Ships will be required to have an initial survey to verify the inventory of hazardous
materials, renewal surveys during the life of the ship, and a final survey prior to
recycling.
 Ship recycling yards will be required to provide a Ship Recycling Plan.
11.6.3 The Guidelines on Ship Recycling also introduced the concept of a "Green Passport" for
ships. It was envisaged that this document, containing an inventory of all materials used in the
construction of a ship that are potentially hazardous to human health or the environment, would
accompany the ship throughout its working life. Produced by the shipyard at the construction stage
and passed to the purchaser of the vessel, the document would be in a format that would enable
any subsequent changes in materials or equipment to be recorded. Successive owners of the ship
would maintain the accuracy of the Green Passport and incorporate into it all relevant design and
equipment changes, with the final owner delivering it, with the vessel to the to the recycling yard.
12.0 Contribution:
12.1 Although some of the conventions elaborated herein have been mentioned before – special
mention is considered relevant – hence described in detail. Since 1959, the International Maritime
Organization (“IMO”), as the sole United Nation’s specialized agency exclusively devoted to maritime
affairs, has been providing a forum for cooperation among Governments in the field of
governmental regulations and practices relating to all kinds of shipping engaged in international
trade, facilitating the adoption of comprehensive multilateral treaties for a wide range of technical
measures and, in particular, the adoption of the highest practicable standards, designed to enhance
safety, security and efficiency in shipping engaged in international trade.
12.2 The achievements of IMO in its field of competence since 1959 have been the adoption of
some 50 international conventions and protocols and well over 800 codes, recommendations and
guidelines relating to these international instruments. The scope of IMO’s responsibilities covers
26
comprehensively all technical as well as operational areas of competence affecting maritime safety
and security, including, but not limited to, technological development; design and equipment of
ships; fire protection; safety of navigation; radio communication; search and rescue; training and
certification of seafarers; carriage of cargoes; flag State implementation; port State control;
enhancing security on ships and in ports; and facilitation of international maritime traffic.
12.3 IMO has effective and efficient mechanisms in place for the elaboration, development and
adoption of international treaties, rules and regulations and their implementation through the tacit
acceptance procedure adopted for amendments to most fundamental international conventions. As
a matter of fact the practice of adoption of Convention turned out to be very slow e.g. SOLAS 74 did
not come into force till 1978 for want of sufficient endorsements. To overcome this problem the
IMO developed an alternative system for amending conventions called “tacit acceptance”.
According to this, amendments to a convention enter into force on a date scheduled unless it is
rejected by a specified percentage of world fleet. With this various amendments to its existing
adoption process has become quicker.
12.4 The national governments are responsible for implementing the conventions and therefore
when a government accepts an IMO convention it agrees to make it part of its own national law and
enforces it just like any other law. The following are some of the major contributions discussed in
detail.
13.0 Seafarers’ training and certification:
13.1 In IMO, the role of the human element, in safe ship operation and the importance of
maintaining high-level training standards for seafarers have long been recognized. The first
international convention on seafarer training standards – the International Convention on Standards
of Training, Certification and Watch-keeping for Seafarers (“STCW”) – was adopted in 1978. Since
then, IMO has regularly revised and updated the STCW Convention bearing in mind the importance
of the human element in safety management ashore and afloat and in particular, the need to
maintain global standard for training for seafarers.
13.2 Bearing in mind that more than ten years had elapsed since its last major revision, the MSC,
in 2007, agreed to undertake a review of the STCW Convention so as to take into account new and
innovative training methodologies, including the use of simulators for training, e-learning, and
training related to cargoes of liquefied natural gas, liquefied petroleum gas, oil and chemicals carried
by tankers, to ensure that it meets the new challenges facing the shipping industry today and in the
years to come. The revised convention has been in force from 2010.
14.0 International Safety Management (ISM) Code:
14.1 In 1989, IMO adopted guidelines on management for the safe operation of ships and for
pollution prevention - the forerunner of what became the International Safety Management (ISM)
Code, which was made mandatory through the International Convention for the Safety of Life at Sea,
1974 (SOLAS). The Code establishes an international standard for the safe management and
operation of ships and for the implementation of a safety management system (SMS) and became
mandatory for oil tankers, bulk carriers and passenger ships in 1998 and for all other ships in 2002.
In 2005, an independent experts group was established by the IMO Secretary-General to study the
impact of the ISM Code. The relevant Committees, having endorsed the group’s recommendations,
approved circulars on guidelines for operational implementation of the ISM Code by companies; and
qualification, training and experience necessary for undertaking the role of designated person under
the provisions of the ISM Code.
27
15.0 ISPS Code:
15.1 The International Ship and Port Facility Security Code (ISPS Code) is a comprehensive set of
measures to enhance the security of ships and port facilities, developed in response to the perceived
threats to ships and port facilities in the wake of the 9/11 attacks in the United States.
15.2 The ISPS Code is implemented through chapter XI-2 Special measures to enhance maritime
security in the International Convention for the Safety of Life at Sea (SOLAS). The Code has two
parts, one mandatory and one recommendatory.
15.3 In essence, the Code takes the approach that ensuring the security of ships and port facilities
is a risk management activity and that, to determine what security measures are appropriate, an
assessment of the risks must be made in each particular case.
15.4 The purpose of the Code is to provide a standardized, consistent framework for evaluating
risk, enabling Governments to offset changes in threat with changes in vulnerability for ships and
port facilities through determination of appropriate security levels and corresponding security
measures.
15.5 The ISPS Code is part of SOLAS so compliance is mandatory for the 148 Contracting Parties to
SOLAS - see Status of Conventions complete list for list of SOLAS Contracting Governments.
16.0 The Human Element:
16.1 In November 1997, the IMO Assembly adopted a resolution containing a human element
vision, principles and goals for the Organization. This resolution recalled a previous resolutions on
IMO guidelines on management for the safe operation of ships and for pollution prevention, which
invited Governments to encourage those responsible for the management and operation of ships to
develop, implement and assess safety and pollution prevention management systems; and recalled a
resolution on fatigue factors in manning and safety, aiming at increasing awareness of the
complexity of fatigue and encouraging all parties involved in ship operations to take these factors
into account when making operational decisions.
16.2 The resolution also acknowledged the need for increased focus on human-related activities
in the safe operation of ships, and the need to achieve and maintain high standards of safety and
environmental protection for the purpose of significantly reducing maritime casualties. The human
element vision, principles and goals for the Organization were updated in November 2003.
16.3 Furthermore, the MEPC and the MSC agreed that IMO’s strategy to address the human
element and, in particular, the action plan should be continuously reviewed and revised, when
necessary. Thus there remains a strong linkage between ILO & IMO.
17.0 TITLES OF CONVENTIONS

TO BE USED AS IMO ANNEXURE
 Convention on the International Maritime Organization (IMO CONVENTION) (in force);
 1991 amendments to the IMO Convention which were adopted by the Assembly of the
Organization on 7 November 1991 by resolution A.724(17) (IMO AMENDS -91) (in force);
 1993 amendments to the IMO Convention which were adopted by the Assembly of the
Organization on 4 November 1993 by resolution A.735(18) (IMO AMENDS-93) (in force);
28
 International Convention for the Safety of Life at Sea, 1974, as amended (SOLAS 1974) (in
force);
 Protocol of 1978 relating to the International Convention for the Safety of Life at Sea, 1974,
as amended (SOLAS PROT 1978) (in force);
 Protocol of 1988 relating to the International Convention for the Safety of Life at Sea, 1974
(SOLAS PROT 1988) (in force);
 Agreement concerning specific stability requirements for RORO passenger ships undertaking
regular scheduled international voyages between or to or from designated ports in North
West Europe and the Baltic Sea (SOLAS AGR 1996) (in force);
 Convention on the International Regulations for Preventing Collisions at Sea, 1972, as

amended (COLREG 1972) (in force);
 Protocol of 1978 relating to the International Convention for the Prevention of Pollution
from Ships, 1973, as amended (MARPOL 73/78);
o Annex III to MARPOL 73/78 (in force);

o Annex IV to MARPOL 73/78 (in force);
o Annex V to MARPOL 73/78 (in force);
 Protocol of 1997 to amend the International Convention for the Prevention of Pollution from
Ships, 1973, as modified by the Protocol of 1978 relating thereto, as amended (MARPOL
PROT 1997) (in force);
 Convention on Facilitation of International Maritime Traffic, 1965, as amended (FAL 1965)

(in force);
 International Convention on Load Lines, 1966 (LL 1966) (in force);
 Protocol of 1988 relating to the International Convention on Load Lines, 1966 (LL PROT
1988) (in force);
 International Convention on Tonnage Measurement of Ships, 1969 (TONNAGE 1969) (in

force);
 International Convention Relating to Intervention on the High Seas in Cases of Oil Pollution
Casualties, 1969 (INTERVENTION 1969) (in force);
 Protocol relating to Intervention on the High Seas in Cases of Pollution by Substances other
than Oil, 1973, as amended (INTERVENTION PROT 1973) (in force);
 International Convention on Civil Liability for Oil Pollution Damage, 1969 (CLC 1969) (in
force);
 Protocol to the International Convention on Civil Liability for Oil Pollution Damage, 1969
(CLC PROT 1976) (in force);
29
 Protocol of 1992 to amend the International Convention on Civil Liability for Oil Pollution
Damage, 1969 (CLC PROT 1992) (in force);
 Special Trade Passenger Ships Agreement, 1971 (STP 1971) (in force);
 Protocol on Space Requirements for Special Trade Passenger Ships, 1973 (SPACE STP 1973)
(in force);
 Convention relating to Civil Liability in the Field of Maritime Carriage of Nuclear Material,
1971 (NUCLEAR 1971) (in force);
 Protocol of 1992 to amend the International Convention on the Establishment of an

International Fund for Compensation for Oil Pollution Damage, 1971 (FUND PROT 1992) (in
force);
 Protocol of 2000 to the International Convention on the Establishment of an International

Fund for Compensation for Oil Pollution Damage, 1972 (FUND PROT 2000) (in force);
 Protocol of 2003 to the International Convention on the Establishment of an International

Fund for Compensation for Oil Pollution Damage, 1992 (FUND PROT 2003) (in force);
 International Convention for Safe Containers, 1972, as amended (CSC 1972) (in force);
 Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974
(PAL 1974) (in force);
 Protocol to the Athens Convention relating to the Carriage of Passengers and their Luggage
by Sea, 1974 (PAL PROT 1976) (in force);
 Protocol of 1990 to amend the Athens Convention relating to the Carriage of Passengers and
their Luggage by Sea, 1974 (PAL PROT 1990) (not yet in force);
 Protocol of 2002 to the Athens Convention relating to the Carriage of Passengers and their
Luggage by Sea, 1974 (PAL PROT 2002) (not yet in force);
 Convention on the International Mobile Satellite Organization, as amended (IMSO C 1976)

(in force);
 Convention on Limitation of Liability for Maritime Claims, 1976 (LLMC 1976) (in force);
 Protocol of 1996 to amend the Convention on Limitation of Liability for Maritime Claims,
1976 (LLMC PROT 1996) (in force);
 International Convention on Standards of Training, Certification and Watch-keeping for

Seafarers, 1978, as amended (STCW 1978) (in force);
 2010 Manila amendments to the International Convention on Standards of Training,

Certification and Watch keeping for Seafarers, 1978 and the Seafarers' Training, Certification
and Watch keeping (STCW) Code (2010 MANILA STCW AMDTS);
 International Convention on Standards of Training, Certification and Watch keeping for

Fishing Vessel Personnel, 1995 (STCW-F 1995) (not yet in force);
30
 International Convention on Maritime Search and Rescue, 1979 (SAR 1979) (in force);
 Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation
(SUA) (in force);
 Protocol for the Suppression of Unlawful Acts against the Safety of Fixed Platforms Located
on the Continental Shelf (SUA PROT) (in force);
 Protocol of 2005 to the Convention for the Suppression of Unlawful Acts against the Safety
of Maritime Navigation (SUA 2005) (in force 28 July 2010);
 Protocol of 2005 to the Protocol for the Suppression of Unlawful Acts against the Safety of
Fixed Platforms Located on the Continental Shelf (SUA PROT 2005) (in force 28 July 2010);
 The International COSPAS-SARSAT Programme Agreement (COS-SAR 1988) (in force);
 International Convention on Salvage, 1989 (SALVAGE 1989) (in force);
 International Convention on Oil Pollution Preparedness, Response and Co-operation, 1990,

as amended (OPRC 1990) (in force);
 Protocol on Preparedness, Response and Co-operation to Pollution Incidents by Hazardous

and Noxious Substances, 2000 (OPRC-HNS 2000) (in force);
 Torremolinos Protocol of 1993 relating to the Torremolinos International Convention for the
Safety of Fishing Vessels, 1977 (SFV PROT 1993) (not yet in force);
 International Convention on Liability and Compensation for Damage in connection with the
Carriage of Hazardous and Noxious Substances by Sea, 1996 (HNS 1996) (not yet in force);
 Protocol of 2010 to amend the International Convention on Liability and Compensation for
Damage in connection with the Carriage of Hazardous and Noxious Substances by Sea, 1996
(HNS PROT 2010) (opens for signature from 1 November 2010 to 31 October 2011);
 International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001
(BUNKERS 2001) (in force);
 International Convention on the Control of Harmful Anti-fouling Systems on Ships, 2001

(AFS 2001) (in force);
 International Convention for the Control and Management of Ships’ Ballast Water and
Sediments, 2004 (BWM 2004) (not yet in force);
 Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter,
1972, as amended (LC 1972) (in force);
 1996 Protocol to the Convention on the Prevention of Marine Pollution by Dumping of

Wastes and Other Matter, 1972 (LC PROT 1996) (in force);
 Nairobi International Convention on the Removal of Wrecks, 2007 (NAIROBI WRC 2007) (not
yet in force); and
31
 Hong Kong International Convention for the Safe and Environmentally Sound Recycling of
Ships, 2009 (HONG KONG SRC 2009) (not yet in force).
ooooooo
1. What is the purpose of IMO? Has the purpose been fulfilled?
2. What is the organizational setup of IMO?
3. Which committee appears to have more extensive area of coverage – explain few relevant
areas of work?
4. How can the States become members of the IMO?
5. What is ISPS? Describe the linkage of ISPS with the IMO conventions.
6. Write short notes on
a. SOLAS
b. MARPOL
c. STCW
d. BWM
e. CLC
f. SUA
g. TONNAGE 69
7. What has IMO done to reduce the time for acceptance/ratification of conventions?
8. How has the FAL convention assisted ports & shipping?
9. Explain why IMO & ILO needs to work hand in hand.
10. Which all conventions deal with the limitation of liability of ship-owner?
****************
32
INTERNATIONAL MARITIME ORGANIZATION
ORGCHART
IMO
ASSEMBLY COUNCIL
MARITIME MARINE LEGAL TECHNICAL FACILITATION

SAFETY ENVIRONMENT COMMITTEE COOPERATION COMMITTEE
COMMITTEE PROTECTION COMMITTEE
COMMITTEE
Sub-Committee Sub-Committee Sub-Committee Sub-Committee Sub-Committee Sub-Committee Sub-Committee

on Human on on Navigation, on Pollution on Ship Design on Ship on Carriage of
Element, Implementation Communication Prevention and and Systems & Cargoes and
Training & of IMO and Search & Response Construction Equipment Containers
Watch Keeping Instruments Rescue
URRENT SHIPPING ENVIRONMENT FIRST YEAR
LESSON 3
MARITIME ADMINISTRATION
1.0 INTRODUCTION:
1.1 A developing country’s participation in the world trade is very important in its economic
and social developments. Connected with this, participation in the World trade is dependent on
developing Country’s infrastructure, Human resource capability and administrative and logistics
structure for handling the trade transportation. Transport in our context is naturally the sea
transport. Maritime development of any country is directly dependant on proper understanding
of the maritime activities to be attended to and the respective capabilities created through
“Establishment and Performance of appropriate Maritime Administration”, to administer maritime
affairs.
1.2 An Administration as a part of the Government is a management entity with authority

granted by law. The officials within an administration are accountable individually and
collectively. In order to meet this responsibility effectively, there are procedures laid down again
as per law both subject specific with which the administration is concerned and the general rules
of Government.
1.3 The Maritime Administration essentially deals with matters concerned with maritime
sector and calls for specialized knowledge and skills of high order as the part of officials within
it. The structure and size of a Maritime administration varies with the size and nature of maritime
industry with which a country has to deal with.
1.4 There is a conceptual difference between ‘Maritime Administration’ and ‘Maritime Safety
Administration’. While ‘Maritime Safety Administration is concerned with safety and
environment protection governed by international conventions, ‘Maritime Administration’
envelops within it, the maritime safety administration and in addition also deals with
developmental aspects of national shipping to meet the demands of trade and protection of
cabotage.
2.0 General Principles of Maritime Administration:
2.1 Membership of IMO and active participation
2.1.1 The Central theme of IMO has been the development of global standards in shipping
towards safety towards safety and pollution prevention. IMO is only a common forum where
member governments get together and evolve these standards through detailed deliberations.
It is imperative that Maritime Administration of countries participation actively so that they are
fully aware of the needs in evaluation of standards so that their own efforts within their country
towards observance of the standards, fully conscious of their implications in the international
33
context. This is very important if a country is to take full advantage of the world trade within the
standardized framework. Participation also enables being aware of the thinking/view points of
the international community so that they can make efforts to protect their interests at the
evaluation stage itself of the standards. The participation gives additional knowledge and
experience to the officials of Maritime Administration through discussion and consultations
during sessions at due enables establishment of formal contacts leading to better understanding
and cooperation.
3.0 Enforcement/Implementation of International Instruments:
3.1 An upto date Merchant Shipping legislation is essential to maritime development and
effective enforcement of standards. The legislation is administered directly by the Maritime
Administration.
3.2 For the purpose of enforcement, two complimentary machineries are needed viz., Legal
and Administrative.
3.3 The Legal machinery of a Maritime Administration is achieved through its respective
National Merchant Shipping legislation which is basically the Municipal law built basically from
the International Maritime Conventions. This encompass not only its own National Ships but
also Foreign Ships which may be belonging to another state party to conventions but also
those states which are not party to conventions.
3.4 The administrative machinery is the management structure acquired as a result of

National Policy. The administrative machinery will acquire human resource according to the
tonnage it has and what is perceived in appropriate to the Government.
3.5 The following could be the role and functions of a Maritime Administration.
(i) Policy making, which will be a Political function of the Govt.

(ii) Advisory body, having a specialized knowledge of the subject.
(iii) A specialized executive arm of the Govt. within framework of rules and
procedures.
(iv) Implementation of Policy finally approved by the Govt.
(v) Regulatory.
(vi) Development/Promotional functions
3.6 The following could be the developmental and regulatory items:
(a) the appropriate analysis/assessment of the most suitable types and numbers of
ships required to meet the scale of development planned;
(b) development of the man-power needs of the Shipping Industry;
(c) development of ship-building and ship-repair capabilities;
(d) development of (marine) ancillary industries;
(e) assessment of the suitability of national ports for the intended ships proposals for
required development/improvement;
(f) development of the (marine) man-power needs of the ports; and
(g) Development of employment opportunities for national seafarers.
3.7 The regulatory functions are expected to ensure:
34
(a) safety of lives, ships and property; and
(b) Protection of the marine environment.
3.8 These in turn are expected to achieve:
(a) maximum efficiency in the operation of ships, with consequential economic

advantage;
(b) creation, development, protection and preservation of national maritime skills;
(c) conservation of national property;
(d) reduction in the maintenance costs of ships;
(e) conservation of foreign exchange;
(f) avoidance of disasters and consequential loss of (or damage to) lives, property,
marine resources and heavy expenditure;
(g) maintenance of marine insurance premia at an advantageous level;
(h) provision of overall impetus to marine development, and
(i) projection of the image of the country in very favourable light in the maritime world.
4.0 Brief History of the Indian Maritime Administration
4.1 Prior Independence Bombay had been the hub of shipping activities. Initially local
provincial states were dealing with shipping matters. Eventually ‘control’ duties were passed
over to centralized authority of the British India Government in 1929.
Earlier The British had introduced various regulations from 1799 to 1826 to control shipping
activities in Indian waters culminating in Bombay Regulation XX of 1827 passed by the
Governor General in Council. The Collector of Sea authorized to register, survey, transfer of
registry, transfer of ownership and issue passes to the vessels. It was made mandatory for the
vessels to obtain passes while moving from one port to another. With the growth of shipping,
British Indian Government introduced further system in Regulations, survey, safety of vessels at
sea etc.
Bombay Coasting Vessels Act XI of 1838 was promulgated, which mainly dealt with registration
of fishing vessels and harbour crafts. In addition to Coasting Vessels Act, the vessels could also
be registered under Indian Ports Act XV of 1908, the Sea Customs Act VIII of 1878 and Public
Conveyances Act VI of 1863. Bombay Coasting Vessels Act, 1838 was amended as Coasting
Vessels Act of 1838 when Master Attendant of Royal Indian Marine was substituted by Principal
Officer, Mercantile Marine Department in Bombay. The Act was applicable to Bombay
Presidency only & not throughout India.
Registration of all inland vessels of all types led to legislation of Inland Steam vessel’s Act (ISV
Act), 1917, (presently as IV Act, 1917). This Act was exhaustive and dealt with registration,
survey, construction, examination, mortgage, manning, safety equipment and so on. The large
ocean going vessels built in wood & operated on sails however used to be registered under
English Merchant Shipping Act of 1854. Bombay was one of the Indian ports of such registry. In
UK, the Chief Officer of Customs was the Registrar of Ships. The Commerce department in
India, was made responsible for the Safety of Shipping and for the functions of BOT of United
35
Kingdom. In UK, the Board Of Trade (BOT) controlled complete Shipping regulations, and
related activities.
It should be of interest to all concerned to know that Mercantile Marine Department, Mumbai still
maintains the 1st such Register in which registration of these vessels commenced in 1856.
Similarly, Inland Vessels Registers are also available with MMD, Mumbai from the year 1853.
The Master Attendant of Royal Indian Marine and the Registrar of Ships, Bombay registered its
first entry of “Dadabhoy Franjee Cama” O.No.30521 owned by a Parsi Merchant of Bombay in
1856. The first “iron built” vessel with sails was registered in Bombay on the 15th February
1866.
Indian MSA of 1923 passed on 2nd April for first time in India by the Legislative Department of
British India Government. By Act of 1928, Ship Surveyors were appointed at Bombay and
Calcutta to approve and certify the position of a disc on ship’s side indicating the load line and
any alterations thereof. By Act of 1930, the regulations for preventing collisions at sea and rules
as to signals of distress were introduced. In 1929, set up Mercantile Marine Departments and to
divide the coast of India into districts based on major ports and to place each district in charge
of Principal Officer. Accordingly, MMD’s were set up simultaneously in Calcutta, Rangoon,
Madras, Karachi, Bombay.
The three districts of Mercantile Marine Department of Mumbai, Kolkata and Chennai were
brought under a centralised controlling authority for setting up policy, rules under Ministry of
Shipping of Govt. of India in 1949, when the Directorate General of Shipping was formed. After
Independence, the Indian Government, consolidating the earlier amendments and alternations,
passed Indian Merchant Shipping Act of 1958.
4.2 The role of Indian Maritime Administration has been well brought out in the Indian
Merchant Shipping 1958. The Merchant Shipping Act is the legislation in India for maritime
development and effective enforcement of standards. The Directorate General of Shipping as
the executive arm fully administers this legislation. The intent and purposes of the Act itself is
brought out in its long title which reads as under:
4.3 “An act to foster the development and ensure the efficient maintenance of an Indian
Maritime Marine in a manner best suited to serve the National interest and for that purposes to
establish a National Shipping Board and to provide for the registration of Indian ships and
generally to amend and consolidate the law relating to Merchant Shipping.”
5.0 Administrative Frame Work :
5.1 ‘Merchant Shipping’ is a Central subject which is dealt by the Ministry of Surface
Transport. In order to deal with all Executive matters, the Directorate General of Shipping which
was set up in 1949 is placed under the administrative control of the Ministry Of Surface and
Transport (MOST). For all practical purposes, the Directorate General Shipping can be called on
the Maritime Administration of India. Apart from the fact that the general matters covered under
the role and functions above broadly, the specific subjects dealt by the Directorate General of
Shipping are as follows:
(i) Matters pertaining to Navigation;

(ii) Safety of Life and Ships at Sea;
36
(iii) Development of Indian Shipping;
(iv) Study of International Conventions on Maritime matters and further processing
for legislation;
(v) Training of Merchant Navy Personnel;
(vi) Regulation of Employment and Welfare of Seafarers;
(vii) Development of Sailing Vessel Industry;
(viii) Development of Coastal shipping.
5.2 India’s map showing MMD offices is at Annex.
5.3 ORGANISATION CHART OF DGS
5.4 The functions of some of the important offices under DGS are as follows:
(a) The Principal Officers (PO), Mercantile Marine Department (MMD) – The Mercantile
Marine Departments have been established at :-
(i) Kandla (with sub office in Jamnagar);

(ii) Mumbai (with sub-office in Goa and NOIDA);
(iii) Kochi (with sub office in Mangalore);
(iv) Chennai (with sub office in Tuticorin & Visakhapatnam);
(v) Kolkata (with sub office in Haldia & Port Blair).
The Principal Officers, in the discharge of their duties are concerned with matters
pertaining to registration of ships, Certificate of Officers, Passenger Ships, Safety,
Collisions and accidents, navigation, prevention of pollution of the sea by oil,
investigation and enquiries etc. Powers under Section 225(1), 229, 229A, 300, 301
and 306(1) concerning safety have also been delegated to them. Lately, the port
37
state control inspections have become very important and are being strictly enforced
by the MMDs.
(j) Shipping Masters - Shipping offices have been established at the port of Mumbai
and “Calcutta under Section (11) of the M.S. Act, 1958 in the charge of Shipping
Masters who discharge their duties and functions under the general control of D.G.
Shipping as per the provision of Section 11(2). Their duties, functions and powers
are derived from the provisions of Part VII of the Act, namely engagement and
discharge of seamen, treatment of distressed seamen, enquiries into disputes
between seamen and masters/ship owners relating to wages, ill-treatment, medical
examination, etc.
(k) Director Seaman’s Employment Offices: Seamen’s Employment Officers in charge of

a Director have been established at the ports of Mumbai and Calcutta under Section
12 of the M.S. Act, 1958. The Directors exercise their powers and discharge their
duties under the general control of the Director General of Shipping. These Directors
attend to the business assigned to them under Section 95 of the M.S. Act, 1958 and
perform their duties and discharge their powers in the manner provided for the rules
made under this section.
(l) Seamen’s Welfare Office: Seamen’s Welfare Officer has been appointed at Madras
under Section 13 of the M.S. Act, 1958, who has the following functions:
1. Supervise, inspect and co-ordinate the work of hostels, welfare clubs and other welfare
centers in operation in the port.
2. Keep in close contact with the seamen of ship which visit the port and to render such
assistance to them as is possible
3. Make provision for hostel accommodation boarding facilities and recreation and to
arrange for entertainment, medical aid, hospitalization and accommodation in
convalescent homes for seamen and for educational aid to seamen and their families.
4. To take charge and to keep in safe custody the personal effects of hospitalized seamen
at the port at which they are stationed.
5. To assist in the functioning of the Welfare Board, if any, and voluntary welfare
organizations in the port.
6. Specific functions under the Merchant Shipping Act, 1958, for the carrying out of which
he may be appointed.
7. Any other function as may be assigned to him from time to time by the Central
Government.
6.0 Training Institutes’ status :
6.1 India has a long maritime tradition with the provision of expert mariners who are
proficient in the skills in sea and expertise in sailing & familiarity with maritime affairs. From 80’s
traditional shipping or sailing that never required a lot of equipment or a plethora of knowledge
to today’s sophisticated vessels and associate equipment which requires variety of skills
amongst seafarers.
38
6.2 In reality, there is a drastic evolution the marine training & education sector during this
period. Let us take the case of sextant. In 80’s, in navigation/sailing sextant was very frequently
used. The position of the vessel in the high seas was fixed mainly by sextant. Then the
SATNAV (Satellite Navigation) came, which was replaced by Global Positioning System (GPS).
Presently, the sights are obsolete & position fixing of the vessel is mainly done by GPS on high
seas. In the coastal regions, the radar is still principal means of position fixing. Lately the A.I.S.,
V.D.R., LRIT & BNWAS, ECDIS have been added up as the bridge equipment.
6.3 Generally it has been noted that the gamut of knowledge being imparted to the seafarers
in their competency courses has a minor mismatch. In this case application of magnetism, gyro
& celestial navigation being reduced drastically in today’s syllabus. Indian seafarers are one of
the most sought after seafarers in the world, because of their knowledge and hardworking
abilities. Another very important factor which works in their favor is that they are available at
relatively lower costs as compared to their western counterparts.
6.4 The performance of Indian seafarers has culminated in India emerging as a major
manpower supplying nation to the world shipping. To be specific strength of Indian seafarers are
good knowledge of English & professional knowledge & thus the employers get good value for
money. It is true that of late, countries with smaller populations but having shorter maritime
tradition have out stripped us in the supply of personnel to the international shipping industry.
Hence, the Indian Maritime Education System could be enhanced and exploited to its fullest
potential to take marine training & education not only a world class education for the future
seafarers but would also take Indian education at a global platform.
6.5 This will happen only after the foreign maritime students are allowed to do courses &
appear for examinations here in India to get Indian Certificate Of Competency (COC). Earlier
there had been a selected list of colleges who had the necessary approval for marine training –
but from 1997 onwards – number of Institutions (basis conditions prescribed by DG in respect of
various training content) have been approved. A list may be seen at the DG Shipping website
which is updated regularly.
6.6 Currently, about 2,00,000 trained and skilled Indian Seafarers are working in the global
shipping industry. They are trained in various Maritime training institutes.
6.7 For superior seafarers, the competency courses are limited to only few institutes majority
of which are sincere & serious about the training barring some who might be tempted to
compromise for some reasons but a monitoring system is in place. As far as onboard ship
training is concerned, the Indian maritime administration has made placement by shipping
company as a compulsory requirement for admitting candidates for pre sea training. However,
the shipping companies are not able to provide enough training berths due to obvious reasons.
6.8 Apparently there is recession in the International & Indian shipping and hence the
maritime training sector is also passing through a rough patch. Indian maritime education,
training and examination system which is a growing recognition that in the increasingly
competitive workforce supply scenario in global shipping, excellence in maritime education and
training is a necessity.
6.9 Hence, the regulatory administrative might consider reforms in the regulatory processes
for maritime training to keep pace with the competitive requirements of international shipping.
India being an heir to an ancient maritime heritage has a special responsibility to maintain this
tradition and provide excellence in the field of trained manpower. To retain the lead, the Indian
39
marine administrative is taking concerted efforts to establish rigorous training & education
standards to keep path with international level.
6.10 Some Measures taken by DGS for quality education and safe employment.
1. e migrate System to control unsafe employment by fraudulent agents.

2. 85% of the candidates getting placement to complete their training on board ships
within one year after passing out from the MTIs.
3. Issue of CDC ( Seaman’s Identity Document) to all candidates after completion of 5
nos basic STCW courses.
4. Arranging various programmes and road shows to increase awareness.
5. Providing useful information on DGS website.
6.11 Indian Maritime University (IMU) : was established in 2008. It has all India jurisdiction
and Headquarter is at Chennai. The following existing seven Government Maritime training
institutes were merged with IMU :-
1. Marine Engineering Research Institute (MERI), Kolkata.

2. Marine Engineering Research Institute (MERI), Mumbai.
3. Lal Bahadur College of Advanced Maritime Studies and Research
(LBS CAMSAR), Mumbai
4. T.S. Chanakya, Nerul, Navi Mumbai.
5. National Maritime Academy (NMA), Chennai.
6. Indian Institute of Port Management (IIPM), Kolkata.
7. National Ship Design & Research Centre (NSDRC), Vizag.
Hence now it has campuses at Kolkata, Chennai, Mumbai, Navi Mumbai, Visakhapatnam,
Kochi. New Campus at Kandla was opened in 2011.
6.12 IMU offers BSc. in Nautical Science, B.Tech. in Marine Engineering, Diploma in Nautical
Science, LLM in Maritime Law, MBA in Ports & Shipping, MBA in Training & Logistics, Pre-Sea
& Post Sea Training. Apart from IMU and its campuses, the maritime training (short & long
courses) is imparted by more than 150 D.G. Shipping approved training Institutes located in
different part of the country.
6.13 India has a good & robust examination system for engineering and nautical officers fully
meeting the requirement of STCW Convention under the supervision of the respective Chief
Examiners at the DGS. Indian Certificate of Competency is highly respected. Indian certificate
is accepted by virtually all flags. This facilitates employment of Indian Seafarers on any country
ships.
7.0 Indian Merchant Shipping Act 1958 ( MSA 1958):
1. The MSA is the maritime legislation of India. The DGS, as the executive arm fully
administers this legislation. Merchant shipping comes under the Ministry of Shipping.
The DGS was set up in 1949 in order to deal with all executive matters. For practical
40
purposes, the DGS may be called the maritime administration of India. The MSA is
revised from time to time as per the requirement.
oooooo
1. What are the functions of the Indian Maritime Administration?

2. Describe the organizational structure of the Indian Maritime Administration?
3. Functions of Shipping Master, Principal Officer, MMD?
4. Explain merchant Shipping Act?
5. Draw Organogram of Indian Maritime administration?
6. Explain importance of Maritime administration for any country.
FURTHER RECOMMENDED READINGS
1. Merchant Shipping Act, 1958
2. The Law Relating to Merchant Shipping in India with Admiralty Jurisdiction by

B.C. Mitra, 2000.
3. Maritime Law of India – in international context – Bhandarkar Publications, 1998.
4. Ref. DGS, MMD website: www.dgship.gov.in & www.mmd.gov.in
41
Annex : India’s Map Showing MMD offices
42
DIRECTORATE GENERAL OF SHIPPING
DIRECTOR GENERAL OF SHIPPING
JOINT DIRECTOR GENERAL NAUTICAL ADVISOR CHIEF SURVEYOR CHIEF SHIP SURVEYOR
OF SHIPPING (Head of Nautical Wing) (Head of Marine Engg. Wing) (Head of Naval Arch. Wing)
(Head of Adm. Wing)
PRINCIPAL OFFICER PRINCIPAL OFFICER PRINCIPAL OFFICER PRINCIPAL OFFICER PRINCIPAL OFFICER
MMD MMD MMD MMD MMD
MUMBAI KOLKATA CHENNAI KOCHI KANDLA
DIRECTOR SHIPPING SHIPPING MASTER

EMPLOYMENT
OFFICE AUTONOMOUS
NATIONAL SHIPPING BOARD
SHIPPING PROVIDENT FUND OFFICE

43
LESSON 4
FLAG STATE CONTROL AND PORT STATE CONTROL
1.0 The need for enforcement of the Rules and Regulations which establish a legal
regime is basic. If these are defective, then the respect for law would tend to be undermined
and the legal regime would be confronted with irregularities and illegalities for which
remedies may become difficult. The legal regime, in such circumstances, would tend to
wither away. It is therefore necessary that lot of emphasis is placed on the enforcement of
law on which the regime comes to rest. This would depend on the nature, extent and limits of
the legal regime.
1.1 In the context of Merchant Shipping, the nation State is the subject of Maritime Law.
Though the origin and base of Merchant Shipping lie within the territory of a Sovereign State
which registers ships and gives the Flag, it is clear that in its operation Merchant Shipping is
very internationalized. The national vessels are more often than not ply in foreign waters and
thus become subject to foreign national jurisdiction of other States. Apart from the regime,
the objects of the law, namely the oceans by virtue of their universality of location and the
ships, by virtue of their operation, give rise to an international regime of Merchant Shipping
as against an exclusively national one. It is therefore necessary to look to an international
judicial machinery for the enforcement of Law governing Merchant Shipping.
1.2 However, the international community, though capable of producing International

Laws and Regulations towards global standards, can not exercise compulsory jurisdiction of
any Court or Tribunal in maritime matters and give and enforce decisions valid
internationally. Thus, if a regular international machinery for effective enforcement of the law
may not be practicable, the remedy lies in Municipal Legal Systems of the sovereign
maritime States enforcing the Laws which constitute the regime of Merchant Shipping.
2.0 Two difficulties are to be overcome in this regard.
2.1 Firstly, while the Municipal Law and its Courts of a state could certainly exercise
complete jurisdiction over its own ships and nationals the question that would arise is about
this jurisdiction being enforced on foreign trading ships to give international validity to the
Municipal Law.
2.2 Second question would be about the enforcement of International Law by Municipal
Courts.
3.0 As a State has sovereignty over its own territories only, the Legislation of a country is
primarily territorial. This leads to the general rule that the laws of a nation apply to all things
and acts within its territories including its waters and ships of its Flag on the high seas and
foreign private ships within its territorial waters. This confers jurisdiction on Municipal Courts
of the coastal State even in relation to ships flying foreign flags when in national or territorial
waters. Thus there is a need that this rule of International Law is clearly brought out in the
national Merchant Shipping Act.
3.1 Municipal Law can thus be effectively enforced by Municipal Courts not only in
relation to nationals and their ships but also in relation to foreign flag vessels when in
national or territorial waters. The Municipal judicial mechanism of a littoral State has,
44
therefore, a proper and effective lever for the enforcement of its national Law in relation to all
those who have dealings with it by way of trade and enter its territorial limits. This furnishes
the basis of a competent and effective jurisdiction.
3.2 The second difficulty of enforcing International Law through Municipal Courts,
appears to be that there can be piecemeal, partial enforcement as the enforcement is
obligatory only to those states that have ratified and accepted a Convention and excluding
those States that are not Parties to it. As there are bound to be some maritime States not
Parties to an International Convention, there would appear to be no chance of universality in
its application and enforcement.
4.0 This is however, not true of the maritime field because even if some states are
Parties to an International Convention on Merchant Shipping, and some states are not
signatories to it, the fact remains that ships of non parties would have to visit the Ports of
state parties to convention in their shipping operations and this may compel obedience to the
Law which state parties have recognized and adopted. It is because ships operate all over
the world, on the basis of the recognized principle of freedom of navigation, and at once
become the objects for effective enforcement of the International Conventions on Merchant
Shipping. It is true that stipulations in International Convention can empower those States
only that are Parties to the Treaty to enforce the provisions of ;the Conventions through
Municipal Courts. However, when a State enacts Municipal Laws for its own ships as well
as for foreign flags visiting its ports, it is not possible for it to discriminate between one flag
and another while applying its own Laws which happen to incorporate the Rules of an
International Convention. The Municipal Law has to be made applicable to all ships and the
distinction for purposes of separate treatment between Convention and Non-Convention
ships cannot normally be a part of any national legal system for fear of flag discrimination. In
the circumstances, when Non-Convention ships, i.e. those flying the flag of States not
Parties to the Convention, enter the ports of Contracting States, such vessels are quite often
expressly subjected to the National Law embodying the International Convention.
4.1 Thus, even if a State is not Party to an International Convention, it has to comply with
the Convention Regulation to become acceptable to members of the maritime community
with whom the Non-Contracting State has got to trade for reasons of sheer economics if
nothing else.
4.2 This aspect is well known and fully recognized and established in maritime circles
and several International Conventions on Merchant Shipping specifically provide an Article
on “Control” or “Regulation” by virtue of which the Contracting States are given powers to
enforce the provisions of the Convention in respect of Convention Ships” visiting their ports.
The ratifying States in turn enact Municipal
4.3 Legislation applicable to all ships visiting their ports thus enabling National Courts to
entertain such cases and to exercise jurisdiction by punishing all flags including the foreign
flag violating the applicable International Convention.
4.4 It may, therefore, be concluded here that for the regime of Merchant Shipping, the
enforcement machinery is almost exclusively municipal though the Law is largely based on
numerous International Convention which find a place in Municipal Legislation also.
5.0 General obligations of Flag States:
5.1 It is the responsibility of flag States to ensure that they establish and maintain
measures for the effective application and enforcement of the IMO instruments to which they
are a party. From the point of view of flag State implementation the most significant IMO
instruments are:
45
(1) the International Convention for Safety of Life at Sea 1974 (SOLAS 74) as
amended;
(2) the International Convention for the Prevention of Pollution from Ships, 1973 as
modified by the Protocol of 1978 relating thereto (MARPOL 73/78), as amended;
(3) the International Convention on Load Lines, 1966 (LL 66);
(4) the International Convention on Standards of Training, Certification and
Watchkeeping for Seafarers, 1978 (STCW 78), as amended;
(5) the Convention on the International Regulations for Preventing Collisions at
Sea, 1972, (COLREG 72), as amended; and
(6) the International Convention on Tonnage Measurement of Ships, 1969,
(Tonnage 69).
Regard should also be given to the United Nations Convention on the Law of the Sea
(UNCLOS).
5.2 Having accepted an instrument, a Government is bound by the provisions of the

instrument to promulgate laws in relation to the implementation of its provisions through
appropriate national legislation (e.g. SOLAS 74 Article 1(b)). The undertaking to give effect
to the provisions of the relevant instrument (e.g. SOLAS 74 1(a)) means that the
Government must have a functioning legislative body to enact laws for ships flying its flag
and to provide for their subsequent implementation and enforcement.
5.3 Under the provisions of the applicable conventions mentioned above, the flag
Administration is responsible for promulgating laws and regulations and for taking all other
steps necessary to give the applicable conventions full and complete effect, to ensure that,
from the point of view of safety of life and pollution prevention, a ship is fit for the service for
which it is intended and seafarers are qualified and fit for their duties. This is the basis for
‘Flag state control’.
5.4 In some cases it may be difficult for the Administration to exercise full and continuous
control over some ships entitled to fly the flag of its State, like those ships which do not
regularly call at a port of the flag State. The problem can be, has to be overcome by
appointing inspectors at foreign ports and/or authorizing recognized organizations to act on
behalf of the flag State Administration.
6.0 Legal framework :
6.1 A flag State should:
(A) take measures to ensure safety at sea and pollution prevention for ships entitled
to fly its flag with regard to:
1. the construction, equipment and management of ships;

2. the principles and rules with respect to the limits to which ships may be
loaded;
3. the prevention, reduction and control pollution of the marine environment and
the minimisation of the impact of accidental discharges of pollutants;
4. the manning of ships and the training of crews; and
5. the safety of navigation (including taking part in mandatory reporting and
routeing systems), maintenance of communications and prevention of
collisions;
(B) promulgate laws which permit effective jurisdiction and control in

administrative, technical and social matters over ships flying its flag and, in particular,
46
relating to the inspection of ships, safety and pollution prevention laws applying to
such ships and the making of associated regulations;
(C) promulgate laws providing the legal basis for the establishment of a registry
and maintain a register of ships flying its flag.
6.1.1 Enforcement :
(A) A flag State should:
1. provide for the enforcement of its national laws, including the associated
investigative and penalty processes;
2. take appropriate action against ships flying its flag that fail to comply with
applicable requirements;
3. ensure the availability of sufficient personnel with maritime and technical
expertise to carry out its flag State responsibilities, including:
(a) the development and enforcement of necessary national laws;

(b) the establishment and maintenance of minimum safe manning levels on
board ships flying its flag and provision of effective certification of
seafarers;
(c) inspection of ships flying its flag to ensure compliance with the
requirements of international instruments to which the flag State is a
Party;
(d) reporting of casualties and incidents as required by the respective
instruments; and
(e) investigation of circumstances following any detention of ships flying its
flag.
7.0 Responsibility of recognized organisations (ROs) acting on behalf of the

Administration :
7.1 When a flag State authorises third party organisations to act on its behalf, i.e. ROs,
any delegation of authority to these recognised organisations must be clearly recorded and
shall follow as a minimum the Guidelines for the Authorisation of Organisations acting on
behalf of the Administration (A.739(18)) and the Specifications on the Survey and
Certification Functions of ROs acting on behalf of the Administration (A.789(19)). The
requirements in SOLAS 74 Chapter I, Regulation 6(c) and the analogous requirements from
MARPOL 73/78 should be included in any delegation of authority. The flag State must also
take full responsibility for all safety and pollution prevention certificates issued under the
relevant instruments by itself or on its behalf.
8.0 Casualty and incident investigation :
8.1 A flag State should undertake prompt and thorough casualty and incident
investigations and submit relevant reports to IMO, as appropriate.
(1) Number of accidents, casualties and incidents reportable to IMO in terms of the
requirements of the international casualty database.
(2) Number of accidents involving personal injuries leading to absence from duty of 3
days or more on board ships flying the flag of the State concerned.
(3) Number of lives lost on its ships resulting from the operation of ships flying its
flag.
(4) Number of ships lost.
47
(5) Number of incidents of loss of pollutants into the sea according to MARPOL
73/78 reporting standards, including a measure of the seriousness of the
incidents.
(6) Number of ships detained by other States under port State control procedures
(7) Communication to IMO of information required in mandatory instruments.
8.2 With the coming into being of the Flag state implementation sub committee under
Maritime Safety Committee, the IMO has endorsed the view that there is a need to
concentrate on the implementation of the already adopted instruments rather than adoption
of any new instrument. The FSI sub committee has been debating on the ways and means
to ensure that there is better implementation by the Flag state administrations. There is also
an effort to bring into force a self assessment form by which the flag states can carry out self
improvement exercise.
9.0 Provision for Port State Control:
9.1 The fundamental aim of port state control is to eliminate sub-standard ships in order
to ensure IMO’s twin objectives of ‘Safer Ships and Cleaner Oceans’. The main theme is to
take corrective action in case of identifies sub-standard ships before they are allowed to sail
further. When ships do not call at home ports for considerable period of time, it is possible
that during a certain period of time, ships’ certificates may not have been renewed or
maintenance in general has suffered due to various reasons. Therefore, it is imperative that
ships must be inspected at various ports to ensure compliance with rule requirements as
regards safety, manning, maintenance, etc. ‘This control is termed as Port State Control’.
9.2 Regulation 19 of Chapter 1 and regulation 4 of Chapter XI of SOLAS 74 Article 21 of

Load Lines 66; Articles 5 and 6, Regulation 8A of Annex I, Regulation 15 of Annex II,
Regulation 8 of Annex III and Regulation 8 of Annex V of MARPOL 73/78; Article X of STCW
78; and Article 12 of Tonnage 69 provide for control procedures to be followed by a Party to
a relevant convention with regard to foreign ships visiting their port. The authorities of port
States have to effectively enforce these provisions for identifying deficiencies, if any, in such
ships which may render ships substandard and towards ensuring that remedial measures
are taken.
9.3 Article II(3) of the Protocol of 1978 to SOLAS 74, Article 5(4) of MARPOL 73/78, and
Article X(5) of STCW 78, provide that no more favourable treatment is to be given to the
ships of countries which are not Party to the Convention.
9.4 Port State Control (PSC) is an inspection regime for countries to inspect foreign-
registered ships in port other than those of the flag state and take action against ships that
are not in compliance. Such inspectors are called PSC officers, and are required to
investigate compliance with the requirements of international conventions, such
as SOLAS, MARPOL, STCW, and the MLC. Inspections can involve checking that the
vessel is manned and operated in compliance with applicable international law, and verifying
the competency of the ship's master and officers, and the ship's condition and equipment.
The conditions of and on a ship and its equipment and the certification of the crew and the
flag State’s minimum manning standard should be compatible with the aims of the provisions
of the conventions. Otherwise, the ship may have to be subjected to such restrictions as are
necessary to obtain a comparable level of safety and protection of the marine environment.
9.5 In accordance with the provisions of the applicable conventions, Parties may conduct
inspections of foreign ships in their ports with Port State Control Officers.
48
9.6 Such inspections may be based on the basis of :
1) the initiative of the Party;

2) the request of, or on the basis of, information regarding a ship provided by
another Party; or
3) information regarding a ship provided by a member of the crew, a professional
body, an association, a trade union or any other individual with an interest in the
safety of the ship, its crew and passengers, or the protection of the marine
environment.
9.7 When states entrust surveys and inspections of ships entitled to fly their own flag or
to recognized organizations, they should be made aware that the responsibility still lies with
the administration of the state for port State control, including boarding, inspection, remedial
action, and possible detention, only by officers duly authorized by the port State. The
authorization of these organizations may be by a general grant of authority or may be
specific on a case-by-case basis.
10.0 Port State Control MOUs

10.1 In 1978, a number of European countries agreed in The Hague on a memorandum
for the audit of labour conditions on board vessels as to whether they were in accordance
with the rules of the ILO. After the Amoco Cadiz sank that year, it was decided to also audit
safety and pollution practices. To this end, in 1982 fourteen European countries agreed on
the Paris Memorandum of Understanding on Port State Control (Paris MoU) to establish port
state control. Nowadays 26 European countries and Canada are signatories of Paris MoU.
PSC was a reaction to the failure of those flag states - especially flag of convenience states
— that had delegated their survey and certification responsibilities to classification societies.
10.2 Modeled on the Paris MOU, several other regional MOUs have been signed,
including the Tokyo MOU (Pacific Ocean), Acuerdo Latino or Acuerdo de Viña del Mar
(South and Central America), the Caribbean MOU, the Mediterranean MOU, the Indian
Ocean MOU, the Abuja MOU (West and Central Atlantic Africa), the Black Sea MOU, and
the Riyadh MOU (Persian Gulf).
10.3 Courses of action a PSCO may impose on a ship with deficiencies (in order of
ascending gravity) are:
1. Deficiencies can be rectified within 14 days for minor infractions.

2. Under specific conditions, deficiencies can be rectified when the ship arrives at the
next port.
3. Deficiencies must be rectified before the ship can depart the port.
4. Detention of the ship occurs.
10.4 Action Codes
The given timeframe for rectification of each deficiency is commonly given in a
coded form in the inspection report, called "action code". Following codes are
mainly used:
30 = Grounds for detention

17 = Master instructed to rectify deficiency before departure
16 = to be rectified within 14 days
15 = to be rectified at next port of call
19 = rectify major non-conformity before departure
18 = rectify non-conformity within 3 months
10 = deficiency rectified
49
40 = next port informed
47 = as in agreed class conditions
50 = Flag state / consul informed
70 = Classification society informed
80 = temporary repair.
10.5 Port state control, 2014 Various MOU black list record
.
Paris Tokyo US
Flag
Blacklist Blacklist Target List
Antigua/Barbuda ✗
Belize X X X
Bolivia X
Cambodia X X X
Comoros ✗
Cyprus ✗
Honduras ✗
North Korea ✗
Malta ✗
Moldova ✗
Mongolia ✗
Panama ✗
St.
✗ ✗
Vincent/Grenadines
Vanuatu ✗
ooooo
50
1. What is difference between Flag State and Port State control?
2. What are the obligations of a Flag State?
3. What is the meaning of Port State Control?
4. What is PSC MOUs ?
RECOMMENDED FOR FURTHER READING:
1. Merchant Shipping Act, 1958
2. Maritime Law of India – In International context – Bhandarkar Publications,

1998.
*****************
51
LESSON 5
SHIP VETTING
1.0 Introduction:
1.1 As per Oxford dictionary ‘to vet’ means to examine carefully and critically for faults or errors etc
and this word can be used in a large number of circumstances. The boom in the shipping industry in the
late 60s and 70s resulted in the presence of many ships and ship-owners especially in the liquid bulk
trade as oil always has been the source of energy for many countries.
1.2 The recession in late 70s and 80s led to many such owners taking measures for their survival. To
save costs; maintenance became minimal and in addition the certified or trained personnel were not
available that led to badly operated or managed ships. Consequently, the number of accidents/incidents
leading to loss/damage to ships, cargo, environment and injuries to personnel increased. This indicates
that the situation was unwanted. Further the increasing size of tankers, due to economics of scale,
presented a possibility of large quantity of cargo being available to cause damage to environment after a
casualty.
1.3 It might be interesting to note that when there is a casualty to a dry bulk or a break bulk ship the
damage is mostly restricted to the vessel and the cargo. But this situation is grossly heightened in impact
when a liquid bulk (either oil or a chemical) tanker faces a catastrophe. The oil majors therefore, realized
the need for ship vetting for ensuring that they only charter-in tankers of an acceptable standard. Hence
it is imperative that to operate efficiently and minimize liability, charterers and all industry players must
take all reasonable steps to ensure ships are being properly operated and are in a suitable condition to
complete a voyage safely.
2.0 EXXON VALDEZ incident:
2.1 Before discussing this issue we can take look at the EXXON VALDEZ oil spill case to understand
the deep impacts that have physical spread and long duration to return to normalcy (sometime over
decades).
2.2 The Exxon Valdez oil spill occurred in Prince William Sound, Alaska, on March 24, 1989,
when Exxon Valdez, an oil tanker bound for Long Beach, California, struck Prince William Sound's Bligh
Reef at 12:04 a.m. local time and spilled 11,000,000 to 38,000,000 gallons of crude oil over the next few
days. It is considered to be one of the most devastating human-caused environmental disasters.
The Valdez spill was the largest in US waters until the 2010 Deepwater Horizon oil spill, in terms of
volume released.
2.3 However, Prince William Sound's remote location, accessible only by helicopter, plane, or boat,
made government and industry response efforts difficult and severely taxed existing plans for response.
The region is a habitat for salmon, sea otters, seals and seabirds. The oil, originally extracted at
the Prudhoe Bay oil field, eventually covered 1,300 miles (2,100 km) of coastline, and 11,000 square
miles (28,000 square kilometers) of ocean.
2.4 According to official reports, the ship was carrying approximately 55 million US gallons
(210,000 m3) of oil, of which about 10.1 to 11 million US gallons (38,000 to 42,000 m3) were spilled into
the Prince William Sound. A figure of 11 million US gallons (42,000 m3) was a commonly accepted
estimate of the spill's volume and has been used by the State of Alaska's Exxon Valdez Oil Spill Trustee
Council, the National Oceanic and Atmospheric Administration (NOAA) and environmental groups such
as Greenpeace and the Sierra Club.
52
2.5 In 2006, a study done by the National Marine Fisheries Service in Juneau found that about 9.6
kilometers of shoreline around Prince William Sound was still affected by the spill, with 101.6 tonnes of
oil remaining in the area. However, in 2007 a NOAA study concluded that this contamination can
produce chronic low-level exposure, discourage subsistence where the contamination is heavy, and
decrease the "wilderness character" of the area. On March 24, 2014, the twenty-fifth anniversary of the
spill, NOAA scientists reported that some species seem to have recovered, with the sea otter the latest
creature yet to return to pre-spill numbers. Thus this narration gives the idea of the impacts as
mentioned before.
3.0 Initiatives of British Petroleum:
3.1 The British Petroleum (BP) was the first oil major to take initiation in this aspect. In 1987 BP
issued the following policy statement and established a Ship Vetting Service:
 The Company will endeavor to ensure that every bulk oil, chemical or liquid gas ship carrying a
BP owned cargo or berthing at a jetty owned or operated by BP meets internationally accepted
standards.
 To this end, no such vessel will be chartered or invited to berth before it has been vetted by an
appropriate, expert body within BP.
 No vessel may be accepted contrary to the vetting body’s advice unless the decision to accept is
taken by a nominated and responsible senior manager who is both aware of all safety and
commercial implications and also takes all reasonable steps in mitigation of the risks involved.
 In order to ensure that the vetting body provides the best possible service, information on
vessels berthing at BP jetties shall be exchanged between the vetting organization and the
jetties concerned.
3.2 In line with the above policy, BP started tanker inspections and kept records of such inspections
in its Ship Vetting Service cell. Any tanker before being chartered by BP or before visiting any of BP
terminal had to be cleared by this cell. Considering the above Exxon incident and keeping in mind the
increasing age of the world fleet and the development of management companies, many other oil
companies started ship vetting program on similar lines as the BP program.
4.0 Ship vetting process:
A step-by-step process of a vetting operation from the initial request until the final approval may be
described as follows:
4.1 Instruction is received to arrange a specific Oil Major Vetting Inspection.
4.2 The Superintendent and Vetting Manager agree whether it is possible to conduct Vetting
Inspection in the current port, and ensure that no other Inspections and/or Class Surveys will be carried
out concurrently. (Annual Class Survey may result in postponement while just a CMS or minor survey
will normally not interfere with a Vetting Inspection).
4.3 The Oil Major is approached with a request for inspection in a specific discharge port at an
approximate time. The request must include:
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- Vessel name
- Operation
- IMO number
- ETA
- Time in port
- Local agent contact reference
- Invoicing details and/or where to send the report
(Note that some Oil Major has internet request (BP), while other has special forms
(ChevronTexaco)).
4.4 Information to the vessel when attendance is confirmed, including a request to vessel to inform
the agent about the vetting inspector attendance.
4.5 Prior to the inspection, the Master must update and prepare a copy of the Vessel Particular
Questionnaire (VPQ) available to the inspector.
4.6 Prior to the inspection, the Master must prepare a copy of table 3.1.1 from chapter 3 in the
Vessel Inspection Questionnaire (VIQ).
4.7 The Vetting Inspection is conducted on board. During the inspection, the Inspector must always
be followed / guided by a senior officer (Master and/or Chief Officer on Deck, and Chief Engineer in the
Engine Room) and never be left alone, or allowed to communicate with a rating or junior officer unless a
senior officer is present. This is mainly to avoid misunderstandings, but also to avoid that items are
brought up later, which the Master is unaware of.
4.8 After an Inspection, there must always be a closing meeting with the Inspector, were the Master
can comment on each and every Observation that the Inspector have recorded. In case there is no time
for a closing meeting, the Master must insist that the Inspector note this fact in his final report, and the
Master must inform the Company accordingly.
4.9 The Master is encouraged to comment on each Observation at his earliest convenience after a
Vetting Inspection, and submit his comments to the Company.
4.10 Normally, the Operator’s Comments are not prepared until after the formal report is received
from the Oil Major. However, in some cases it may be worthwhile to be proactive and comment directly
to the Oil Major on basis of the notes left with the Master. This approach may be useful in case the
Inspector has detected a serious breach of regulations, or if it is a matter of a clear misunderstanding.
4.11 After the formal report from the Vetting Inspection is received in the office, the Operator’s
Comments are prepared. Prior to sending same to the Oil Major, the draft must be reviewed by the
Master and the Superintendent.
4.12 The Operator’s Comments are sent to the Oil Major as per instructions on the received report.
4.13 When the vessel is “approved” by the Oil Major, a statement is given that, “no further
information is required”. When this statement is received, we consider the vessel approved by the Oil
Major, and the case is closed; we must close all observations.
4.14 After the vessel is “approved”, the Vetting Inspection is registered in the Vetting database, and
a final copy of the Operator’s Comments shall be filed on board in a designated Vetting File.
But while accepting or rejecting a tanker following aspects are considered:
54
1. Ship Inspection – A detailed inspection of the tanker is conducted and comments,
recommendations, if any, are given to the owners. It is completely voluntary for the owners
to offer their vessel for inspection, however due to greater acceptability in the market most
owners opt for such inspection.
2. Owner Reputation
3. Owner Audit – The audit of the system and procedure in the office of the owner/manager.
4. Terminal Feedback
5. Charterer Feedback
6. Flag/Registration Changes – A vessel whose flag has been changed is looked into carefully.
7. Manning/Management Changes
8. Casualty data
9. Market Intelligence
5.0 Ship Inspection Report Exchange (SIRE) :
5.1 The Oil Companies International Marine Forum (OCIMF), which is an association of oil
companies, started a common program. This is called Ship Inspection Report Exchange (SIRE) program.
This is a readily accessible pool of technical information regarding the condition and operational
procedures of a tanker. Earlier same tanker was inspected by different oil companies. Now this
duplicate effort is avoided. The inputs into the system are by following two methods:
1. Vessel Inspection Questionnaire (VIQ):- All oil companies inspecting a tanker must submit the
information according to the questionnaire. This brings about uniformity in inspection by
different companies. The report does not indicate any overall tanker rating but gives objective
technical information.
2. Vessel Particular Questionnaire (VPQ):- This contains the information regarding particulars of a
tanker. This is not compulsory, though VIQ is compulsory if a tanker has to be in the SIRE
program.
5.2 Inspectors are asked to report on all vessel or operational deficiencies, and to detail both
positive and negative comments on the vessel's operations. Those deficiencies considered serious are
assessed as 'High Risk', and are identified as such in an Observations List that is left with the Vessel’s
master at the end of each inspection. Vessels with "HIGH RISK" findings cannot be used until all
observations have been closed-out and the vessel is found suitable for BP business by a V&C
Superintendent.
5.3 Normally each SIRE inspection report issued by an inspector is reviewed by a V&C
Superintendent before it is released to the ship’s managers via the SIRE programme. This process
ensures inspection standards are maintained and closely monitored. Following the successful close-out
of an inspection report by a V&C Superintendent, the ship owner will be advised of a period in which a
further operational inspection will not normally be required. BP Shipping employs the OCIMF SIRE
inspection format (VIQ) as the vessel inspection tool for all third party hydrocarbon carrying vessels.
5.4 The information from SIRE, i.e. the output, is available to OCIMF members, potential charterers,
other organizations and governmental bodies having a direct interest in tanker safety. The system
extensively uses the tools of information technology and only reports transmitted electronically are
accepted.
5.5 Though the system of ship vetting is extremely helpful to the industry, it should not be seen as a
replacement of port and flag state control. The statutory authorities must carry out their own
inspections to check the implementation of IMO Conventions and other statutory requirements. It must
be policed by governments and not by charterers.
55
5.6 In India various Oil Companies ( IOC, HPCL, ONGC, BCL etc.) have taken measures for starting a
system of vetting of tankers.
5.7 While we have discussed the vetting process and other related issues it might be necessary to
understand related important issues / information / database sources which are described herein:
6.0 SMART Vetting :
6.1 Whilst affecting all members, this issue particularly impacts the chemical parcel trade where, on
one voyage, a ship with more than one cargo and more than one customer the vessel could be required
to have more than one inspection, potentially with one inspection company accepting the vessel and
another not accepting the vessel; aspects regarding correct identification of root cause assessment and
corrective action following an inspection, as well as Conditions of Class are issues associated with this
aspect which being positively progressed.
7.0 Confidential Accident Reporting Platform (CARP) :
7.1 This work relates to establishing a platform of incidents and data that can point to the correct
root cause of the incident, which in addition to assisting with the above issue, also aims to establish an
industry standard as well as create a simple format of incident reporting and root cause analysis. This
information will be shared in confidence within INTERTANKO and ultimately alert Members to incidents
and preventative actions.
8.0 Benchmarking Databases
Several benchmarking databases are now available through the work of the committee:
• Lost Time Indicating Frequency Database and Total Recordable Case Frequency (LTiF & TRCF)
continues to be well used by members and provides assistance with Tanker Management & Self
Assessment (TMSA).
• Officer & Crew Retention Benchmarking Databases also continue to provide benefits.
• TMSA 2 Benchmarking database also continues to be well utilized by members
• A new database, “VIQ Benchmarking Database” is currently under BETA testing and is
available from 2010
9.0 Vetting Inspection Feedback Forms (VIFF) :
9.1 This useful feedback form was fully revised during 2009 and now records compliance with the
SIRE Inspector code of conduct, the process is currently under electronic production and will enable
confidential feedback to the SIRE Compliance Manager as well as INTERTANKO.
10.0 Port State Control Inspection Feedback Form(PSCIFF):
10.1 This useful feedback form was fully revised during 2010 and now records compliance with the
IMO Port State Control Inspector Code of Conduct, the process is currently under electronic production
and will enable confidential feedback to the relevant MOU as well as INTERTANKO
11.0 Vetting Clauses:
11.1 The vetting committee, in cooperation with the Documentary Committee, issued its revised
model INTERTANKO Vetting Clause in 2009 which aims to provide a balanced clause, satisfying both the
owner and charterer.
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12.0 Terminal Vetting Database (Upgrade):
12.1 INTERTANKO completed the upgrade of the Terminal Vetting Database (TVD), shifting this to a
new level of operation, requiring comments from terminals where low scores are received, with the aim
of enhancing safety at the terminals during the ship shore interface. The database is available to non
INTERTANKO members also.
The purpose of the database is to enable members to share their experience of various terminals and
berths and also to use the information in their dialogue with the terminals as users. If you already have
an account on Q88.com, then click the link “Register Account” and “Enter Terminal Vetting Database” to
enter the Terminal Vetting Database.
13.0 Oil Company Aide Memoir (OCAM):
13.1 The committee revised the OCAM during 2009, the purpose is for members to use it in their
daily business, for example when visiting oil companies or meeting their representatives, so that the
points that INTERTANKO members consider important are raised at every opportunity in day-to-day
dialogue.
14.0 Questionnaire 88 :
14.1 Questionnaire 88 (version 5) remains highly used within the industry and the committee retains
focus on this to ensure it remains fully up to date.
15.0 Detention statistics:
15.1 Annual detention statistic reports globally and those of INTERTANKO members in particular is
available for consultation.
16.0 A few definitions explained:
16.1 Vetting Inspection -is the common name on inspections conducted by an Oil Major, on oil
tanker intended for service, in order to verify that the tanker complies with the Oil Major’s
requirements. Chemical Distribution Institute (CDI) is required on other tankers, as chemical and gas
tankers.
16.2 Oil Major -is referring to the Oil Companies (members of OCIMF), but the term is also now used
on some of the Charterers and some of the Traders.
16.3 Observation is a recorded deficiency or remark noted by the Vetting Inspector, normally
referred to the VIQ, other OCIMF publications, or industry requirements.
16.4 Operator’s Comments - in this procedure means the Technical Manager’s response to the Oil
Major on Observations noted during the Vetting Inspection. The Operator’s Comments are mainly based
on comments from the Master, in response to the report from the Vetting Inspector. It is important to
note that the comments are a statement of the actions taken to rectify the Observation, or our intention
to rectify it in the future, and therefore we are obliged to comply with our own statement. (A statement
given, and not actually fulfilled will be considered a serious breach of trust between the two parties, and
may result in the vessel being placed on a hold by the Oil Major).
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16.5 OCIMF -Oil Companies International Marine Forum, is a voluntary association of oil companies
having an interest in the marine transportation and terminalling of oil products. OCIMF has issued
several publications with guidelines related to safety on tankers.
16.6 Screening is used to describe a process the Oil Major conducts prior each use of a vessel. In this
process, an Operator may be contacted for further information, or updated information in respect of
the Operator’s Comments.
16.7 SIRE -Ship Inspection Report, is a common database for vetting reports, operated by OCIMF and
available to the OCIMF members. It is in this system that an OCIMF member can review (screen) a
previous vetting report and evaluate a vessel’s suitability for service, without actually inspecting the
vessel.
16.8 Technical Hold is a terminology used if a vessel is not suitable for service by an Oil Major.
16.9 VPQ -Vessel Particular Questionnaire is an OCIMF questionnaire providing details of a vessel, its
equipment and certificate status. The VPQ must be electronically transferred to SIRE, and updated on a
regular basis, so that an OCIMF member has this available at any time. The on board copy must be
reviewed and updated prior to an inspection.
16.10 VIQ -Vessel Inspection Questionnaire is an OCIMF questionnaire identical to that used by an
Inspector during the Vetting Inspection. This is valuable information to the Master, as most questions
asked during the Vetting will be found here. (Table 3.1.1 Qualification of Officers) must be completed
prior to an inspection
16.11 Vetting Manager is a designated person in the office organization, responsible for coordinating,
arranging, and follow-up a vetting inspection.
oooooo
1. What is ship vetting?

2. Why is vetting necessary mostly for tankers?
3. What are the advantages of ship vetting?
4. Describe the process of ship vetting?
5. Explain how vetting standards have evolved?
6. Elaborate the role of INTERTANKO.
7. How can the charterers access the databases?
8. Describe the working of SIRE system.
9. Explain : a) VIQ b) VPQ c) CARP d) TVD e) OCAM
****************
58
LESSON 6
SHIP MANAGEMENT CONCEPT

1.0 Introduction:
1.1 When an owner involves in a ship-owning business; he is concerned about the profits and
returns. In most of the cases the ships; immediately after the construction from the shipyard is
handed over to the charterers – may be for long term or for short term. Even a day is important in
the life if the ships. The adage that the ship earns while she sails remains extremely valuable.
Looking at these the owners may like to hand over the ships to competent organisations that might
be capable of taking care of the vast array of the activities and management techniques that makes
the shipping venture viable and sustainable.
2.0 Background:
2.1 Last few decades had been a very turbulent phase in shipping when it went through
different cycles of ups and downs. But the innovations and entrepreneurship enabled the industry to
develop technically and strategically. The advent of larger vessels, especially oil tankers and bulk
carriers, along with the development in the containerization and cellular container vessels also
threw up management challenges.
2.2 In addition the number of crisis and the recessions has forced the traditional ship-owners to
look for means of reducing the operating costs. The owner also started looking for greater operating
flexibility, cheaper crews, reduced repair and maintenance expenditure etc. Adding to fleet on mid-
term charters and leaving similar number of ships on off-hire also demanded flexible management
systems. Moreover shipping business witnessed the arrival of a new breed of owners who are
normally categorized as bankers and financial institutions.
2.3 These events led to the development of ship management concept. Further, vessels were re-
flagged allowing for availability of cheaper seafarers being available for such vessels. Newer ship
registries, including some second registries, opened.
2.4 The ship management system allowed for shifting of the responsibilities of various ship
operations to specialized organizations.
3.0 Definition of Ship Management:
3.1 It can be defined as follows:
“The professional supply of one or a number of management services to a vessel supported

by a degree of shore-based supervision by a management company separate from that
vessel’s ownership.”
3.2 The definition of ship management concept is very broad based and can include almost all
functions of ship operations.
3.3 Ship management is, therefore, an “umbrella term” which usually encompasses manning,
technical management and commercial management.
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4.0 “Ship management service” includes:
(i) The supervision of the maintenance, survey and repair of ship;

(ii) Engagement or providing of crews;
(iii) Receiving the hire or freight charges on behalf of the owner;
(iv) Arrangements for loading and unloading;
(v) Providing for victualling or storing of ship;
(vi) Negotiating contracts for bunker fuel and lubricating oil;
(vii) payment, on behalf of the owner, of expenses incurred in providing services or in
relation to the management of ship;
(viii) The entry of ship in a protection or indemnity association;
(ix) Dealing with insurance, salvage and other claims;
(x) Arranging of insurance in relation to ship.
5.0 Essential qualities required for a ship management company:
5.1 The company must be capable of delivering reliable and efficient ship management
combined with optimum operational safety, thus maintaining the ship’s value.
5.2 Services must be so developed as to meet the complete needs of Ship Owners and
Operators. In addition to the core services of technical ship management and crew management,
there must be a provision of a comprehensive range of individually structured and value-added
services for a discerning client base.
5.3 It is necessary that the company may have a global presence and have global operations and
establish offices ( or highly dependable & quality conscious associates) around the world ensure that
they are in a position to deliver an all-encompassing, first-class service while maintaining close
relationships with clients with global spread.
5.4 The highest standards need to be maintained on the basis of highly developed procedures
and sophisticated systems, with advanced quality management which underpins every aspect of the
business, and a comprehensive range of accreditations demonstrating that in reality; the high
standards are maintained.
5.5 Close attention must be given to every aspect of recruiting and supporting personnel of all
categories. Effort should be to attract, train and retain the best quality personnel the industry can
offer. So far onboard operations are concerned there can be qualified and highly trained
multinational crews. Onshore, team should consist of equally strong team of experienced members
thus ensuring highest level of service and support.
5.6 It is quite logical that a company having experience of handling large fleet will add to the
experience and also to the technical database enabling management of every type of ship that are
offered for management.
6.0 These are described below:
6.1 Manning (Crewing):
6.1.1 This basically refers to the function of supplying of appropriately trained and certificated
officers/ratings for a vessel. This function includes selection/engagement, relief planning, training,
travel, welfare, and performance appraisal of the seafarers. The flag of a vessel is an important
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factor as it allows the flexibility in choosing the number of seafarers, their nationalities and,
therefore, their wages. The following activities may be included in the crew management:
 Provide a medical plan for seafarers and their families
 Monitor rest hours for each ship
 Train the cooks to a high standard
 Pay attention to food safety regulations
 Operate high standard of hygiene
 Implement the drugs & alcohol policy
 Maintain smoking regulations
 Maintain targets and objectives for continuous improvement
 Also ensure imbibing behavior based safety culture
6.2 Technical Management:
6.2.1 Basically technical management looks forward to the following:
 The allocated fleet of ships to come under the coverage of the technical management
team
 To ensure that these vessels are operated in a safe, reliable, efficient and compliant
fashion.
 The technical teams must monitor vessel performance and condition though regular
reporting from the ships and detailed on-board inspections. With the introduction of the
concepts like EEDI & EVDI by the IMO; there must be a robust Ship Energy Efficiency
Management Plan.
 To ensure that owners get the greatest value from their assets which are fully
maintained, surveyed and audited to comply with all national and international
legislation.
 There must be robust in house, integrated ship management software that should
include a modern Planned Maintenance System which might allow cost effective
planning of maintenance work and planning of spares purchases.
 Detailed running cost reports to be prepared to ensure that owners are kept fully
informed of the financial position, and regular meetings must be held with owners to
discuss both the technical and financial aspects of the vessel performance.
 This also allows the SMC to propose upgrades (which are now a demand by the IMO
conventions) to owners in order to comply with future legislation and maximize
efficiency.
 Management of the supply of stores and spares in a prompt and economic manner.
 The existence of a worldwide purchasing network will be ideal in terms of adding
leverage to the buying power to obtain significant discounts.
6.2.2 Summarizing; the above points will also cover the repair and maintenance aspects of a
vessel, supplies to be made to the vessel and consequentially includes budgeting, performance
monitoring and reporting, purchasing of stores, spares and other supplies, repairs and maintenance
supervision, surveys and certification, dry-docking, financial reporting etc. It is evident that the
technical management remains a key function and is extremely important requiring effective co-
operation between the ship and the shore. For effective operation of the ship, the ship-management
company usually employs experienced shore superintendents with a preference of the same
nationality as the senior officers on board ships.
6.3 Commercial Management:
6.3.1 Commercial Management encompasses the various modes of vessel’s employment on

behalf of the owner, either on time charter (bareboat) or voyage charter basis, from spot to period
61
employment. It also includes providing the three main groups of services rendered by a Company as
Managers to their clients. Thus in reality the function relates to the engagement of the vessel in the
most profitable manner that is likely to provide best returns on the investment by the owner. The
functions likely to be included are: chartering, operations, calculations, controls & accounting and
possibly banking, insurance placement and claims handling, sale and purchase etc.
6.4 Chartering:
6.4.1 Chartering is a core activity of any commercial management process which in accordance
with BIMCO’s Standard Ship Management Agreement “SHIPMAN 2009” comprises but is not limited
to “seeking and negotiating employment for the Vessel and the conclusion of charter parties or
other contracts relating to the employment of the Vessel”. Depending on owners’ requests the
company may provide for each ship voyage, single time charter (“time charter trip”) or where
required period employment.
6.4.1 This function is carried out by a designated nodal office for say any class e.g. the handy,
supra size and Panamax ships. The focus should be to secure the best employment available in order
to optimize earnings and to ensure positioning of tonnage to best take advantage of the constantly
changing market conditions. As a priority and for security, all prospective new business partners and
charterers are screened.
6.5 Operations
6.5.1 The Operational aspect of commercial management is a crucial part of the equation. This is
the area where money can be saved or lost and a voyage can be made more or less profitable.
Mostly the experienced ship operators ensure the safe and efficient handling of all the ships and the
smooth execution of all voyages.
6.5.2 The SMC will be in constant communication with the fleet’s competent ship’s Masters as
well as with charterers, brokers, port agents and bunker suppliers. The operators are made fully
aware of the vital importance from a commercial viewpoint of the effect their work will have; in the
context of the competitive environment within which shipping operates. As such there should be a
constant liaison with the commercial department to ensure that any/all possible problematic
situations which may arise are dealt with promptly and efficiently.
7.0 Calculations, controls & accounting:
7.1 It is impossible to imagine that modern model of commercial management could exist
without comprehensive system of such tools as voyage estimating and accounting, actual voyage
results calculations, full load calculation, advising shortest routes for the vessel, calculation of hire,
freights, demurrage and despatch monies from or due to the charterers of the Vessel, accounts
control, performance analyses in the form of time charter equivalent for any period required. These
tasks are normally carried out with the assistance of up-to-date marine IT solutions, ship
management and accounting software, as they are vital to the profitability of shipping business for
which the SMC exist.
7.2 The above described three functions can be given by a ship-owner together or individually.
He may retain commercial management and hire ship management companies for the other two
functions.
8.0 Regulatory Compliance:
8.1 The regulatory requirements with which vessel owners and operators are required to
comply are continuing to become more stringent, as well as increasing in overall number and
62
breadth of coverage. Significant legislation coming this way or on the horizon includes ballast water
treatment systems and Electronic Charts. The recently implemented Maritime Labour Convention
(MLC 2006) is facing fundamental difficulties due to varying interpretations of who is the ‘Ship-
owner’ by the flag administrations.
8.2 The self-management of new regulation continues to become more difficult, costly and
time-consuming for vessel owners and operators. It clearly makes sense to pass the responsibility
for regulatory compliance to experienced external ship managers who possess the necessary
specialist knowledge and compliance control systems.
8.3 In addition to international and national regulations, the SMC must also satisfy particular
compliance requirements of certain end-customer groups, notably the oil companies who are the
ultimate customers of some of the ship owning customers. The oil majors have strict internal and
external operational safety requirements that may go beyond industry requirements and regularly
undertake vessel inspections (known as “vetting”).
8.4 It requires framing of a series of detailed policy and procedure manuals which is set out for
employees and crew guiding as to how the Company should conduct its business on strict
accordance with all relevant international and national regulations and customers’ requirements.
9.0 Legal functions of the Ship Manager:
9.1 The Baltic and International Maritime Council (BIMCO) has developed a standard ship
manager agreement which is code named “SHIPMAN” 1998 which has now been replaced by 2009.
9.2 The above contract form (SHIPMAN) represents the ship manager as the agent and the ship-
owner as the principal. Therefore, general law of agency governs the relationship between the ship-
owner and ship manager.
9.3 Besides the BIMCO form, many management companies have their own forms having
clauses regarding the contract.
10.0 Vetting Functions:
10.1 Some ship management companies are taking care of the Oil Major vetting inspections every
year. The magnitude of this exposure has led to the development of a streamlined approach to the
inspection process. A number of experienced training Superintendents; often dedicated to crew
training and pre-vetting attend vessels; in advance; to assist ship’s staff with preparation and
execution of the inspection. The response to each inspection is required to be coordinated by a
vetting focal point at each regional office to ensure a sufficient level of assurance, incorporating root
cause analysis, is delivered consistently.
10.2 Data from each inspection is required to be collected centrally and analyzed for trends and
weaknesses and reviewed against a common Safety Management System. It is always required to
maintain close relationships with the Oil Majors to ensure understanding of their evolving
expectations and the SMS is kept up-to-date. These practices can (and the tanker sector culture of
compliance) be generally replicated in the dry bulk sector to sustain the commercial success.
11.0 Compensation to Ship Managers:
11.1 In this connection it is better to refer to the SHIPMAN clauses (a copy if the SHIPMAN 2009 is
annexed). There it is indicated that the budget is prepared in advance taking into account the yearly
expenditure and that is to be approved by the owners. Then there is a need of allocation of capital
expenditure on vessels and also the unforeseen expenditures [emergency repairs; additional
63
insurance premium; bunkers & provisions] as might come up. The yearly budgets are prepared &
submitted at least three months in advance.
11.2 The ship management companies prepare a budget (quotation) in most cases have following
considerations:
1. Types of management function needed to be covered.

2. Vessels particulars and characteristics – This is very important for technical management as fuel,
lubricant, repair, supply of spares etc. are involved.
3. Flag, union membership, number of compliment and any other special requirement of the owner.
Owner may like to have master and chief engineer from a particular nationality.
4. Area of operation – The trading range will affect the operating costs like fuel. It will
simultaneously affect repatriation costs of the crew.
11.3 Based on the above features and considering the types of management being offered, the
management company prepares the yearly and monthly budget for the vessel. This, along with their
management fee is submitted to the ship-owner.
12.0 Selection of a ship management company:
1. Quotations from Management Companies are taken into consideration.

2. The contract is carefully checked for identifying any unclear/potentially contentious
clauses.
3. The office of the management company is visited for getting a feel of its operations.
4. Various documentation, report forms and manuals are checked.
5. Available references are checked.
12.1 But these are very few points – and therefore the SHIPMAN 2009 (which is revised and
reviewed for many times and in the perspective of legal disputes) is used for creating an agreement.
Thus it is always useful to consult this for understanding the contexts. Copy of SHIPMAN 2009 is
enclosed at Annex-I.
oooooo
1. What is ship management
2. Why is ship management an important aspect of shipping business today?
3. What do ship management companies do?
4. What are the commercial aspects of a ship management company?
5. Discuss the challenges of a ship management company today.
6. What are the different types of management functions contracted by the ship-owner?
7. What type of contract is used in ship management business?
8. Discuss the difference between the SHIPMAN 2009 and SHIPMAN 1998.
FURTHER RECOMMENDED READINGS:

1. Ship Management by John Spruyt – Lloyd’s of London Press
2. Elements of Shipping by Alan E. Branch
3. Managing Ships by John Downard – Fairplay Publications.
4. Discussion on SHIPMAN 2009 and SHIPMAN 98 – BIMCO website provides soft copy
*************
64
LESSON 7
DEVELOPMENT OF INDIAN PORTS, SCENARIO & PRIVATISATION
1.0 Introduction to our Maritime Tradition:
1.1 It will be not be fair if we do not connect to our maritime tradition where ports in India and
ships built in India both played major roles in the growth of our economy, commerce and at the same
time enrich our culture. We can date this to third millennium BC when inhabitants of the Indus
Valley initiated maritime trading contact with Mesopotamia. The tradition was not restricted to sailing
into the sea only – it related to flourishing trade, building docks & also constructing sturdy sea going
vessels as well.
1.2 The world's first dock at Lothal (2400 BCE) was located away from the main current to avoid
deposition of silt. Modern oceanographers have observed that the Harappans must have perfect ideas
on tides in order to build such a dock on the shifting course of the Sabarmati in addition to
exemplary knowledge of hydrography and maritime engineering. Lothal was possibly the first dock
found in the world, equipped to berth and service ships. It is speculated that Lothal engineers studied
salinity of water and their effects on brick-built structures, since the walls are of kiln-burnt bricks. These
parameters also enabled them to select Lothal's location in the first place, as the Gulf of
Khambhat which has the highest tidal amplitude and ships can be sluiced through flow tides in the river
estuary.
1.3 The intensity of the business transaction is supported by Roman historian Strabo’s mention of
increase in Roman trade with India following the Roman annexation of Egypt. By the time
of Augustus up to 120 ships were setting sail every year from Myos-Hormos to India. As trade between
India and the Greco-Roman world increased, spices became the main import from India to the Western
world in preference to silk and other commodities. The Indian commercial connection with South East
Asia proved vital to the merchants of Arabia and Persia during the 7th–8th century when the carriage of
commodities overland to China was fraught with incidents of theft & robbery. Thus as a corollary we can
imagine how the port facilities grew up everywhere along the Indian coastline & matched such a large
volume of international trade.
1.4 With astronomers and mathematicians like Aryabhatta who was able to pinpoint exact shipping
routes to enable maritime trade between India and nations like China and with the help of visionary
kingdom like the Cholas and the Mauryas, Indian Maritime History did go places at a time when many
other nations were still grappling with the subject.
1.5 Mention must be made to the Chola dynasty (200—1279) which was at the peak of its influence
and power during the medieval period. http://en.wikipedia.org/wiki/Indian_maritime_history - cite_note-
kulke115-26The kingdoms along the east coast of India up to the river Ganges acknowledged their
suzerainty. Chola navies invaded and conquered Srivijaya (7th–13thcentury) in the Malay Archipelago.
The Cholas excelled in foreign trade and maritime activity, extending their influence overseas to China
and Southeast Asia. Towards the end of the 9th century, southern India had developed extensive
maritime and commercial activity (ports like Pugar, Masulipatnam, Puducherry, were the main port
centers. The Cholas, being in possession of parts of both the west and the east coasts of peninsular
India, were at the forefront of these ventures.
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1.6 This proves that India throughout the ages had very successfully managed to adapt and fully
utilize its vast coastline with numerous successful voyages across the world. It is often conjectured
that through these expeditions they inspired Europeans to sail out and discover the Indian soil with its
rich and varied culture. This inadvertent beacon also proved to be a costly mistake and from the time
the Europeans managed to colonize India, the Indian Maritime History began to change and European
influence slowly spread its influence on the Indian culture and technology.
1.7 We can generally point to the three European nations that had colonized India – the British, the
Portuguese and the French. And, even though efforts of the Portuguese and the French were limited to
just colonizing only a limited part of the nation, they nonetheless created their own fleet of naval vessels
thus vetoing the Indian naval fleet and adding yet another chapter to the Indian Maritime History.
1.8 While the Europeans were forming a grand alliance to get a firm footing on the Indian soil,
Chatrapati Shivaji (1674—1680) visualized the counter-strategy well & invested in forts, ports ( like
Ratnagiri, Jaigarh etc. which are being developed today into modern ports) & maintained a navy under
the charge of General Kanhoji Angre (1678—1729).The initial advances of the Portuguese were checked
by this navy, which also effectively relieved the traffic and commerce in India's west coast of Portuguese
threat. The Maratha navy also checked the English East India Company for a considerable period and
this act is fondly remembered by Indian maritime fraternity.
1.9 While the ships, both commercial & naval held sway over the Indian Ocean & beyond the
development of the port facilities evolved in tandem. The British Empire strategically created three
major ports viz. Calcutta, Bombay & Madras; but these were soon to be supplemented with seven other
major ports in the country. The figure now stands at twelve today. But this picture is incomplete unless
we mention about the conglomerate of 180 plus ports (of different sizes; some even bigger are than a
Major Port) in the country which dot the Indian coastline. The Shipping Ministry puts an estimate of
required cargo handling capacity in 2020 to about three billion tons.
1.10 We must understand that all these activities like international trade, commercial shipping,
ports, shipbuilding and navy are closely synergistic in nature & development in one area creates a
booster for the other. Studying the development of Indian Ports with this focus will certainly prove to be
exciting.
2.0 Post Independence developments:
2.1 At the time of independence India was left with five major ports at Bombay, Calcutta, Madras,
Cochin and Visakhapatnam. With the loss of Karachi to Pakistan, the need was felt to have an
alternative port as also to provide another deep draft port between Bombay and Cochin. A committee
was set up to examine the locations of new ports. The Kasturbhai Lalbhai Committee recommended
Malpe near Mangalore and Kandla as the two sites. A subsequent committee, the Intermediate Port
Development Committee, however shifted the location from Malpe to Mangalore. The construction of
Kandla port was also recommended in 1948 by the West Coast Major Port Development Committee.
2.2 Work on Kandla started soon after in 1949 and it became the sixth major port in 1955. It serves
as the gateway for the entire hinterland comprising the whole of Rajasthan, Punjab and Jammu &
Kashmir for international trade and commerce. It is of interest to note that even the State of Assam at
the eastern extreme one time served as a hinterland to Kandla, the transport of tea and jute for export
being found competitive over the meter gauge, compared to export through Calcutta port.
2.3 Mormugao developed by the Portuguese was declared a major port after its liberation in 1963.
Paradip in Orissa came up in 1966. New Managalore took a long time to materialise and joined as major
port in 1974 along with Tuticorin.
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2.4 The following are listed for better clarity:
Serial Port Name Year of

commissioning
1 Kolkata (Calcutta) 1870
2 Mumbai (Bombay) 1875
3 Chennai (Madras) 1877
4 Cochin (Kochi) 1930
5 Vizag 1933
6 Kandla 1955
7 Mormugao 1963
8 Paradip 1966
9 New Mangalore 1974
10 Tuticorin (V.O.Chidambaranar) 1974
11 Nhava Sheva ( JNPT) 1989
12 Ennore (Kamarajar Port Ltd) 2000
2.5. GoI has planned to develop three more ports as 13th, 14th and 15th Major ports. These are
Dahanu in Maharashtra, Colachel in Tamilnadu and Sagar in West Bengal.
3.0 Classification and management of Indian ports:
3.1 In Indian ports (Government Operated Ports) have been classified as: (a) Major ports; (b)
Intermediate ports; and (c) Minor ports.
3.2 According to article 364(2) of the Indian Constitution “Major port means a port declared to be a
major port by or under any law made by Parliament or an existing law and includes all areas for the time
being included within the limits of such port."
3.3 A port is declared as major port under Section 3 (8) of the Indian Ports Act 1908. The Article
does not lay down specific criteria which will entitle a port to be regarded as a major port except that a
port should be so declared by the Union Government, which becomes directly responsible for its
development. It means any port which the Central Government may by notification in the official
gazette declare to be a major port. Thus, the entire port of Cochin comprised within the territories of
the state of Madras and Travancore-Cochin was declared to be a major port on 8th January 1952.
Similarly the port of Paradip was declared as a major port in 1966.
3.4 According to the Ports (Technical) Committee of India,1948, the facilities at a major port should
include an all weather sheltered harbour, modern berths which can take alongside ships with over 9
meter draft, as also direct road and rail to the hinterland. Other ports, called intermediate and minor,
fall under the Concurrent List, that is, List III in the Seventh Schedule of the Constitution of India and are
administratively under the control of the State Governments, the Centre providing technical assistance
whenever required.
3.5 But looking at the total volume and the quantum of cargo and the draft indicated for
classification of a Major or Intermediate port; it may seem to be very insignificant today – but if you look
at the ship sizes used in international trade between 1950-s & 1960-s; the draft of 9.0 meter was quite
adequate.
3.6 The planning of major ports used to be done by the Ministry of Shipping on the basis of plans
drawn up by port trusts and in consultation with other organisations like the NITI Aayog, National
Development Council, Ministry of Commerce, Ministry of Finance, etc.
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3.7 The Major Port Trusts Act 1963 empowers the Central Government to constitute a Board of
Trustees for each major port. Board of Trustees in a port is responsible for the management of port's
property, control, maintenance and operations at the harbour. It is also empowered to levy dues on
cargo; control pilot services, conservancy, lighthouses, signal stations and regulate harbour traffic;
provide and maintain launches, barges, tugs etc; improve the harbour, prevent pollution and make
regulations governing operating and maintenance of the port and associated facilities. The Board of
Trustees comprises of a Chairman and a Deputy Chairman, if necessary, appointed by the Centre and
not more than 19 other trustees in case of Mumbai, Calcutta and Chennai ports and not more than 17
for the remaining ports. The trustees represent major interests like dock labour, mercantile marine,
customs, state government, defence services, Indian railways, ship owners of sailing vessels and
shippers/importers (trade). A representative of the Ministry of Shipping is also being appointed since
1980.
3.8 The relevant portion of the Act is reproduced below:
Sec 3: Constitution of Board of Trustees.- (1) With effect from such date as may be specified by
notification in the Official Gazette, the Central Government shall cause to be constituted in respect of
any major port a Board of Trustees to be called the Board of Trustees of that port, which shall consist of
the following Trustees, namely:-
(a) A Chairman to be appointed by the Central Government;

(b) One Deputy Chairman or more, as the Central Government may deem fit to appoint;
(c) Not more than nineteen persons in the case of each of the ports of Bombay, Calcutta and
Madras and not more than seventeen persons in the case of any other port who shall consist of-
(i) Such number of persons, as the Central Government may, from time to time, by notification
in the Official Gazette, specify, to be appointed by that Government from amongst persons who
are in its opinion capable of representing any one or more of such of the following interests as
may be specified in the notification, namely:-
(1) Labour employed in the port;

(2) The Mercantile Marine Department;
(3) The Customs Department.
(4) The Government of the State in which the port is situated;
(5) The Defence Services;
(6) The Indian Railways; and
(7) Such other interests as, in the opinion of the Central Government, ought to be represented
on the Board.
3.9 In 2011 the Ministry of Shipping has prepared a draft of a proposed new Ports Act amalgamating
the existing two statutes governing the sector into a single piece of legislation. After a thorough review,
the Ministry has proposed a new Act, "Indian Ports (Consolidated) Act, 2010" titled as “THE INDIAN
PORTS BILL 2011”. This was circulated for comments from industry. The merger of two acts is done with
a view to simplify and streamline ports regulation in India.
3.10 At present, the Indian Ports Act, 1908, applies to all ports in the country and the Major Ports
Trust Act, 1963, applies solely to the 12 major ports. The Shipping Ministry wants one comprehensive
Act to regulate the sector. The ministry has also proposed re-jigging the Tariff Authority for Major Ports
(TAMP). TAMP was constituted in April, 1997, as an independent authority -- the Port Regulatory
Authority -- to regulate all tariffs, both vessel-related and cargo-related, and rates for the lease of
properties in respect of major port trusts and the private operators located therein.
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3.11 The Major Ports Trust Act, 1963, was amended by the Port Laws (Amendment) Act, 1997, to
constitute the TAMP. Minor ports are outside the ambit of TAMP. Once the major ports are converted
from trusts into corporate entities, they might go out of the ambit of the Major Port Trusts Act, 1963.
Only the Ennore Port (Kamarajar Port Ltd) is a corporatized port today. Ministry is keen on corporatizing
other ports in terms of various recommendations of World Bank and other international consultants. As
many issues are involved – it may take some time to finally transform the ports.
3.12 Following is a current picture showing different port locations in the country:
4.0 National objectives of ports:
4.1 Immediately after India became free the major ports were mandated to provide adequate ship
to shore and port facilities to handle import and export trade expeditiously and economically. Thus to
provide efficient ship & cargo handling and storage services the ports had to arrange for adequate depth
at berths, pilotage, harbour crafts and suitable mechanized cargo handling appliances, workers etc., in a
synchronized manner in order to ensure quick turn-round of ships. As a matter of fact the ports were
not much different from the other international port practices where only ship and cargo handling was
paramount.
4.2 But Indian seaports are today more than just government owned public utilities; they are
indeed, focal points of convergence for several contending and competing business interests from
shipping lines, port authorities and individual terminal operators to freight forwarders and inland
logistics agencies; not to leave out the shippers (the exporter-importer fraternity) whose cargo is what is
being ultimately transported. They represent what may rightly be considered a complex mosaic of
contractual and business relationships, which in turn give rise to maze of regulatory and operating
institutions and procedures and ever-changing rules of dynamic interplay.
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4.3 Under the impact of first-generation port reforms, initiated since the mid-nineties, following
economic liberalization and globalization policies, the entire gamut of existing institutional
arrangements and underlying transactional and business processes in the port sector have been
undergoing a profound transformation. Consequently, conventional port and terminal ownership,
management and regulatory frameworks guiding the port operations are undergoing changes in line
with broader process of functional evolution of ports and global maritime trade.
4.4 The critical changes underway in the port sector have many facets which demand a
comprehensive review from contemporary perspective. It is also a fact that Indian port projects are now
increasingly becoming key destinations for strategic business investments and are increasingly becoming
key links in the rapidly expanding global trade; understanding of the working of the port sector becomes
an urgent and critical task both from the public policy angle and strategic business decisions.
4.5 There are other authorities also at the port like Port Health Officer, Customs, MMD (Mercantile
Marine Department), Coast Guard, Immigration and also Dock Labour Board. The Port Health Officer is
responsible for the providing “free pratique” to all ships entering the port so as to prevent the berthing
of a ship where either passengers or crew could be suffering from a communicable disease. Customs
jointly control the port operations in terms of the powers vested upon them in Customs Act 1962. The
Customs administer and collect revenue from duties levied on various cargos passing through the port.
The port authorities can land and ship goods from places specified within the port area duly approved
by the customs. The goods landed must await appraisal by the customs staff in accordance with the laid
down procedures before clearance.
4.6 The Mercantile Marine Department of the Directorate General of Shipping has a role to play in
respect of ships calling at ports. It administers various merchant shipping laws and rules relating to the
registration and tonnage measurement and crew accommodation of ships, survey of loadline and safety
of ships, inspection of statutory equipment including life-saving appliances, fire fighting appliances,
wireless equipments, certificates of competency of the seafarers, etc. They also carry out inspections of
the ships under Port State Control or Flag State Control.
4.7 The Dock Labour Board was created through decasualized workers and to provide structured
operations on board vessels. But many commercial and operational issues cropped up during 1970 to
2000 and thus with reviewing of performance and cost factors – a general policy has been adopted by
the port trusts to merge the DLB with the port employees with the objective of providing one stop
support system.
5.0 Intermediate and minor ports:
5.1 According to the Port (Technical) Committee, ports with an annual cargo tonnage below one
lakh tonnes but not less than 1500 tonnes or which have an importance for any reason such as
passenger amenities, customs or naval requirements are classified as intermediate ports and the rest as
minor ports. At these ports ships may anchor in stream and cargo between them and the shore may be
handled by boats, lighters or barges. All the intermediate and minor ports are under the direct
administrative control of the State Governments. As the thrust of development has hitherto been on
major ports, the smaller ports were left to remain by and large undeveloped.
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Some prominent Intermediate or Minor ports operated by State Govt. or Private party
Sr. Names of the ports Name of the State
No
1 Jakahu, Mandvi,Salaya, Okha, Porbandar,Muldwarka, Gujarat
Veraval,Jafrabad,Sikka, Bedi, Bhavnagar, Navalakhi.
2 Dighi,Revdanda,Dharamtar,Ratnagiri,Redi, Maharashtra
3 Karwar,Belikeri Karnataka
4 Kasaragod, Calicut,Allepy Kerala
5 Nagapattanam, Coddalore Tamilnadu
6 Pondicherry Pondicherry
7 Kakinada Andhrapradesh
8 Gopalpur Orissa
9 Haldia West Bengal
5.2 The Commission on Major Ports, in their report (June 1970), placed the number of working
minor and intermediate ports at 168 comprising 23 intermediate ports and all the rest as minor ports.
The number of intermediate/minor ports in various states has now increased to 187. A proper list
collated by the Ministry of Shipping is enclosed at Annex-I to this chapter.
5.3 Even though the responsibility of the development of minor ports essentially vests in the
maritime State Governments, the Centre is involved in development of minor ports. The Government of
India renders technical assistance to the State Governments for their development and gives long term
financial assistance.
5.4 To have an integrated approach for the development of both Major and Non-Major Ports, the
Maritime States Development Council (MSDC) was constituted in May, 1997 under the Chairmanship of
the Minister of Shipping. The Minister in-charge of Ports in all Maritime States, Union Territories of
Pondicherry, Andaman’s & Nicobar Administration, Daman & Diu and Lakshadweep Islands are its
members. The deliberations and decisions of the MSDC provide the institutional framework for
coordinated development of Major and Non-Major Ports. Till August 2015 sixteen meetings of MSDC
have been held. The minutes of the meeting of the MSDC are available in the Ministry of Shipping
website. The Council functions as a policy coordinating body between the Central Government and the
Maritime States.
6.0 Evolving legislation for the Indian ports:
6.1 The Commission of Calcutta Port came into being with the passing of Act V of 1870, effective
from October 17, 1870; the Bombay Port Trust was created by the Bombay Port Trust Act, 1873 and the
Madras Harbour Act was passed in 1886 and the management of the port was transferred to a Board of
Trustees.
6.2 The Indian Ports Act, 1908, was passed by the Indian Legislature on 18th December, 1908,
consolidating previous acts beginning with the Indian Ports Act, 1889. Besides; there is Convention and
Statute on International Regime of Maritime Ports, 1923, which India accepted being a part of the
British Empire. After India's independence and with emergence of new major ports, the Major Port
Trusts Act, 1963, was passed by the Indian Parliament on 16th October, 1963, with a view to providing
for the constitution of port authorities for certain major ports and to vest the administration, control
and management of such ports in port authorities. The major Port Trust Act 1963 was further amended
in 1974 and 1982. The Act is now made applicable to the Major Ports of Bombay, Calcutta, and Madras
vide G.S.R (E) of 1st February 1975. Meanwhile the Major Port Trust act has been amended a few times;
though in bits and pieces – the last one being in 1996. The Maritime States have also enacted their
regulations like Gujarat Maritime Board Act 1981, Maharashtra Maritime Board Act of 1997, Tamilnadu
Maritime Board Act 1995, Karnataka Maritime Board Act 2011; etc; which are mostly in line with the
provisions of the Indian Port Act 1908 and Major Port Act 1963.
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6.3 Draft Ports Regulatory Authority Bill, 2011 has been proposed to provide for the establishment
of Regulatory Authorities to regulate rates for the facilities and services provided at the ports and to
monitor the performance standards of port facilities and services and for matters connected therewith
or incidental thereto. MOS intends to announce the new tariff guidelines for Major Ports in the country,
which would provide autonomy to the operators to fix market-driven tariff; which could create a level-
playing field for both major and non-major ports in the country. It may be noted here that the Shipping
Ministry had been long contemplating to come up with new set of tariff guidelines in response to strong
feed-backs received from the stakeholders that the existing Tariff Authority for Major Ports (TAMP)s
regulations are detrimental to the growth of the sector. Besides, Inter-Ministerial Task Force on Draft
Port Regulatory Authority Bill also suggested that the Ministry of Shipping should notify broad guidelines
and rules in line with the international best practices.
6.4 It is worth mentioning here that the traffic at non-major ports has grown faster than the traffic
at Major Ports. Over the past five years, the traffic at Major Ports has grown by a CAGR of 2.73% while
the traffic at non-major ports has grown at a CAGR of 10.01%.
6.5 According to the draft Port Regulatory Authority Bill, it seeks to regulate tariff rates at all major
and non-major ports and to monitor performance standards of facilities and services offered at all ports
in India. As per the draft Bill, a Major Ports Regulatory Authority (MPRA) would subsume and replace the
Tariff Authority for Major Ports (TAMP) while State Port Regulatory Authorities (SPRAs) would be
created to regulate tariffs in non-major ports. This initiative is being strongly resisted by State
Governments who are presently independent of Central Govt. for development & regulation of Minor
Port under concurrence list.
6.6 TAMP was constituted in April, 1997 to provide for an independent authority – the Port
Regulatory Authority – to regulate all tariffs, both vessel-related and cargo-related and the rates for the
lease of properties in respect of major port trusts and the private operators located therein. Another
major move by the MOS is the draft Captive Port Policy which is discussed in the following paragraphs.
7.0 As of today there are a number of maritime which has been mentioned before. The Boards are
mostly having their authority to control and permit provision of different services to the port users.
These Acts are drafted in line with the Indian Ports Act and they also have many resemblances with the
Major Port Act. They provide clarity in defining the various topics like: port/ port approaches/ pier/
owner / master / high water mark/ board / jurisdiction & so on. The constitution of the board is also
elaborated with the identification of the status of the Members.
An extract from the Maharashtra Maritime Board Act 1997: The Board may, subject to any other law
for the time being in force, execute such works, within or without the limits of port and works and
provide such appliances as it may deem necessary or expedient.
7.1 Such works and appliances may include,-

(a) wharves, quays, docks, stages, jetties, piers, place of anchorage and other works within the
port or port approaches or on the foreshore of the port or port approaches in the State, with all
such convenient arches, drains, landing places, stairs, fences, roads, bridges, tunnels and
approaches, and buildings required for the residence of the employees of the Board as the
Board may consider necessary;
(b) Buses, locomotives, rolling stock, sheds, hotels, warehouses and other accommodation for
passengers and goods and other appliances for carrying passengers and for conveying, receiving
and storing goods landed, or to be shipped or otherwise;
(c) Moorings and cranes, scales and all other necessary means and appliances for loading and
unloading of vessels;
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(d) Reclaiming, excavating, enclosing and raising any part of the foreshore of the port or port
approaches which may be necessary for the execution of the works authorized by this Act or
otherwise for the purposes of this Act ;
(e) Such breakwaters and other works as may be expedient for protection of the port;
(f) Dredgers and other machines for cleaning, widening, deepening and improving any portion of
the port or port approaches or of the foreshore of the port or port approaches and so on.
8.0 Traffic scenario of major ports:
8.1 In the year 2017-18, 1133.09 million tons (mt) of cargo were handled at Indian port. The major
ports handled 674.76mt, while non major ports handled 458.33 mt. The absolute volume in major ports
came down, while it went up in non major ports. Since last 10 years, Sikka, a non major port in Gujarat,
has been the largest port by cargo volume, surpassing Kandla, a major port in Gujarat, that year. It has
essentially been a captive port to the Reliance refinery. Mundra, largest private port, another non major
port in Gujarat, is the second largest port, surpassing Kandla. The Gujarat state has 42 ports of which 41
are non major, while Kandla is the sole major port.
8.2 The average turnaround time improved to 3.44 days in FY17 from 4.01 days in FY15
8.3 Details of traffic handled by the major ports during the financial year FY 2008 to 2018 is shown
below:
8.4 The composition of traffic handled by major ports is also of interest and importance as it is a key
factor for planning port facilities and capacity building.
9.0 Capacity Utilisation in Major Ports :
9.1 The development of non-major ports due to growing private-sector participation has led to a
shift of cargo traffic from major ports, that operate at above-optimum capacity, to non-major ports.
Non major ports handled total of 485.33 MMT of cargo in FY17. Cargo traffic has expanded at a CAGR of
10.01 per cent during FY07–17.
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The addition of handling capacity has gradually outpaced cargo traffic at ports, capacity utilization at
major ports has decreased; it declined from 98 per cent in FY08 to 60 per cent in FY17; this trend is
expected to continue for several reasons.
9.2 The high rate of capacity addition due to private sector investments and moderate traffic
growth adversely affected the capacity utilisation of non-major ports in last many years. Capacity
utilisation in future years is expected to decline.
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10.0 Traffic projection:
10.1 The economy reforms and the policies of deregulation, liberalization and globalization launched
by the Government of India have undoubtedly led to the revival of robust economic growth.
Consequently there is tremendous surge in port traffic.
11.0 Consolidated perspective plan of major ports
11.1 Increasing trade activities and private participation in port infrastructure set to support port
infrastructure activity. The Maritime Agenda 2010-20 has a 2020 target of 3,130 MT of port capacity. India
has 12 major ports. Under the National Perspective Plan for Sagarmala, six new mega ports will be
developed in the country. By FY17, cargo capacity at major ports grew to 1,065 MMT from 965.36 in
FY16. As of December 2017, major ports had a capacity of 1,359 MMT.
12.0 INDIA: Port Sector Development- Possibilities for Accelerating Growth - World Bank 2013
assessment:
12.1 The analysis contained in this report shows that four traffic segments viz., containers, coal, iron
ore and petroleum, make up 80% of India‘s port traffic. The containers have quadrupled as a
proportion of tonnage from 4 percent to 16 percent since 1992, while coal tonnage increased from 13 to
15 percent of the total. By contrast, Petroleum, Oil and Lubricants (POL) tonnage declined from 41
percent to 37 percent of total tonnage, iron ore from 19 percent to 15 percent and all other cargo from
23 percent to 17 percent. The strong trend to containerization of general freight in India reflects the
strengthening integration of Indian supply chains with the global container transport networks.
12.2 Growth and Capacity Outlook: The Maritime Agenda 2010-20 of the MOS foresees an average
growth rate of 11 percent/year for maritime cargo in India in the period 2010-2020, with highest annual
growth rates anticipated for coal (18 percent/year), containers (15 percent/year) and other cargo (13
percent/year). In terms of traffic distribution between ports the non-Major Ports are expected to
surpass the Major Ports in aggregate tonnage handled, before the end of the decade. The analysis
presented in the Report suggests that if the capacity of India’s ports is developed as planned they will be
capable of handling expected merchandise trade volumes at least in the medium-term (to 2020).
However, throughput is currently lagging, as per the 2010 MOS projections: in 2011, total traffic
tonnage was 15 percent below forecast. But capacity enhancement is also lagging. Despite the current
slowdown, MOS still expects volumes to grow by a factor of some 2.5 between 2010 and 2020.
12.3 Over the last twenty years, the Major Ports have significantly improved their performance. The
average vessel turnaround time has been reduced by around 80 percent and berth productivity (average
ship-berth-day output in tons) has more than tripled. Contributory factors include more bulk cargoes,
containerization of non-bulk cargoes, a greater reliance on mechanized systems, and improved
management, including greater private sector participation in terminal operations. Pre-berthing delay
has deteriorated marginally, partly reflecting the relatively high average berth occupancy, the
proportion of time that a berth is occupied by vessels, at Major Ports (though there is wide variation
between ports). At many of India’s Major Ports, the berth occupancy ratios realized for certain types of
berth are beyond the levels considered optimum, and thereby lead to ‘queuing’ and sometimes
congestion. More effective use of scheduling agreements (the booking of berths for particular periods)
can increase levels of non-congested utilization. There is a wide variation in performance between
India’s ports but JNPT (Mumbai) scores well on most performance criteria. However, berth and crane
handling rates (moves/hour) at India’s ports are all generally lower than other ports in the region such
as Singapore, Port Rashid/Jebel Ali, Khor Fakkan and Salalah, though heavy transshipment operations at
the comparator ports contribute to elevating their performance statistics. Nevertheless, Indian ports
have headroom for improvement, which would both boost return on existing investment and (for a
period) defer the need for investment in additional infrastructure. But there is no doubt that even with
higher berth productivity more investment in container terminal capacity, in particular, will still be
required.
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12.4 As regards to the combined traffic of thermal and coking coal, India presently imports about 8%
of its coal consumption of about 370 million tonnes, however port traffic also includes coastal
movement of domestic thermal coal from the east coast to the west coast ports. Presently, over 75% of
the coal traffic is concentrated along the east coast as a result of the location of both mining centres and
steel making capacity in the east. Thermal coal traffic at India‘s major ports grew to 43.4 million tonnes
in 2009-10.
12.5 Future Challenges to the Sector : Despite a very creditable record of achievement in increasing
both volume and performance over the last twenty years, India’s Port sector is confronted with many
challenges to its ability to meet future demand and to meet competition from larger and more efficient
ports in the region. Five main challenges are ability to handle the largest vessels, transport
infrastructure linkages to ports, private sector participation, port governance structures and the legal
and regulatory framework in which ports operate.
12.6 Capability to Handle Large Vessels: Vessel drafts that can be accommodated by India’s Major
Ports are generally limited; none can presently receive fully laden Capesize dry bulk ships (the largest
ore and coal carriers) of more than 180,000 dwt, large tankers, or container ships of over 8,000 TEU
carrying capacity. The limitation of draft restricts the opportunities for India’s shippers to gain the
transport cost advantages of direct services by the largest vessels. Partly for this reason, India’s ports are
facing increased competition for direct shipping calls from major transshipment ports in the region
which can berth larger vessels. Transshipped Indian traffic is then consigned to/from Indian ports by
smaller vessels, adding a transport cost penalty.
12.6.1 A fully laden Capesize vessel has a draft of 16 to18 meters. Only Chennai (17.4 meters) and
Visakhapatnam (16.5 meters) have drafts that come near this at their dry bulk berths. All other ports
have at best just enough draft to receive Panamax vessels (80,000 dwt with a draft of 12 meters when
fully loaded). In the liquid bulk sector the situation is slightly better: Paradip (at its Single Point Mooring
– or SPM), Cochin and Kandla offer drafts over 20 meters and Visakhapatnam and Chennai drafts of 17.2
meters and 17.4 meters respectively. The draft issue is particularly serious for container trades. No
major port in India is presently capable of receiving container ships capable of carrying more than 8,000
TEU. The implication of not having the capability to handle larger container ships could be that much of
India’s future containerized trade might not take place by direct service but instead be carried on
transshipment routes using smaller vessels out of ports that can handle the largest vessels. For example,
the new South Container Terminal in Colombo (a day closer than Mumbai or Chennai to international
shipping routes) is operating with 2.4 million TEUs of container throughput capacity and the ability to
handle both New Panamax and Triple E super container vessels. Not only in Sri Lanka but ports in the
United Arab Emirates (UAE) have deeper drafts for container ships and will compete for the direct
container service traffic at India’s ports, which may add both time and international transport costs for
India’s trading enterprises.
12.7 Hinterland Connectivity: Good connectivity to/from the ports is an essential complement to the
growing need for port capacity. Hinterland traffic to and from India’s Major Ports is mainly carried by
road when measured by tons (though probably more than half is carried by rail when measured by ton-
km). Haldia, Paradip and Visakhapatnam carry more than half of tons by rail and V.O. Chidambaranar,
Cochin and Mumbai less than 10 percent. A small amount of port-connecting transport is carried by
inland waterways (mainly shipments of iron ore in Goa) and there is significant pipeline transport of POL
traffic. Road transport has greatest competitive advantage for small consignments over shorter
distances and for more time-sensitive consignments, particularly in corridors where rail lines are
congested. Railways are more competitive over most distances for large consignments of bulk raw
materials (coal, ores and minerals, crude oil, sand and gravel, grains, etc.), over longer distances for
semi-processed industrial goods (oil products, chemicals, iron and steel, cement, fertilizer) and for
sufficiently dense flows of containers to/from ports Roads. The low capacity and poor quality of roads in
many corridors, low truck utilization (on average covering only 300 km/day) and delays at state borders
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add to hinterland transport costs. The Government of India, through the National Highways Authority of
India (NHAI) and its flagship program, the National Highways Development Project (NHDP), is working to
improve the Indian road network. The program includes specific port connectivity projects. Likewise,
state governments are investing significant amounts in the roads sector, including port connectivity
projects. However, there is no certainty that road infrastructure capacity growth will match traffic
growth and road connections to ports can be expected to become more congested.
12.8 Railways: Railway sector productivity has increased substantially in recent years since 1995, the
average freight train load has improved by 40 percent, and locomotive and wagon productivity
increased significantly. However, traffic congestion on main lines has become a serious traffic
constraint. India’s railways have been losing market share to road haulage due partly to insufficient
physical capacity and partly to poor service quality, exacerbated by the need to fit freight train
movements into a busy passenger service schedule. The key corridors of the Golden Quadrilateral
connecting Delhi, Mumbai, Chennai and Kolkata and associated lines form 16 percent of the railway
network’s route length but carry more than 60 percent of its freight task. The government has therefore
approved a comprehensive long-term plan to build Dedicated Freight-only Lines (DFCs),in parallel with
the existing Golden Quadrilateral routes. A dedicated freight line is now planned for Delhi-Mumbai with
double stack container train capability and designed for longer and heavier trains with a 25 ton axle
load. Bridges and fixed structures will be dimensioned at 32 ton axle loads. The DMIC is planned as a
dedicated freight corridor, from the ports to the hinterland, with the Western dedicated Freight
Corridor (W-DFC) stretching 1,483 km from Jawaharlal Nehru Port (Mumbai) to Dadri. It is being
implemented by the Dedicated Freight Corridor Corporation of India Ltd. (DFCCIL), a special purpose
vehicle owned the Ministry of Railways but operating at arm’s length under a Concession Agreement. At
the same time, DFCCIL is effectively also responsible for the development of the Eastern Dedicated
Freight Corridors (E-DFC), which will run from Ludhiana to Dankuni (1,800 km). The capacity of the W-
DFC is foreseen to be 140 trains per day in each direction, which should be sufficient until FY 2039.
12.9 Coastal shipping: World over the coastal shipping is recognized as an important part of the
overall transport network. There is scope for the greater development of coastal shipping in India but
progress is hindered by inherent policy issues, operational flaws, regulatory bottlenecks and the short-
sighted customs procedures.
 The lack of an integrated transport policy in which coastal shipping might attain a much
more significant share of attention and traffic.
 Lack of shipbuilding capacity to build appropriate coastal vessels of different types and sizes
at the same time government specifications that could be too strict for the construction of
these vessels and lead to higher capital costs.
 The lack of financial mechanisms to assist in the acquisition of coastal vessels.
 The levy of corporate tax when deploying coastal vessels as compared to the tonnage tax for
ocean-going vessels.
 Lack of quality manpower to run the ships and the coastal vessels’ management.
 High operational costs of the vessels in service, many of which are in need of early
replacement.
 Adding to the cost burden are the high import duty on bunker oil and spare parts.
 Lack of specialized berthing facilities for coastal vessels in the Major Ports and of inadequate
cargo handling facilities for both Major and Non-major Ports.
 The continued imposition of a cumbersome and sometimes irrelevant set of customs
procedures.
12.10 The Indian Government has accepted the potential importance of a well-run coastal shipping
system and has initiated certain improvements such as:
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 The exemption to file a bill of coastal goods at the loading ports and a bill of entry at the
discharging ports;
 Removal of the requirement by coastal vessels to pay light dues;
 Provision of some dedicated terminals for coastal shipping in the major ports;
 Reduction in the vessel related charges on coastal vessels and cargo-related charges for
coastal cargo to some 60 percent of those charges applying to foreign-going vessels.
 The Government has also drafting a coastal shipping policy.
12.11 There are three major reasons why the coastal shipping industry is not contributing its full
potential to India’s transport system, each involving the application of stringent regulations for ocean-
going vessels also to coastal vessels, making it very difficult to run a viable coastal service:
Rules on manning: the crew size, the education and the training that are required do not match
with the nature of coastal shipping.
Rules on equipment: the rules for example on safety equipment are not based on the actual
conditions and risks that coastal shipping faces.
Construction standards: these are too rigid for ships that do not have to cross the high seas and
could be more adapted to the need of coastal vessels.
12.12 Another problem that makes coastal shipping comparatively less attractive is the fact that the
externalities of road transport are underestimated – the price of diesel for trucks is subsidized and
though trucks are commonly overloaded by some 25 to 30 percent they are not penalized. This
artificially lowers the haulage price that can be offered by trucks. Last mile connectivity is also
hindrance.
12.13 Inland Waterways: India has approximately 5,700 kilometers (which includes 500 kilometers of
canals) of waterways suitable for mechanized barge traffic. These waterways consist of a number of
separated water systems, not a national network, and Inland Water Transport (IWT) at present handles
only 1 percent of India’s total inland cargo transport. When efficiently operated with large modern
vessels, IWT is a safe, economic, fuel-efficient and environment-friendly form of transport. The main
physical limitation on viable IWT on most waterways in India is inadequate navigation infrastructure
(deep-draft shipping channels, river training and regulation, locks and sluices, navigation aids, loading
and unloading points and other facilities). Most of India’s existing navigable waterways cannot provide
all year access to vessels of more than about 300-500 dwt, and provide access to vessels mostly less
than that. Larger vessels would be required to deliver a long-term competitive advantage over other
modes, particularly compared to railways that carry most bulk traffic in India. In those waterway
corridors where market prospects are promising IWT could contribute more to port-hinterland
connectivity if the economic case for the substantial public investment required could be sustained. The
government’s anticipated two-thirds private sector contribution to India’s waterway development
program does not seem feasible. However, a series of supportive short- and long-term measures and
proposals by GoI may be helpful in encouraging the barging industry to respond to market opportunities
if adequate navigation conditions can be guaranteed by the Inland Waterways Authority of
India (IWAI). IWAI is the statutory authority in charge of the waterways in India. Its headquarters is
located in Noida, UP.
Projects included in development program of IWAI:

National Waterway River/Canal Route Declared in Distance
NW 1 Ganga From Haldia to Allahabad 1620 km
NW 2 Brahmaputra From Dhubri to Sadiya 891 km
NW 3 West Coast Central From Kottapura to Kollam along the
Udyogmandal and Champara canals 205 km
NW 4 Godavari and Krishna Kakinada – Puducherry stretch 1078 km
NW 5 Brahmani river and Mahanadi delta The East Coast canal 588 km
Source: IWAI
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12.14 The National Waterway 1 or NW-1 or Ganga-Bhagirathi-Hooghly river system is located
in India and runs from Haldia (Sagar) to Prayagraj across the Ganges, Bhagirathi and Hooghly river
systems. It is 1,620 km (1,010 mi) long, making it the longest waterway in India. It is of prime importance
amongst all the national waterways considering its locational advantages. The NW-1 passes
through West Bengal, Jharkhand, Bihar and Uttar Pradesh and serves major cities and their industrial
hinterlands. Kolkata to Varanasi inland waterways was started in November 2018.
12.15 Ro Ro Ferry service was started in October 2018 between Ghogha and Dahej via sea route. The
route cuts the distance to just 30 kilometers when compared to 300 kilometers by road, and the travel
time from 10-12 hours (by road) to 1.5 hours (by sea).
12.16 Private Participation: The GoI has been encouraging private sector participation in ports since
1996 especially by awarding Public Private Partnership (PPP) concessions. They have been mainly on a
Build, Operate and Transfer (BOT) basis with revenue sharing formulas, and include the construction of
berths for cargo handling, container terminals, cargo handling equipment, warehousing and the
construction of dry docks and ship repair facilities. The MOS Maritime Agenda identified some 352 new
investment projects in Major Ports for the period 2010-2020 with an estimated cost of Rs. 109,449
crore. Given the limited internal resources of ports and expected constraints on public budgetary
support, the private sector is expected by MOS to provide around two-thirds of this capital investment.
In the Non-major Ports a total of Rs. 167,931 crore is planned, of which the Government hopes that 96
percent will come from the private sector. India’s trading success in the next 10-20 years will depend
heavily on its success in attracting private sector participation and investment to ports. Certainly, PPPs
are being increasingly sought in both Major and non-major Ports and some of the leading terminal
operating companies in the world have invested in Indian Ports. Nevertheless, progress in implementing
PPPs so far has generally been sluggish, reflecting both perceived risk and tortuous process. Key risks
perceived by private investors have been the role of the Tariff Authority for Major Ports (TAMP) in price
setting, uncertainty that private investors can enjoy economic control of the facilities that they provide,
and sometimes insufficient periods of exclusivity against the possible provision of competing
infrastructure. In terms of process, projects have fallen foul of bureaucratic delays, uncertainty and
indecision, statutory clearance problems, local community opposition, site squatting by concession
holders and the opposition of small scale proximate port facilities. PPP project frameworks must of
course protect the users and stakeholders of ports, and also be seen to be implemented, in both
substance and process, in the public interest. But this depends on clarity of principles and simplification
of process. The Report suggests possible ways of improving the enabling framework for PPPs. The state
of Gujarat has also demonstrated more success in bringing together public and private resources for the
development of ports and related infrastructure facilities, convincing other state governments to use
PPP for their port developments. Even if the impediments to private sector investment are resolved it
remains uncertain how fully the central government can rely on the massive level of investment that the
private sector is expected to fund. It would be prudent to examine how further internal or public finance
contributions might be sourced if private sector contributions do not materialize at the required rate or
levels.
13.0 Ports Policy Framework: According to the survey made by Ernst & Young in 2008 - in
connection with formation of Dredging Alliance, looking at past growth rates of traffic handled at ports,
it is expected that between 2012-13 till 2026-27, traffic would grow at a CAGR of approximately 10% in
line with GDP growth. However following is a combined Traffic Projection made by the Shipping Ministry
(after considering different reports) for both Major and Non-Major Ports are as follows:
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14.0 Traffic Projection in million tons:
15.0 Capacity Estimation in million tons:
16.0 Resource planning:
16.1 Private Port operators feel that the Government has to play a major role in materialisation of
the planned investments, as its role will be more as a facilitator for formulating investment-friendly
policies and in expediting process of clearances and approvals for port development, It seems that large
amounts of the funds required for capacity expansion in both major and minor ports is expected from
the private sector.
17.0 Policy initiative and other actions:
17.1 India has been an emerging and vibrant economy with a huge market and a billion plus
population. As per the prediction of experts, India has the potential to grow as the fastest economy for
the next 30 years and is more likely to occupy the second position after China by 2030. This economic
upsurge will be one of the important drivers for the growth of Indian Ports in the years to come.
Coupled with this, the technological changes in shipping and information technology will trigger the
growth in Indian Ports and provide stimulus for cargo handling.
17.2 Hinterland connectivity and Information and Communication (ICT) integration among all Port
Community members are the two vital elements which drive the port sector in India towards
comprehensive development of efficient world class ports. Various Ministries in Government of India
viz., Ministry of Shipping, Road Transport & Highways and Ministry of Railways as well as State
Governments should lay specific emphasis and focus on hinterland connectivity. Major and non-major
ports in the country should initiate and update various ICT measures and also integrate themselves with
stakeholders to vitalize themselves into world class ports.
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17.3 The Indian major ports in the recent past have exhibited very strong change management
capabilities and have made significant strides in modernization and capacity augmentation. Port
capacity development was possible mainly due to the various policy initiatives taken by the Government
for increasing the pace of privatization, which include, amongst other things, standardization of RFQ,
RFP and MCA and formulation of guidelines for fixation of upfront tariffs. The maritime states also have
come up with several policy initiatives and identified potential locations for development of new outlets.
Thus, the major ports and non-major ports have assumed complementary roles, besides creating
healthy competition which in turn enabled the sector to provide cost effective and quality service to the
customers.
18.0 Indian Ports Privatisation and Understanding the logic.
18.1 Privatisation is a word that has been in use frequently from the 1990-s which is often termed as
the era of liberalization, privatisation & globalization. People had been using the two words privatisation
and outsourcing synonymously but these are quite different. India is economically and politically
entwined with the other states of the world & quite deeply. Thus the port development in regional
perspective is often reviewed by the international agencies and their recommendations are selectively
acted upon by the Government – in line with their involvement in Indian port development. To
understand this we shall look at the challenges in
 Capacity utilization & enhancement

 Future traffic scenario
 modernization of infrastructure
 role of private funds ( promoters),
 issues of regulation
 PPP and relevant concerns
 Failures and constraints
 Roadmap for future
18.2 Port cost is a large element of the total transport cost of any commodity either exported or
imported. The port cost is directly linked with the effectiveness of operation and the turn round time
of ships. Therefore in other words; whatever their shape or size, is the speed at which the physical
transfer of goods takes place from sea-going traffic to road or rail or vice versa. As will be evident from
the above descriptions we need sharp increase in port capacity and that too must be created within a
very short span of time.
18.3 Ports in India had been conventionally associated with the following constraints – though many
ports have started their fight against these:
(i) High labour costs

(ii) Low productivity
(iii) Inefficient equipment maintenance
(iv) Obsolete technology
(v) Inadequately trained manpower
(vi) Large idle time at berth
(vii) High manning scales
(viii) Inadequate draft in ports
(ix) Poor infrastructure facilities
(x) Real estate management problems
18.4 There had been a problem with the country's major ports in terms of the constraint as above
and as a result many of the PSU-s of the country had to suffer loses to the tune of millions of dollars in
foreign exchange on account of demurrage claims of ship owners due to port delays – but the situation
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has been largely reversed now with the MOS (Ministry of Shipping) and their officials monitoring
performance and consequently ensuring high performance. We also expect that with the capacity
additions – the situation will ease to a considerable extent.
18.5 Having set the tone for the growth path, the Indian major ports and non-major ports have
formulated ambitious plans for development of new outlets, augmentation of existing service centers,
induction of state-of-art cargo handling equipment and improvement in logistics in order to meet the
challenges emanating from the anticipated growth in the trade. As per these plans, the capacity at 12
major ports is likely to increase to 1459.53 million tonnes by 2020 from the present level. The capacity
at non-major ports is poised to increase by 2020 to 1660.02 Million Tonnes from the present level.
18.6 Thus, the Indian Ports are aiming at a surplus capacity of above 25% over the projected demand.
This will enable the ports to provide berthing facilities on arrival of the ships, thus achieving zero waiting
time for the vessels.
18.7 In addition to capacity augmentation, all the major ports are aiming at bringing structural
changes in the administration of the ports to improve organizational effectiveness. To this end, all the
ports are planning towards implementing landlord port concept duly limiting their role to maintenance
of channels and basic infrastructure leaving the development operation management of terminal and
cargo handling facilities to the private sector. The ports are aiming at lean staff by extending information
technology to the entire gamut of operations. Thus the Indian Ports are marching forward with a
confident note and gearing themselves to meet the anticipated demand from the trade in the years to
come.
18.8 While the present policies in the Government, both Central and State are quite dynamic and
investor friendly, it is felt imperative that some more path-breaking initiatives, may be required to be
taken over a period of time to boost the sector to the huge anticipated levels of growth and
development of Ports in terms of traffic as well as capacity. It would also be necessary to review the
policies periodically, to keep them relevant in changing times.
19.0 Some of the future priorities given by the MOS are as follows:
19.1 Major Ports to be landlord ports:
19.1.1 The Major ports in “landlord port” concept duly limiting their role to maintenance of channels
and basic infrastructure leaving the development operation management of terminal and cargo
handling facilities to the private sector. The Port Authority retains the ownership of the port’s
infrastructure, but this is leased out (licensed) or given in concession to private operating companies.
The private operating companies provide and maintain their own superstructures, their equipment and
their information systems. The main benefit of this model is the fact that the private operator owns the
cargo handling equipment and executes at the same time the operational activities, whereby planning is
greatly improved and there is also a greater responsiveness to the needs and the changing conditions of
the market. There may be both a risk of overcapacity (more than one operator for a similar type of
facility) and under-capacity (one operator who does not want to invest in additional facilities for a
specific type of cargo), although this can be solved through specific clauses in the concession
agreement. This approach will continue and total realisation of this concept is expected by 2020.
19.2 Policy on PPP projects:
19.2.1 Public Private Partnerships will be the preferred mode for the development of port terminals
and other commercially viable activities in the Major Ports. The standardization of RFQ, RFP and MCA
and the formulation of guidelines for fixation of upfront tariffs have served to make the PPP process
transparent and to give confidence to the investors. These documents will be reviewed every five years.
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19.3 Land Policy :
19.1 Land Policy for Major Ports, 2010 and Directives for Land Management by Major Ports, 2012. The
policy is to encourage the best use of port land, which must be set out in a port land-use plan approved
by the port board. Land within the ‘customs-bound’ area can be allocated by license to activities directly
related to sea trade and security, and land outside the customs-bound area can be allocated for other
uses (but with a preference for port-related activities). The policy contains various safeguards to ensure
legitimate allocation of port lands by competitive tender, with a reserve benchmark price based on
notional market value. The draft Directives for Land Management by Major Ports are mainly further
clarifications of the policy application. The GoI hopes the policy will improve the management and use
of land at ports while ensuring legitimate allocation and pricing. It will be crucial in establishing the land-
use plan, and awarding time-bound allocations to users, to ensure that sufficient land will be available,
when it is needed, for the substantial increases in capacity required.
19.4 Various kinds of port governance models:
19.4.1 The public service port model
In this model, the Port Authority owns the land and the fixed and mobile assets, and performs all
regulatory and port functions. The advantage is that development and operations are the responsibility
of a single entity, which in principle makes for a cohesive approach, on condition that the Ministry does
not exceed its controlling role. The lack of internal competition can lead to inefficient port
administration, port operations and port maintenance. Moreover, there is often a lack of innovation and
long delays in responding to the demands of the market. Finally, there is a heavy dependence on
government funding which, if it cannot be accommodated, leads to underinvestment or a wasteful use
of limited financial resources.
19.4.2 The tool port model:
In this model the Port Authority owns, develops and maintains the port infrastructure and
superstructure, including the cargo handling equipment. The operation of the port’s equipment is
mainly done by the Port Authority labor, although small private cargo-handling firms can work on board
the ships and on the quayside. While this model results in an avoidance of the duplication of
investments, the fragmentation in responsibility can lead to serious conflicts between the Port Authority
and the operators if they both work as stevedores and/or quay operators. Also, the risk of
underinvestment remains, as everything has to be funded by the Government or the Port Authority
itself.
19.4.3 The landlord port model:
The Port Authority retains the ownership of the port’s infrastructure, but this is leased out (licensed) or
given in concession to private operating companies. The private operating companies provide and
maintain their own superstructures, their equipment and their information systems. The main benefit of
this model is the fact that the private operator owns the cargo handling equipment and executes at the
same time the operational activities, whereby planning is greatly improved and there is also a greater
responsiveness to the needs and the changing conditions of the market. There may be both a risk of
overcapacity (more than one operator for a similar type of facility) and under-capacity (one operator
who does not want to invest in additional facilities for a specific type of cargo), although this can be
solved through specific clauses in the concession agreement.
19.4.4 Private sector port model (private sector service model):
In this model, the public sector has no longer an interest in port activities, or it leaves port management
and operations entirely to the private sector. Port land is owned or bought by the private sector and all
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operational activities are performed by the private sector. If there is regulation of the port it will be
done by the private sector as well. The main advantage of this model is that port development and the
tariff policies tend to be market-oriented. The main disadvantage of the private sector model is the risk
of creating an abusive monopolistic system and the suppression of public involvement in the
development of ports within a longer term economic policy.
20.0 Issues with respect to PPPs in Indian Ports:
20.1 The Government of India has been encouraging private sector participation in ports since 1996
especially by awarding PPP concessions. Some of the PPP models which are available worldwide are and
the concession models such as:
 Build-Operate-Own-Transfer (BOOT)
 Buy-Build-Operate (BBO)
 Build-Own-Operate (BOO)
 Build-Operate-Transfer (BOT)
 Build-Lease-Operate-Transfer (BLOT)
 Design-Build-Finance-Operate-Transfer (DBFOT)
 Operations License-Design-Build (DB)
 The Annuity Method
 The Royalty or Revenue Share Method
 The Finance Only Method
 The Special Purpose Vehicle
21.0 Points against privatization:
 Profits to be reinvested in port capital expenses

 Have access to cheap capital from Government
 Improvement in productivity can be effected from Labor Reforms also
 Port Privatization can be permitted by small changes in law – thus
avoiding full privatization
 Valuation of ports is a difficult subject as the ports across the world have been seen to have
appreciated in value 5 to 10 times in a period of few years
 Public commitments to be fulfilled
 Governments have no rights to sell ports which belong to their local community
22.0 LATEST UPDATES FROM MINISTRY OF SHIPPING:
22.1 A large number of PPP projects are under operation, implementation & bidding. It may look very
confusing if more tables and data are included. It is requested that students must access the website of
the Ministry of Shipping which has a dedicated page for the PPP and the updated project profiles can be
seen from time to time.
22.2 For the present chapter the PPP under operation and PPP under implementation has been
provided as under :-
(a) Review of the PPP projects in major ports:
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Port/Project Value in Capacity
Rs. Crores M.T.
Kolkata 330 -
Multipurpose berth No. 4A 150 1.50
Multipurpose berth No. 12 30 0.50
Mechanization at HDC Berth No. 2 75 2.00
Mechanization at HDC Berth No. 8 75 2.00
Paradip 2,186 -
Captive fertilizer berth 26 2.50
Mechanization of cargo handling project-1 37 2.00
Mechanization of cargo handling project-2 25 2.00
Construction of SPM captive berth 500 15.00
Captive fertilizer berth to PPL 100 2.50
Construction of deep draft iron ore berth 591 10.00
Construction of deep draft coal berth 479 10.00
Mechanization of Central Quay-III Berth 40 4.00
Multipurpose berth project 387 5.00
Visakhapatnam 2,154 -
Container terminal Outer Harbor 108 1.74
Multipurpose berths - EQ 8 & EQ 9 196 2.00
Development of Western Quay (WQ-6), northern 114 2.00
arm of Inner harbor
Development of EQ-10 berth in Inner Harbor for 55 1.85
handling liquid cargo
Mechanized coal handling facilities, at general 444 10.18
cargo berth, Outer Harbor
Development of EQ 1 in Inner Harbor to handle 323 5.60
steam coal
Development of EQ 1A in Inner Harbor to handle 313 5.60
thermal coal
SPM by HPCL 600 8.00
Chennai 895 -
Container terminal at Chennai 400 24.00
Development of 11th container terminal 495 9.60
Ennore 2,536 -
Marine liquid terminal at Ennore 249 3.00
Development of an iron ore terminal on BOT basis 360 6.00
at Ennore (1st Phase)
Development of coal terminal for users other than 399 8.00
TNEB on BOT basis
Iron ore terminal (Phase II) 120 6.00
Development of container terminal 1,407 18.00
V.O.Chidambaranar 481 -
(formerly Tuticorin)
Container terminal (berth No. 7) 100 5.00
Construction of coal berth at NBW for NLC-TNEB on 49 6.30
captive basis
Construction of NCB-II 332 7.00
85
Cochin 5,678 -
ICTT at Cochin Vallarpadam (1st Phase) 1,262 12.50
Crude oil handling facility 703 7.50
International Container Transhipment Terminal 518 25.00
(ICTT) (Phase II and III)
LNG Regasification Terminal 3,195 2.50
New Mangalore 507 -
Construction of captive jetty for handling coal by 230 5.40
Nagarjuna Power Corp Ltd.
Setting up of mechanized iron ore handling facilities 277 6.62
at Berth No. 14
Mormugao 502 -
Bulk cargo berth No. 5A & 6A -
Development of berth no. 7 for handling bulk cargo 252 7.00
Jawaharlal Nehru 2,065
Container terminal NSICT 965 15.00
BPCL Jetty 200 5.50
Third container terminal 900 26.40
Kandla 1,872 -
Fifth oil jetty (IFFCO) 22 3.00
Oil jetty related facilities at Vadinar (Essar) 750 12.00
Oil jetty awarded to M/S IOCL 21 2.00
Container freight station 41 3.00
Container terminal (Phase - 1 & II) 447 7.20
Development of 13th multipurpose cargo berth 188 2.00
(other than liquid & containers)
Development of captive barge jetty for IFFCO 27 2.00
22.3 Some of the Private ports developed and operational are as under:
Some Private Ports

Sr. Name of the ports Operated by
No
1 Mundra MPSEZ ( Adani Group)
2 Pipavav AP Mullar Maersk Group
3 Dahej Petronet
4 Jamnagar RIL
5 Dighi Balaji Infra Pvt. Ltd ( Mr. Kalantri)
6 Jaigad Chougule and Jindal
7 Dabhol RPGL
8 Kattupalli L&T and Adani
9 Krishnapattanam KPCL ( Navayug Eng. Co. Ltd)
23.0 Port Capacity Utilization and Possible Shortfalls in Capacity:
23.1 The Ministry of Shipping Maritime Agenda 2010-2020:
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23.1.1 The Maritime Agenda 2010-20 of the MOS foresees an average annual growth rate of 11
percent for maritime cargo in India in the period 2010-2020 (see Table below). Growth is projected to be
particularly high for coal, containers and other cargo. It should be noted that the projected volume for
2011-12 was 1,032 million tons, whereas the actual total in 2010-11 stood at only 882 million tons.
Actual growth to date, therefore, is currently slower than anticipated in the Maritime Agenda 2010-20.
Table 8: Projected Growth In Key Maritime Cargo Categories (in million tons):
2010-11 2011-12 2016-17 2019-20 CAGR CAGR

Cargo category Actual Projected Projected Projected FY10-17 FY10-20
POL 334 333 528 660 7% 7%
Iron Ore 105 156 228 259 6% 6%
Coal 131 187 476 570 23% 18%
Containers 134 148 384 486 19% 15%
Others 178 208 403 520 15% 13%
Total 882 1032 2019 2495 13% 11%
23.1.2 Table 9 shows the projected port volume versus the projected port capacity growth, according
to the Maritime Agenda 2010-20. If things remain unchanged (e.g. regarding port regulation) Non-major
Ports will probably surpass the Major Ports in their volume and capacity shares before the end of the
decade. The data in Tables 8 and 9 also suggests that planned capacity expansions would be sufficient
to keep up with the expected growth. But both actual throughput and capacity enhancement are
lagging behind MOS projections.
Table 9: Projected Volume Growth Versus Capacity Growth (in million tons)
2011-12 2016-17 2019-20

Cargo Cap. Util. Cargo Cap. Util. Cargo Cap. Util.
Major Ports 630 741 85% 1032 1328 78% 1215 1460 83%
Non Major Ports 403 499 81% 1264 1264 78% 1280 1670 77%
Total 1032 1240 83% 2592 2592 78% 2495 3130 80%
23.1.3 The big question that remains to be answered is whether capacity expansion will be realized in
time to keep up with throughput volume. The Ministry of Shipping expects throughput figures to be
somewhat behind expectations, but still expects that overall volumes will grow by a factor of some 2.5
between 2010 and 2020. Table 10 shows actual and projected data and existing and projected data for
11-12:
Table 10: Major Ports, Existing & Projected Volume & Capacity (in million tons)
2011-12 2011-12 2016-17 2019-20 2011-12 2011-12 2016-17 2019-20

Actual Projected Projected Projected Existing Projected Projected Projected
POL 179.1 188.6 280.3 329.2 231.3 243.4 372.5 380.5
Iron Ore 60.7 97.5 121.1 136.6 83.5 81.4 122.6 125.9
Coal 78.7 97.8 191.2 223.5 68.5 81.7 196.6 217.6
Containers 120.2 116.4 244.8 279.9 139.4 146.0 313.7 373.7
Others 121.2 129.3 194.1 245.7 180.2 188.9 322.9 361.9
Total 560.0 629.6 1031.5 1214.8 702.9 741.4 1328.3 1459.5
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24.0 SAGARMALA and LAST MILE CONNECTIVITY:
24.1 Sagarmala Programme is an initiative of Government of India to enhance the performance of

logistics sector in India. The programme envisages unlocking the potential of waterways and coastline,
to minimize infrastructural investments required to meet these targets. It entails ₹8.5
trillion (US$120 billion or €100 billion) investment for setting up of new mega ports, modernization of
India's existing ports, development of 14 Coastal Employment Zones (CEZs) and Coastal Employment
Units, enhancement of port connectivity via road, rail, multi-modal logistics parks, pipelines &
waterways and promote coastal community development, resulting in boosting merchandise exports by
US$110 billion, and generation of around 10,000,000 direct and indirect jobs.
24.1.1 The Sagarmala Programme is the flagship programme of the Ministry of Shipping to promote
port-led development in the country through harnessing India’s 7,500 km long coastline, 14,500 km of
potentially navigable waterways and strategic location on key international maritime trade routes.
Sagarmala aims to modernize India's Ports so that port-led development can be augmented and
coastlines can be developed to contribute in India's growth. It also aims for "transforming the existing
Ports into modern world class Ports and integrate the development of the Ports, the Industrial clusters
and hinterland and efficient evacuation systems through road, rail, inland and coastal waterways
resulting in Ports becoming the drivers of economic activity in coastal areas.
24.1.2 The Sagarmala Programme was originally mooted by the National Democratic Alliance
(India) Government under Late Atal Bihari Vajpayee in 2003 as the maritime equivalent to the Golden
Quadrilateral, another project under his government in the roads and highways sector. The Programme
aimed to leverage India's vast coastlines and industrial waterways to drive industrial development.
24.1.3 On 25 March 2015 Cabinet gave approval for the Sagarmala Programme. The National
Sagarmala Apex Committee (NSAC), composed of the Minister of Shipping, with Cabinet Ministers from
stakeholder Ministries and Chief Ministers / Ministers in-charge of ports of India's maritime states as
members, provides policy direction and guidance for the initiative’s implementation. The NSAC
approved the overall National Perspective Plan (NPP) and regularly reviews the progress of
implementation of these plans.
24.1.4 To assist in implementation of Sagarmala projects, the Sagarmala Development Company

Limited (SDCL) was incorporated on 31 August 2016, after receiving Cabinet approval on 20 July 2016,
for providing funding support to project SPVs and projects in-line with Sagarmala objectives.
Additionally, SDCL is also in process of preparation of Detailed Project Report (DPRs) and feasibility
studies for specific projects that could provide avenues for future equity investment by the company.
The Sagarmala Development Company was incorporated after approval from the Indian Cabinet on 20
July 2016 with an initial authorized share capital of Rs 1000 Crore and subscribed share capital of Rs 90
Crore, to give a push to port-led development. The present subscribed share capital of SDCL is Rs. 215
Crore.
24.1.5 The Indian Port Rail Corporation Limited (IPRCL) was incorporated on 10th July 2015 to
undertake the port-rail connectivity projects under Sagarmala Programme. IPRCL has taken up 21 port
rail connectivity projects.
24.1.6 The Sagarmala National Perspective Plan was released by the Prime Minister on 14-April-2016 at
the maiden Maritime India Summit 2016, with details on Project Plan and Implementation.
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Following are the details of total 577 projects and its cost under Sagarmala project:
Sr. Project Theme No. of Project Cost (Rs.10)

No. Projects
1. Port Modernization 245 Rs. 1,416,410 million
(US$34 billion or €17 billion)
2. Connectivity Enhancement 210 Rs. 2,444,640 million
3. Port Linked industrialization 57 Rs. 4,639,700 million
(US$ 65 billion or €57 billion)
4. Coastal Community 65 Rs. 69,760 million
Development (US$970 million or €850 million)
Total 577 Rs. 8,570,500 million
25.0 Conclusion:
25.1 We have discussed about the ports in India, their development and also the possibilities of PPP
and port privatisation in future in two chapters. Numerous data are available but most of them are not
connected. Thus we are presenting the Major Ports and a few Private ports – so that the understanding
is complete. Though today private ports are handling nearly 42% of cargo – they are mostly focused on
four main commodities like coal, ore, oil & containers.
25.2 It is a matter of concern that the private ports do not share major portion of their data publicly.
Hence some of these are created from tertiary sources. It may be appreciated that these are mostly
exchanged in B2B meetings where marketing is involved. But looking at the cargo handling and size of
ships handled – it would suffice to indicate that the ports are benchmarked well.
25.3 So far the requirement of Current Shipping Environment is concerned – we need to understand
the following so that a connection is established between all chapters and allows needed
comprehension. The description of individual ports may be had from the IPA website with member ports
area. The following aspects could be kept in focus:
 Location of the ports

 Basic infrastructure like berths and terminals with categories of cargo handled between
them
 A inventory on equipment and summary
 Main performance parameters on which benchmarking of a port depend
 Storage capacities in major ports
 Number of vessels arriving in port – cargo category-wise
 Simplistic financial performance
oooooo
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1. Why has the Government interested in Private Sector Participation?

2. According to you what are the reasons for advocating privatisation of ports in India?
3. What are the salient features of the guidelines of port privatisation policy?
4. Name some of the fiscal incentives promised by the government to encourage foreign
investments.
5. Discuss the statement: "In spite of the interest generated within the Government for
private sector participation, delays and hassles for clearance of projects still continue."
6. There is a strong lobby which advocates against corporatization of ports. What are its
main points of contention?
7. How are ports classified in India? Under what list do intermediate and minor ports fall.
Who controls them?
8. What are the national objectives of a major port? Has the objectives been modified with
the globalization?
9. Enlist the authorities that play a role in the functioning of a major port. Also explain how
major ports function?
10. In a Major Port what are the functions of (i) Customs, (ii) Mercantile Marine
Department, (iii) Port Health Officer, and (iv) Dock Labour Board?
11. Discuss what facilities Govt. must provide to a port developing private party so that port
functions efficiently.
12. What are facilities / infrastructure that port needs to offer to its users? Explain in detail.
13. Which are Major ports in India (Govt. controlled) and explain their functioning and
hurdles faced by them
14. Discuss differences between Govt. Operated ports and Private ports in India. What are
constraints for growth of shipping in India.
15. Explain importance of Shipping (Foreign Going, Coastal and Inland Water) in
Development of the country.
16. Explain Functions of IWAI
17. Write a note on Sagarmala project.
RECOMMENDED FOR FURTHER READING

1. Shipping & Shipbuilding Industry in India -- Dr. Dev Raj.
2. Containerization and Multimodal Transport in India -- Dr. K.V. Hariharan.
3. Port Management: A 360 degree view - published in 2014: Covers the development of Indian Ports
in detail.
4. Various shipping Magazines and business news papers.
5. IPA and various ports WEB site, GoI and World bank reports
6. Wikipedia and other available information on Net
*********************
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LESSON 8
CONTAINERISATION IN INDIA
1.0 Introduction and global perspective:
1.1 The world is embracing the concept of containerization as a solution to deal with the challenges
of contemporary global supply chains. In most the maritime related import and export flows of general
cargo. It is only with containerization that production could become globalised by a better usage of
comparative advantages while distribution systems were able to interact more efficiently, reconciling
spatially diverse supply and demand relationships.
1.2 In fact, ‘trading in the box’ is one of the most popular and efficient global transportation
methods. In line with the global trend, the container business in India is also growing at a brisk pace, as
importers and exporters are increasingly shifting away from general cargo. Container traffic in India has
achieved more than CAGR of 11 per cent over the last 10 years and India now looks forward to a future
growth rate of 15% as per current estimates.
1.3 While global container shipping celebrated its 50th anniversary in 2006, as an innovation that
had a tremendous impact on production and distribution, it is still an evolving business model in India. In
this context, the role of containers in Indian trade, its share among various ports, distribution models
and future growth, need to be looked at from a fresh perspective. To further support the growth of
containerization, major innovations in terms of logistics support, technology and policy interventions are
required.
1.4 The students must understand that the containerization is a revolution from the point of view of
the global Supply Chain Management – as it is a warehouse on demand. The just in time process and
lean manufacturing technique has been well supported by the supply of containers depending on the
demand – thus reducing costs in every link in the supply chain.
1.5 The abundant opportunities offered by containers lure various transport sector players to
promote the containerization drive. Government of India has also taken several initiatives and brought
forth policies to increase the utilization of containers. One study suggests that infrastructure
bottlenecks, connectivity and trade imbalance is hampering growth of container throughput and
capacity on the east coast. Future container infrastructure growth in India will be driven by PPP model at
policy as well as at the implementation level.
2.0 Analyzing Indian Scenario:
Beginning is made:
2.1 The concept of ocean going containers was introduced in India for the first time in 1968 in a
seminar held jointly by the Indian National Shipowners’ Association (INSA), Directorate General of
Shipping, The Shipping Corporation of India Ltd. (SCI) and the All India Shippers Council (AISC) at
Mumbai. The Indian ship-owners and the trade began to consider the implications of implementing the
concept. A Working Committee report on the subject was circulated. In early 1970s SCI acquired the
first semi-container ship with three holds designed to carry containers along with two-holds for general
cargo. Other shipping companies like Scindia Steam Navigation Co. Ltd. and India Steamship Co. Ltd.
followed on the steps of SCI. Indian Steamship Company went ahead to acquire a small cellular and also
RORO type container ship.
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2.2 In 1973, the American President Lines began scheduling their cellular feeder container ships to
Mumbai and brought the necessary handling equipment with them. Thereafter lines of European and
other countries also started scheduling their container vessels to Indian ports.
2.3 However, India started seriously to adopt containerization only in 1978. Major ports like
Mumbai, Cochin, Chennai, Haldia/Calcutta commenced to equip themselves for handling container ships
and containers in an appropriate way. Shippers and consignees also responded to the opportunities and
benefits in containerization. The buyers of India goods abroad stipulated in their letters of credit that
the goods should be containerized. Hence, despite the need for heavy investments and numerous
problems in smooth flow of goods, India was forced into containerization to stay abreast with the
dominant trend in the world economy.
3.0 Current scenario:

3.1 India had declared 12 Major Ports and 187 Non-Major ports spread across a coastline of around
7,500 km. The segregation of Major and Non-Major Ports is just a nomenclature used within India
which shows if the ports are under the control of the Central Government (Major) or under the
jurisdiction of a state government (Non-Major). Currently, there are only 12 Major and 6 Non-Major
ports which handle container traffic in India. Three on the west coast (Mundra, Pipavav and Hazira) and
three on the east coast (Karaikal-only limited handling, Kattupalli and Krishnapatnam).
3.2 India’s container port traffic grew by 13% in 2017, following 11% growth in 2016. All Indian ports
recorded positive growth during the year, barring one or two ports. Mundra’s traffic grew by more than
20%, and JNPT’s traffic inched up by 4.8% in 2017. On the east coast, Chennai increased its port
throughput by 1.6%. Furthermore, Krishnapatnam - a new port - has been growing at a fast pace.
3.3 Major vs Non-major ports

Major ports have lost a significant share of container traffic to non-major ports during the last decade.
The market share of non-major ports has surged by more than five times in the previous 13 years from
2005. The market share of terminals (in terms of traffic) operating in major ports plummeted from 92%
in 2005 to 59% in 2017. The rapid expansion of private terminal operators in non-major ports diverted a
significant chunk of cargo to these private ports. The market share (in terms of container traffic) of non-
major ports collectively rose to a whopping 41% in 2017 from a paltry 3% in 2005. Krishnapatnam and
Katupalli on the east coast of India, operational since 2013, have amassed significant volume in four
years. These ports have been adding to the growth story of non-major ports, previously driven by
Mundra and Pipavav. In 2017, among non-major ports, only Pipavav has registered a 3% decline in
container traffic. Neighbouring port Mundra handled 22.4% more boxes over 2016 and Hazira’s
container traffic increased by 27.6%.
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West coast versus East Coast handling
3.5 East coast ports vs west coast ports:

Ports on the west coast dominate the container infrastructure and throughput in India. More than 70%
of the country’s containers are handled at the west coast ports. We expect this dominance to continue,
though handling at east coast ports has accelerated in recent years with new private ports.
3.6 The connectivity between the major industrial cluster in north-western region and the west coast
ports is more efficient and nearer compared to the ports on the east coast. The current trend is likely to
continue in the near term. And, in medium to long term, the movement of cargo will depend on the
industrial development in the hinterland nearer to East coast of India. Port connectivity infrastructure,
which includes road and rail connectivity, will also play an important role.
4.0 Containerization level in India:
4.1 It is a fact that commodities handled by dry and liquid bulk ships do not provide further scope
for containerization. Therefore these commodities cannot be included in calculating the penetration
levels in the country. Certain commodities like maize, flat rolled steel coils; scrap, granite, etc. have
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traditionally been transported as break bulk cargo. However, in recent years, owing to changing shipping
business dynamics, such as multiple consignees with requirement of small volumes and increasing bulk
vessel freight rates have resulted in conversion of a certain portion of these commodities from break
bulk to containers. These commodities still continue to move in large volumes as break bulk cargo. The
following graph shows how the growth in the level of containerization has been forecasted depending
on the trend.
4.2 Additionally a large share of break-bulk commodities which has traditionally been shipped as
non-containerized cargo is now sent in containers. For example, granite exports from Andhra Pradesh
were shipped primarily as break-bulk cargo however due to increase in number of small shipments to
multiple consignees around the world; there has been rapid rise in the containerization of this
commodity. Other examples include scrap which is still being imported by India as break-bulk cargo but
a large share of it also comes as a containerized commodity. There has been containerization of some
non-traditional cargo like bananas over the past few years which have generally been air-freighted out
of the country. Therefore, this process of containerization of non-traditional containerized commodities
as well as generation increase in container penetration has helped increased container traffic growth in
India.
4.2 It is observed that observed that a period of recent growth had been boosted by rapid growth in
containerization of general cargo that has increased from 60% in 2001 to around 68% in 2011. There is a
view that container penetration in India could reach 72% by 2020. Major industries like chemical,
pharmaceutical, garments, plastic, automobile and auto ancillary units, tyres/tubes, re-rolling mills-
related products, all of which have a high propensity for containerization, if not so already.
4.3 It may be seen that factors effecting growth of containerization could be:
 Value and sensitiveness of the cargo

 Availability of ICD/CFS
 Competitive freight rate compared to bulk/break-bulk shipping
 Availability of container equipment
 Attention on packaging, safety and environmental regulations
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Snapshot of the container handling vis-à-vis other cargo at Major Ports: (in ‘000 tons) FY 2013-14
PORT P.O.L. Iron Fertilizer Coal Container Other Total

Ore Fin. Raw Thermal Coking Tonnage TEUS Cargo
KOLKATA
Kolkata Dock System 717 147 5 34 - 238 7062 449 4671 12874
HDC 6105 2170 194 366 1598 5350 2202 114 10526 28511
Total: Kolkata 6822 2317 199 400 1598 5588 9264 563 15197 41385
Paradip 17703 5593 122 3932 25027 7042 99 9 8485 68003

Visakhapatnam 14009 12999 1771 795 2744 6928 4916 263 14341 58503
Kamarajar (Ennore) 2340 - - - 22127 355 - - 2515 27337
Chennai 12784 - 160 255 - - 28330 1468 9576 51105
V.O.Chidambaranar 479 - 388 790 6644 - 10129 508 10212 28642
Cochin 14321 - 36 271 - - 4785 351 1474 20887
New Mangalore 24647 3123 454 50 2928 5420 747 50 1996 39365
Mormugao 522 44 179 - - 7518 235 22 3241 11739
Mumbai 35982 - 151 151 4459 - 450 41 17993 59186
J.N.P.T. 4566 - - - - - 55234 4161 2546 62346
Kandla 53137 586 2644 991 6080 270 452 29 22845 87005
All ports 187312 24662 6104 7635 71607 33121 114641 7465 110421 555503
5.0 Future scenario – 2020:
5.1 Ports Handling Containers in terminals (though most of the ports handle containers in small
quantities but not in a terminal):
Western Ports Eastern Ports Southern Ports

Major Ports JNPT, Mumbai, Kandla Kolkata, Haldia, Chennai, Tuticorin,
Paradip, Vizag Cochin, New
Mangalore, Goa
Private Ports Mundra, Pipavav, Hazira Vallarpadam, Ennore
Proposed Ports Rewas, Dighi Vizinjam Gangavaram
5.2 Container handling projects envisaged up to 2020:
 Upper West Coast – New container terminals at Hazira and Jamnagar

 Central West Coast – Offshore terminals at Mumbai Port ( shelved and different plans being
worked out) & 4th terminal at JNPT ( in operation) and new developments at Rewas and Dighi
 Lower West coast – Container terminals at Vallarpadam ( in operation) and Vizjinjam
 Lower East Coast – Container handling facilities at Gangavaram and Krishnapatnam ( in
operation)
 Upper East Coast – New container terminal at Paradip, New developments at Kulpi –WB
(temporarily shelved) & Dhamra Port
5.3 The following map will show the expected scenario as regards the container throughput in 2020.
But depending on the various issues like connectivity, environment, shipping scenario in the world the
changes might affect the capacity enhancement. But the paragraph devoted to explain the regional
imbalance in container handling in India will largely explain the future challenges.
95
6.0 Intermodal systems:
6.1 In a fast changing and fast evolving transport scenario the ports must be integrated with the
total logistics chain. If we look at the problem globally, we can find different models and the successes,
but it might be relevant in this context to take assess this situation in the Indian context. Basically the
modes that interface the port are road, rail and inland waterways. The successful ports are capable of
seamlessly integrating these. But we must remember that the external conditions, which are much
beyond the control of port authorities, are definitely decisive factors in shaping a smart and agile Supply
Chain Systems.
6.2 Indian railways introduced container service for the first time in January 1966 and it provided an
integrated intermodal door-to-door service within the country at competitive rates. Containers with a
pay load of five tonnes were loaded, sealed and taken over by the railways at the consignor’s godown
and subsequently delivered at the consignee’s godown. Both road and rail transport was provided by
railways. The risk of loss, pilferage and damage was thus minimized besides the substantial saving in
packaging costs.
6.3 In 1969, Indian railways also started the Freight Forwarder Scheme. Selected road haulers were
enlisted to work as freight forwarders for booking consignments from individual parties followed by
clearance in containers as well as wagon loads. The road haulers carried the consignments in their
vehicles between the rail-head and the godowns.
7.0 INLAND CONTAINER DEPOTS (ICDS) & CFS: Roles and functions:
7.1 Complete benefits of containerization can be obtained only if the containers are permitted to
move to the locations of the original (many times it is inland) cargo generation points. The Government
of India decided to set up Inland Container Depots (ICDs) which are also called dry ports. Shipping
formalities can be completed in ICDs for containerized cargoes instead of at the exit gateway port.
Inland Container Depots are intermodal interfaces between connecting modes of transportation.
“An Inland Container Depot is an organization offering a total package of activities to handle and control
container and general cargo flows between road, rail and waterways, and vice versa, resulting in
maximum service for inland transportation at minimum costs."
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7.1 Definition of ICD/CFS:
7.1.1 An Inland Container Depot / Container Freight Station may be defined as :-
A common user facility with public authority status equipped with fixed installations and
offering services for handling and temporary storage of import/export laden and empty
containers carried under customs control and with Customs and other agencies competent to
clear goods for home use, warehousing, temporary admissions, re-export, temporary storage for
onward transit and outright export. Transhipment of cargo can also take place from such
stations.
7.2 Distinction between an ICD & a CFS :
7.2.1 Functionally there is no distinction between an ICD/CFS as both are transit facilities, which offer
services for containerization of break bulk cargo and vice-versa. These could be served by rail and/ or
road transport. An ICD is generally located in the interiors (outside the port towns) of the country away
from the servicing ports. CFS, on the other hand, is an off-dock facility located near the servicing ports
which helps in decongesting the port by shifting cargo and Customs related activities outside the port
area. CFSs are largely expected to deal with break-bulk cargo originating/terminating in the immediate
hinterland of a port and may also deal with rail-borne traffic to and from inland locations.
7.2.2 Keeping in view the requirements of Customs Act, and need to introduce clarity in
nomenclature, all containers terminal facilities in the hinterland would be designated as" ICDs".
7.3 Functions of ICDs/CFSs :
7.3.1 The primary functions of ICD/CFS may be summed up as under:
a. Receipt and dispatch/delivery of cargo.

b. Stuffing and destuffing of containers.
c. Transit operations by rail/road to and from serving ports.
d. Customs clearance of import and export cargoes.
e. Consolidation and desegregation of LCL cargo.
f. Temporary storage of cargo and containers.
g. Reworking of containers.
h. Some ICDs also carry out maintenance and repair of container units.
7.4 The operations of the ICDs/CFSs revolve around the following centres of activity:
7.4.1 Rail Siding (in case of a rail based terminal): The place where container trains are received,
dispatched and handled in a terminal. Similarly, the containers are loaded on and unloaded from rail
wagons at the siding through overhead cranes and / or other lifting equipments.
7.4.2 Container Yard : Container yard occupies the largest area in the ICD.CFS. It is stacking area were
the export containers are aggregated prior to dispatch to port, import containers are stored till Customs
clearance and where empties await onward movement. Likewise, some stacking areas are earmarked
for keeping special containers such as refrigerated, hazardous, overweight/over-length, etc.
7.4.3 Warehouse: A covered space/shed where export cargo is received and import cargo
stored/delivered; containers are stuffed/stripped or reworked; LCL exports are consolidated and import
LCLs are unpacked; and cargo is physically examined by Customs. Export and import consignments are
generally handled either at separate areas in a warehouse or in different nominated warehouses/sheds.
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7.4.4 Gate Complex: The gate complex regulates the entry and exist of road vehicles carrying cargo
and containers through the terminal. It is place where documentation, security and container inspection
procedures are undertaken.
7.5 Benefits of ICDs/CFSs:
7.5.1 The benefits as envisaged from an ICD/CFS are as follows :- (The main benefits from ICDs/CFSs) :
(a) Concentration points for long distance cargoes and its unitization.
(b) Service as a transit facility.
(c) Customs clearance facility available near the centres of production and consumption.
(d) Reduced level of demurrage and pilferage.
(e) No Customs required at gateway port.
(f) Issuance of through bill of lading by shipping lines, hereby resuming full liability of
shipments.
(g) Reduced overall level of empty container movement.
(h) Competitive transport cost.
(i) Reduced inventory cost.
(j) Increased trade flows.
7.6 Normally ICDs provide the following services:
(a) Handling of containers from road, rail and barges to a temporary storage area (e.g., CY -
container yard).
(b) Intermediate storage between the various transportation modes. Special containers
and/or cargo may require additional provisions, such as refrigeration services and
special areas for dangerous cargo.
(c) Receipt and delivery of containers and general cargo. This may include activities such as
weighing, inspection of seals and damages, stickers and safety plate control and
container information control. Stuffed containers may be received from the satellite
Container Freight Stations (CFSs) in ready condition to be transported to the exit port.
Shippers may also directly bring "Less than Container Load (LCL)" cargoes for the
purpose of consolidation and dispatch.
(d) Cargo consolidation and distribution, if the container cannot be received or delivered
directly at the final consignee’s door. In this case, containers are stuffed with or
destuffed as LCL, depending upon the direction of the cargo movement prior to
dispatch.
(e) Depot functions as the storage for empty containers. Space may also be required for
temporary storage of loaded containers awaiting movement out of an ICD.
(f) Maintenance and repair services for containers -- Container handling equipment,
refrigeration equipment, road chassis etc. In this respect, an ICD is a self-sufficient unit.
(g) Customs clearance activities; at Inland terminals helps to decrease the dwell-time of
containers in deep-sea ports. These activities include checking of LCL cargo prior to
stuffing or after destuffing, checking container seals, assessment and valuation of
cargoes, perusal of container manifests, and so on. The transport of containers under
bond to ICDs from deep-sea ports is a necessary feature of well-developed multimodal
transport systems because this saves time & cost.
(h) Physical distribution services are provided economically at or close to the ICDs. Ideally
even garments can be ironed and packed, prices tagged on consumer goods, liquids in
bulk can be bottled – in short, a variety of cargo-related services to finish the goods are
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normally placed near the ICD itself. For agricultural products. ICDs might provide
refrigeration plants and warehousing facilities to prepare meat, fish and vegetables for
export.
7.7 Guided by economic and strategic considerations, each ICD may decide what functions it should
perform. Indian ICDs however may perform many of the possible functions outlined above. These
include stuffing, destuffing, locking, sealing, providing trailers, chassis, railways flats, repairs, handling
equipment, storage, facilities for reefer containers, customs examination and processing of customs
documents, issuance of combined transport document (CTD) by carriers, etc.
7.8 CFS has most of the functions including customs clearance /bonding etc. but not a railhead –
and they might be having a common customs control point. But the ICD-s mostly are having a dedicated
Customs station.
8.0 CENTRAL WAREHOUSING CORPORATION (CWC):
8.1 CWC (Central Warehousing Corporation) operations include scientific storage and handling
services for more than 400 commodities include Agricultural produce, Industrial raw-materials, finished
goods and variety of hygroscopic and perishable items.
 Scientific Storage Facilities for commodities including hygroscopic and perishable items
through network of 476 warehouses in India with more than 6000 trained personnel.
 Import and Export Warehousing facilities at its 36 Container Freight Stations in ports and
inland stations.
 Bonded Warehousing facilities.
 Disinfestation services.
 Handling, Transportation & Storage of ISO Containers
8.2 The largest CFSs at Kalamboli on Mumbai-Pune Highway and also import warehouse near JNPT
are both managed by CWC. There is also a CFS for export and import at Dronagiri Node (operated by a
private entity), in Navi Mumbai. In addition to the public sector CFSs, there are private CFSs at
Chembur, Taloja and Mulund in the Mumbai area.
9.0 Growth of Container Corporation of India Ltd. (CONCOR):
10.1 Container Corporation of India was incorporated in March 1988 under the Companies Act, and
commenced operation from November 1989 taking over the existing network of 7 ICDs from the Indian
Railways. From its humble beginning, it is now an undisputed market leader having the largest network
of 63 ICDs/CFSs in India. In addition to providing inland transport by rail for containers, it has also
expanded to cover management of Ports, air cargo complexes and establishing cold-chain. It has and will
continue to play the role of promoting containerization of India by virtue of its modern rail wagon fleet,
customer friendly commercial practices and extensively used Information Technology. The company
developed multimodal logistics support for India’s International and Domestic containerization and
trade. Though rail services is the main stay of CONCOR’s transportation plan, road services and also
provided to cater to the need of door-to-door services, whether in the International or Domestic
business.
10.2 Containerization of exports and imports does not begin and end at the ports. CONCOR provides
transport linkages between ports and the hinterland. Regular container trains are run to and from ports
to CONCOR's terminals in the hinterland. Some of the terminals are also served by road. With
liberalization and opening up of the India economy, lowering of import tariffs and reduction in the
number of commodities whose import/export was prohibited by the Government, there is an increasing
trend of containerized imports/exports into/from India. Along with the growth of container business at
Indian Ports, the level of containerization itself is increasing
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10.3 The advantage of containerized movement into the hinterland is self evident, a major plus being
the decongestion of ports which would lead to higher turnover and added growth. CONCOR'S existing
presence at port-towns is sizeable. CONCOR's Terminals at Mumbai at Mulund, New-Mulund &
Wadibundar cater to the Ports of Jawaharlal Nehru Port Trust and Mumbai Port Trust. Similarly, we have
presence at Tondiarpet and the Harbour of Madras for Chennai Port, and Cossipore Road and Shalimar
terminals at Kolkata cater to Kolkata & Haldia. There are terminals also at Cochin and Tuticorin and
Vishakhapatnam.
10.4 Presence in the port towns, in addition to the hinterland, integrates both end points of the
shipment route facilitating control over the entire logistics chain. Carrying this strategy
further, CONCOR has involved itself in operating container berths e.g. APM Terminals in JNPT. Thus it is
better equipped to provide integrated transportation logistics solutions to customers. Rail face
operation at Port terminals still remains a strong challenge even at the Private Ports – as the global
movement of containers ( including incidents / exigencies and container imbalances) pose very difficult
situation ( may be a congestion situation) for the terminal operator.
10.5 One of the major thrusts in improving the quality of service in area of exim business has come
with the introduction of new State-of-the-art Rolling Stock by CONCOR for running long lead export and
import special trains to and from the gateway ports. Presently CONCOR maintains 63 Container
terminals across the country [Purely EXIM terminals: 13, Combined Terminals 35 and Domestic: 15]. The
organization is running regular scheduled container rakes between the ports and the ICDs.
10.6 To maintain the flow of the container across the country – they have the following assets:
1. The number of container rakes: 250

2. Number of containers (domestic): 19000
3. Number of gantry cranes in the ICD-s: 14
4. Number of reach stackers: 53
10.7 These wagons run at higher speeds (100kmph) and safety norms than conventional railway
wagons, and have contributed significantly in reducing transits and improving the reliability of exim train
services. CONCOR procures 1350 wagons from IR workshops on a yearly basis and is in the process of
acquiring 3000 containers and 5 gantry cranes. Apart from above, deployment of tailor-made equipment
like Grappler arms etc. in some of the terminals is being contemplated to increase their handling
capacity and efficiency.
10.8 CONCOR’s website is extremely user-friendly providing train running schedules (not replicated
here as it changes from time to time), tariff for different destinations & for different types of containers,
on-line tracking of rakes / containers and other facility descriptions.
10.9 The EXIM warehousing space should has exceeded 2,50,000 Sqm., with facilities for handling
bonded cargo, multi stacking, consolidation of LCL cargo, air cargo handling etc. besides conventional
transit warehousing. CONCOR has already introduced value-added services like Palletisation/Fumigation
of cargo, Repacking/strapping of cargo etc. at all its terminals. Though presently CONCOR is providing
this service through contractors at some of its Exim terminals, these services are proposed to be
extended, and once they have been introduced, CONCOR will be geared to provide almost all
warehousing-related services to its users.
10.10 CONCOR sees its future growth in accessing the untapped potential market within the country
by opening more terminal facilities. The global trend in containerization of general cargo, particularly in
relation to international trade has been rapid from the 1960's. Abroad, 75-80% of general cargo is
containerized, as against approx. 50% in India. In India the percentage of container traffic out of the
total Port traffic has also risen from 0.2% in 1981 to 21% in 2013-14. The growth in containerization has
been faster than the growth in volumes of general cargo. This is partly because international trade in
focused on containerized cargo.
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10.11 The global trend is that 70-80% of containerized cargo moves directly between the hinterland
customers and the seaports in containers. Of total container handled at Indian Ports, CONCOR at
present moves 25-30%. There is therefore intrinsic potential for further growth in CONCOR business
apart from the push given by increase in foreign trade. In the decade of its existence, the throughput
growth of the company's exim business has been almost 20% per annum.
10.12 As a CFS operator CONCOR provides a number of value added services
 Transit warehousing for import export cargo

 Bonded warehousing, which helps importers to store import cargo and take partial
deliveries as and when required, thereby deferring duty payment
 Provision of air cargo complexes in some terminals
11.0 Hub & Spoke services at CONCOR:
11.1 One of the areas in which CONCOR faces competition in the transportation of goods is from
truck operators offering transportation by road. Competition with such operators is primarily on the
basis of price and dependability. The Company believes that it competes favorably with road
transportation on the basis of price on movement of heavier cargoes over longer distances, although the
truck operators may offer, among other things, greater flexibility with respect to the timing of
shipments. Volvo trucks, with vastly reduced transit times as compared to conventional trucks, are
challenging the rail transit times of CONCOR and are set to heighten competition.
11.2 In order to take full advantage of the rail linkages offered, while at the same time offering the
reach and dependability of road services, the concept of "hub and spoke" operations are likely to
become crucial in the company's long term development. Hub and Spoke operations are feasible for
both the international and domestic business segments. Such operations involve the linking of road or
short lead rail shuttle services within defined catchment areas, to long lead point to point train services.
11.3 In the international domain, some hubs like Tughlakabad are fed by several satellite locations
like Panipat or even Gwalior, until traffic justifies running a scheduled service from the satellite itself, as
was done in the case of Ludhiana and Moradabad, both of which started out as remote locations linked
to the hub terminal at Tughlakabad, but now function as stand-alone terminals.
11.4 Competition in the field of container handling is increasing, especially in the metropolitan ports.
Several companies have started operations in ports. In the deep hinterland, other operators have
entered the market in the sense that new terminals have been set up. However,
as CONCOR concentrates on its hub-spoke strategy, these developments can become complementary
to CONCOR's operations, as their competitors in the CFS business often become customers for transport
of containers from and to gateway ports.
Hub & spoke operation by CONCOR
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12. 0 Details of ICD- CFS operated by CONCOR
Babarpur(Panipat), BADDI, Baddi, Ballabhgarh, Bhagat Ki Kothi

(Jodhpur), Dhandharikalan (Ludhiana), DHAPPAR, Kanakpura
Northern Region
(Jaipur),KHATUWAS, Khemli (Udaipur), MORADABAD, Okhla (Delhi), Phillaur
(Ludhiana), Rewari, Sonepat, Suranassi, TUGHLAKABAD (Delhi)
CHINCHWAD (Pune), DCT TURBHE (Mumbai), DRONAGIRI Node (MUMBAI), ICD
Western Region
New MULUND (Mumbai), ICD PITHAMPUR (Indore), ICD RATLAM,MIRAJ
AMINGAON, BALASORE, DURGAPUR, Fatuha

Eastern Region (Patna), HALDIA, Majerhat(Kolkata), ROURKELA, SHALIMAR (Kolkata), TATA NAGAR
(JAMSHEDPUR)
CONTAINER FREIGHT STATION MILAVITTAN (TUTICORIN), DOMESTIC CONTAINER

TERMINAL SALEM MARKET, INLAND CONTAINER DEPOT TONDIARPET, INLAND
Southern Region CONTAINER DEPOT WHITEFIELD, INLAND CONTAINER DEPOT, IRUGUR, INLAND
CONTAINER DEPOT, TIRUPUR,KUDALNAGAR (MADURAI), PORT SIDE CONTAINER
TERMINAL HARBOUR OF CHENNAI, RAIL SIDE CONTAINER TERMINAL ,COCHIN
Bhusawal, DAULATABAD (AURANGABAD), INLAND CONTAINER DEPOT,

Central Region
NAGPUR, Mandideep Container Terminal, RAIPUR
DCT GUNTUR, DESUR (BELGAUM), INLAND CONTAINER DEPOT, SANATHNAGAR

South Central Region
(Hyderabad), Nagalapalle, VISHAKHAPATNAM
Ankleshwar, CFS/Gandhidham, Chhani (Vadodara), ICD-KHODIYAR

North Western Region
(Ahmedabad), RCT VADODARA, SABARMATI (Ahmedabad)
Agra East Bank (Agra), DADRI (Greater Noida), Kanpur, Madhosingh

North Central Region
(Mirzapur), Malanpur (Gwalior), Rawtha Road- KOTA (RDT)
13.0 Private Rail Operators (CTO):
13.1 In India, railways are under the control of the government which is the sole provider of the
infrastructure, operations and regulatory functions. Private participation, though very limited, was
largely in the domain of infrastructure creation. In January 2006, in a landmark initiative to introduce
competition in the container operations segment, the Ministry of Railways allowed the entry of private
and public sector operators to obtain licences for running container trains on the Indian Railways (IR)
network. Until then, the Container Corporation of India, a subsidiary of IR, was the monopoly operator
of container trains in India. This initiative was the first significant move of its kind where private parties
were allowed to make entry in the domain of railway operations with direct customer interfacing. The
response to the policy was good and 15 new entrants obtained licences to run container trains. Due to
lack of clarity or inconsistency in matters pertaining to haulage charges, maintenance of wagons, transit
guarantees from IR and terminal access charges, operators started feeling skeptical about the viability of
the business.
13.2 For becoming a private Container Train Operator, the following Licenses would be given:
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License Area of Operation Registration Fee
Category (Rs m)
I JNP/Mumbai Port - National Capital Region rail corridor 500 (automatically
and beyond. This category will also include all domestic includes all four
traffic. categories)
II Rail corridors serving JNP/Mumbai Port and its 100
hinterland in other than National Capital Region and
beyond. This category will also include all domestic
traffic except on category I routes.
III Rail corridors serving the ports of Pipavav, Mundra, 100
Chennai/Ennore, Vizag and Kochi and their hinterland.
This category will also include all domestic traffic except
on category I routes.
IV Rail corridors serving other ports like Kandla, New 100
Mangalore, Tuticorin, Haldia/Kolkata, Paradip and
Mormugao and their hinterland and all domestic traffic
routes. This category will also include all domestic
traffic except on category I routes.
13.3 The rolling stock had to be procured by the operators based on IR approved design. It would
have to be inspected by IR as per the rules in force. Locomotives would be supplied by the IR. For
terminal activities, operators were required to either have a rail linked Inland Container Depot (ICD) or
give an assurance within a period of six months of getting approval that they would construct their own
ICD within three years or arrange to furnish a lease agreement with an existing ICD owner.
13.4 Maintenance of track at the terminals would be done by the operators at their own cost, with IR
being paid for inspection/supervision according to the prescribed prevailing rates. Maintenance of
rolling stock would be done by IR, for which the prescribed charges would be recovered from the
operators. Operators could carry all goods subject to conditions specified in the goods tariff and under
provision of IR Act and any other instructions issued on the subject by MoR from time to time. The
operators were given full freedom for setting tariff from their customers.
13.5 Operators had to pay haulage charges to IR for using its infrastructure. IR reserved the right to
determine haulage charges. Trains would be dispatched on a nondiscriminatory ‘first come first served’
basis. IR would not provide any transit times guarantees. The process of registration as well as train
operations would be uniformly applicable to all including CONCOR. The scheme would be open for one
month in a year for registration. 15 players took this scheme. The operators had made hefty
investments. Though they had taken care of the wagon shortage (here container wagons are identified
as BLCA and BLCB) – the factor concerning locomotives remained. Plus there was a factor that the
entire haulage (thus associated payments) remained with the IR. A time had come, with lean bookings
they had been mostly out of pocket. However their marketing strategies; associated with general
volume increase in EXIM container trade is giving results. It is good news for the shippers / importers.
13.6 It has been established that containerization cannot be successful unless the connectivity is
established and it is reliable. With the ship-sizes growing the challenge is with volumes and it is expected
that investments in private railways will certainly assist in making 2-way inland transport more seamless.
13.7 Here is a list of 16 private rail operators that have been given license for running trains:
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13.8 To the credit of CTOs, more commodities moved in containers and new services were being
provided on routes where road was a monopoly.
14.0 The following examples demonstrate this:

 One of the operators was providing customized solutions for moving marble in containers
from Kishangarh and Makrana (both in Rajasthan) to Kolkata (West Bengal). Earlier this
traffic was moving entirely by road. Now 60% of marbles on this route move in containers.
 25% market was captured by CTOs for tiles moving from Morbi (Gujarat) to Eastern India.
 There was a major shift from road to rail for refrigerated containers from National Capital
Region to Mumbai.
 Arshiya Rail Infrastructure was moving aluminum ingots in customized container from
Jharsuguda (Orissa) to Vizag Port.
 Adani Logistics Ltd was transporting cars in specially designed containers for carrying
automobiles
15.0 Inadequate Progress & infrastructural problems:
15.1 Despite all these measure which are intended to facilitate multimodal transport, the progress of
multimodal transport in India has not been satisfactory. The following points will explain the situation.
The containerization in India continues to be essentially a port to port movement and the economic
benefits of multimodal transport have been realized only to a limited extent by the Indian trade and
transport industry.
(a) Container handling facilities at most of the ports are not adequate to attract main line container
vessels who continue to rely to a large extent on feeder services entailing additional cost.
(b) The cost of moving a container through an Indian port is comparatively higher than the cost in
other South East Asian ports, i.e. Singapore, Hongkong, Colombo, etc.
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(c) Both road transport and rail transport have not been adequately developed as yet for the inland
movement of containers.
(d) National highways need proper connections with state highways
(e) Carrying capacity need be enhanced
(f) Last mile connectivity is missing in many ports – thus efficacy of intermodal transport is reduced
(g) The more mature ports are unable to service the rail mode and as a result the rakes are often
waiting outside the port in different zones – thereby adding to eth turn round time of the rakes
16.0 Right kind of Co-ordination:
16.1 We expect that the intermodal challenges can be effectively met through inter-ministerial
coordination and keeping trade involved in developments and allied issues. It is a general feeling that
authorities like ports & customs and similar ones must act transparently so that the synergy brings in
more business and words are spread that it is easy to do business in India. This is apparently a very sore
point – as some of the international agencies had been questioning the control systems and the
operational excellence in Indian ports; especially container ports.
17.0 Feeder, transshipment cargo, Main Line and Largest Container Ship:
Feeder vessels are small capacity vessels which are mostly Coastal and collect cargo at Main Line port
where bigger vessels call. Containers will be collected or distributed from Main line port to smaller ports
by Feeder, such cargo is called as TP or transshipment cargo. Main line ports are Singapore, Colombo,
Shanghai, Hong Kong, Rotterdam etc.
oooooo
1. When did the containerization start in India? Which international company started its operation?
Which Indian companies took the lead?
2. Which ports are having container terminals? Which other ports are poised to come in the
forefront as far as projection till 2020 is concerned?
3. Examine the reason for imbalance between Western Ports and Eastern Ports in India.
4. What is an Inland Container Depot? Enumerate services provided by an ICD.
5. Name ten Inland Container Depots in India and mention the region it is serving.
6. What is a Container Freight Station and how do its functions differ from an ICD.
7. What is the role of Container Corporation of India in developing containerization? How does it
help in the movement of containers? What are the latest projects undertaken by CONCOR to
make intermodal movement more effective and optimized.
8. What assets are being used by the CONCOR and what more are being added to their fleet?
9. Explain the reasons for inadequate progress of multimodal transport been slow in India? Analyze
and suggest measures for improvement.
10. How is CWC helping the CONCOR?
11. Give full forms of following abbreviations:
(a) AISC (b) INSA (c) LCL (d) CY (e) CTD (f) CONCOR
(g) CWC (h) Hub & Spoke model in CONCOR (i) CFS

(a) The information and books listed below, as well as in all other subsequent lessons, are available in
library of our Institute.
(b) This is not an exhaustive list, keeping in mind the fact that the course is for beginners.
Containerization & Multimodal Transport in India -- Dr. K.V. Hariharan, 3rd Ed., 2000 Magazines:
 Containerization International
 Link
 Cargo talk
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LESSON 9
QUALITY MANAGEMENT IN SHIPPING AND ISM CODE
1.0 Introduction:
1.1 The concept of "Quality Management" is converted into something very difficult and
incomprehensible by many people, but in simple language quality management is nothing
but keeping every thing in proper order. What is going to be done shall be planned and
executed according to established procedures and instructions. Nothing shall happen
coincidentally and depend on a single person's personal opinion and mood.
1.2 Quality Management requires more or less a change of attitude at all levels of an
organisation and this requires information to and motivation from all employees.
2.0 Quality Management :
2.1 In India, the Bureau of Indian Standards (BIS), formerly known as the Indian Standards
Institute (ISI) has been accepted as a hallmark of Quality. Till the nineties, the familiar ISI mark
was just about the only credible quality stamp available. This government owned agency
dominated the domestic product certification business, till the multinational competition
redefined the meaning of quality. This agency is in its 50 years of existence and feels that it is
time for introspection. Although BIS schemes are mostly voluntary, there are 135 items, which
concern consumer health and safety, for which certification is mandatory.
2.2 With 17,000 standards to its name and 12,600 licences in operation, BIS is one of the
worlds largest certification agencies. “BIS” core competence has been limited to its role as
the sale product certification agency in India. In the important and emerging quality and
environmental management services segment, the agency is yet to make a mark.
2.3 BIS launched its quality systems certification scheme under ISO 9000 series of
standards in 1991 but has not been able to grab a major share of that market. BIS is actively
considering introducing some sort of grading and raising standards which could be an
intermediary between the minimum standards and the international standards. To this end, the
organization is now setting its sights on upgrading grading levels to international standards.
3.0 ISO 9000 :
3.1 The International Standards for Quality Management defines the basic and fundamental
terms relating to quality concepts, as they apply to products and services, for the preparation
and use of quality standards and for mutual understanding in international communications.
3.2 ISO 9001 is the international standard that specifies requirements for a quality
management system (QMS). Organizations use the standard to demonstrate the ability
to consistently provide products and services that meet customer and regulatory
requirements. Successful businesses understand the value of an effective QMS that
ensures the organization is focussed on meeting customer requirements and they are
satisfied with the products and services that they receive. ISO 9001 is the world’s most
recognized management system standard and is used by over a million organizations
across the world. ISO 9001 was first published in 1987 by the International Organization
for Standardization (ISO), an international agency composed of the national standards
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bodies of more than 160 countries. The standard was revised in 1994, 2000, 2008 and
in September 2015. ISO 9001:2015 applies to any organization, regardless of size or
industry. More than one million organizations from more than 160 countries have
applied the ISO 9001 standard requirements to their quality management
systems. Organizations of all types and sizes find that using the ISO 9001 standard
helps them organize processes, improve the efficiency of processes and continually
improve.
While the 9001 standard is appropriate for all production and service industries,
shipping needed some specific system in similar lines as 9001.
3.3 As a consequence, they contain some elements that are not fully applicable to:
 The quality management of "Ship Transportation Services"; or

 The quality management of "Ship Management Services".
3.4 There are also specific activities that have vital importance to quality in shipping, which
the ISO Standards do not address.
4.0 THE SHIPPING INDUSTRY:
4.0 Background:
4.1 The recession in shipping during the 1980s led to re-alignment of methods of ship
operations. Newly formed ship management companies took over some of these functions from
the traditional shipowners. Methods and systems of reducing and cutting operating costs
became necessary. Many ships were re-flagged allowing new job opportunities from non-
traditional seafaring countries. The repairs and maintenance of a vessel, though important,
received low priority thereby resulting in breakdowns and subsequent claims. The increased
public awareness on protection of the environment further highlighted the damage caused by
pollution of seas by ships, especially oil tankers.
5.0 Action by shipping industry:
5.1 Before looking at these actions it is pertinent to understand the meaning of some of the
relevant terms. These are defined in ISO 8402:1994.
(1) Quality – Totality of characteristics of an entity that bear on its ability to satisfy stated
and implies needs.
(2) Quality Assurance – All the planned and systematic activities implemented within the
quality system, and demonstrated as needed, to provide adequate confidence that
an entity will fulfill requirements for quality.
(3) Quality Management – All activities of the overall management function that
determine the quality policy, objectives and responsibilities, and implement them by
means such as quality planning, quality control, quality assurance and quality
improvement within the quality system.
(4) Total Quality Management – Management approach of an organization, centred on

quality, based on the participation of all its members and aiming at long-term
success through customer satisfaction, and benefits to all members of the
organization and to society.
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6.0 The International Ship Manager’s Association (ISMA) was established on 30th April 1991
and compliance with code, referred above, became compulsory for its members. By 1995 more
than 40 member companies of about 60 million DWT were using it. This was the first attempt in
documenting a quality system.
7.0 Some other shipping companies adopted the ISO 9002 with some modification making it
applicable to a service industry like shipping.
7.1 The Classification Society Det Norske Veritas (DNV) too developed a Safety and
Environment Protection (SEP) certification system which addressed the question of quality.
7.2 The shipping industry is one of the most international industry in the world. It embraces
virtually every nationally and culture. There is growing consciousness today about safety, quality
and environmental issues.
7.3 The concept of Maritime Safety has far too long been associated with the safe condition
of the ship. The Classification Societies and Statutory Authorities all have been concerned with
the design, construction and maintenance aspects of the ship. Considerable improvements
were made in these areas over the years and the systems worked reasonably satisfactorily as
far as the condition of the ship itself was concerned. The Safety of Life at Sea (SOLAS) and
Marine Pollution (MARPOL) Conventions represented significant developments in our quest for
achieving higher standards in Maritime Safety. In all these efforts, the "Ship" remained at the
core of the emphasis.
7.4 Inspite of the above, maritime casualties continued to rise causing great concern not
only to the maritime community but to all living beings due to their much larger environmental
implications. A survey by the Japanese Maritime Research Institute revealed that 80% of the
casualties were caused by human error. Only 20% of the casualties related to the ship
condition. No wonder, therefore, that the concern for safety shifted the focus from the ship to
the human factor behind it. A new participative approach to the problem has emerged where
every participant has a role to play in creating and promoting a safety conscious environment.
The adoption of the International Safety Management (ISM) code by the IMO Assembly in
November 1993 is the most significant step in this direction.
7.5 The IMO Assembly adopted resolution A.680 (17) “IMO Guideline on Management for
the Safer Operation of Ships and for Pollution Prevention” on 6th November 1991. The IMO
subsequently adopted another resolution A. 741 (18) on 17th November 93. The “International
Management Code for the Ship Operation of Ships and for Pollution Prevention (ISM Code) was
annexed to this resolution. The ISM Code is now compulsory, from 1st July 1998, for all
passenger ships, oil and chemical tankers, bulk carriers, gas carriers and high speed crafts of
500 GT and above. For other cargo ships and mobile offshore drilling units of 500 GT and
above this will be in force from 1st July 2002.
8.0 INTERNATIONAL SAFETY MANAGEMENT CODE (ISM CODE) :
8.1 Preamble:
 The purpose of this Code is to provide an international standard for the safe
management and operation of ships and for pollution prevention.
 The Assembly adopted resolution A.443(XI) by which it invited all Governments to

take the necessary steps to safeguard the shipmaster on the proper discharge of his
responsibilities with regard to maritime safety and the protection of the marine
environment.
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 The assembly also adopted resolution A.680(17) by which it further recognised the
need for appropriate organisation of management to enable it to respond to the need
of those on board ships to achieve and maintain high standards of safety and
environmental protection.
 Recognising that no two shipping companies or shipowners are the same, and that
ships operate under a wide range of different conditions, the Code is based on
general principles and objectives.
 The Code is expressed in broad terms so that it can have a widespread application.
Clearly, different levels of management, whether shore-based or at sea, will require
varying levels of knowledge and awareness of the items outlined.
 The cornerstone of good safety management is commitment from the top. In matters
of safety and pollution prevention it is the commitment, competence, attitudes and
motivation of individuals at all levels that determines the end result.
8.2 Applicability:
On 24th May, 1994, SOLAS decided on a new Chapter IX of SOLAS, which makes the ISM
Code mandatory for ships regardless of the date of construction as follows :
 All passenger ships, including high speed light craft (regardless of size), not later
than 1st July, 1998.
 Oil tankers, chemical tankers, gas carriers, bulk carriers and cargo high speed crafts
of 500 gross tonnage and over, not later than 1st July, 1998.
 Other cargo ships and mobile offshore drilling units of 500 gross tonnage and over,
not later than 1st July, 2002.
8.3 Requirements:
1. GENERAL
2. SAFETY AND ENVIRONMENTAL PROTECTION POLICY
3. COMPANY RESPONSIBILITIES AND AUTHORITY
4. DESIGNATED PERSONS (S)
5. MASTER'S RESPONSIBILITY AND AUTHORITY
6. RESOURCES AND PERSONNEL
7. DEVELOPMENT OF PLANS FOR SHIPBOARD OPERATIONS
8. EMERGENCY PREPAREDNESS
9. REPORTS AND ANALYSIS OF NON-CONFORMITIES,
ACCIDENTS AND HAZARDOUS OCCURRENCES
10. MAINTENANCE OF THE SHIP AND EQUIPMENT
11. DOCUMENTATION
12. COMPANY VERIFICATION, REVIEW AND EVALUATION
13. CERTIFICATION, VERIFICATION AND CONTROL
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9.0 Description:
9.1 The International Sefety Managgement (ISM) Code, which was adopted by the
International Maritime Organisation (IMO) Assembly in Resolution A 741(18) on 4th November
1993, aims to provide an International management code for the safe operation of ships and for
pollution prevention. The objectives of the code are as follows:
 To ensure safety at sea

 Prevention of human injury or loss of life
 Avoidance of damage to the environment, in particular to the marine environment
and to property.
9.2 To achieve the objective of the code, every company has to develop, implement and
maintain a Safety Management System (SMS) which includes the following functional
requirements:
 A safety and environmental protection policy

 Instructions and procedures to ensure safe operation of ships and protection of
environment in compliance with relevant international and flag state legislation.
 Defined level of authority and lines of communication between and amongst shore
and Shipboard personnel.
 Procedure for reporting accidents and no-conformities with the provisions of the
code.
 Procedure to prepare for and respond to emergency situations.
 Procedures for internal audits and management reviews.
9.3 The ISM Code is a management system code designed to cover the organisational
arrangements adopted by a shipping company to achieve the objectives of the code. The code
establishes an international standard for the safe management and operation of ships, by
setting rules for the organisation of company management in relation to safety and pollution
prevention for the implementation of the Safety Management System.
10.0 Certification:
10.1 To ensure due and proper compliance with the requirements of the ISM Code, a scheme
of certification, verification and control is provided. The code provides that the ship should be
operated by the company which is issued a Document of Compliance (DOC) relevant to that
ship, by the Administration or an Organisation recognised by the Administration.
10.2 An assessment of the company's Safety Management System is made by the authority
concerned to ensure that the system complies with the requirements of the ISM Code. A
Document of Compliance (DOC) is therefore issued to the company. The DOC specifies the
types of ships it covers.
10.3 A copy of the DOC should be placed on board each relevant ship for being produced for
verification whenever called for. Another certificate called "Safety Management Certificate
(SMC)", is issued to each ship after an assessment of the ship is carried out by the
Administration or an Organisation authorised by the Administration to verify that the company
and the Shipboard management are operating in compliance with the code. Periodical
verification of the proper functioning of the ship's SMS as approved is carried out by the
authority concerned with has issued the relevant certificate.
ooooo
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1. Describe factors leading to the development of quality management in

shipping.
2. Which ISO standard can be used in the shipping industry?
3. What is the function of BIS? Why was it not able to grab a major share of
the quality management services market?
4. Why was a need felt to shift emphasis on quality from the “ship” to the
“human factor” in shipping?
5. Discuss the ISM Code with reference to (a) Application,

(b) Objectives and (c) Certification.
6. How is SMS implemented?
7. Write short notes on: (i) ISO Standards

(ii) SMC
(iii) DOC
**********
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LESSON 10
SHIPPING ORGANISATIONS : INTERNATIONAL AND INDIAN
INTERNATIONAL TRANSPORT WORKERS’ FEDERATION
1.0 The International Transport Workers' Federation is founded on respect for human and
trade union rights. The federation claims that these rights are regularly violated and as a
defender of these rights it finds itself in conflicts with employers and governments. Its campaign
against the Flags of Convenience (FOC) is the most visible part of that conflict. Behind that
conflict there is a steady program of work promoting solidarity between workers in the transport
industry and supporting workers in an uneven fight against the worst kind of employers.
1.1 The International Transport Workers' Federation (ITF) is an international federation of

transport workers' trade unions. Any independent trade union with members in the transport
industry is eligible for ITF membership. According to ITF; around 700 unions representing over
4.5 million transport workers from some 150 countries are their members. It is one of several
Global Federation Unions allied with the International Trade Union Confederation (ITUC).
The ITF's headquarters is in London and it has offices in Amman, Brussels, Nairobi, New Delhi,
Ouagadougou, Rio de Janeiro and Tokyo.
1.2 The condition of membership is that democratic principles must be upheld and be free of
outside control and interference. The ITF brings together the trade unions with transport workers
from most of the free economies of the world.
1.3 The aims of the ITF are based on the UN Declaration of Human Rights and the rights of
freedom of association laid down in the ILO convention. The ITF's aim is set out in the
Constitution as follows:-
1) To promote respect for trade unions and human rights worldwide.

2) To work for peace based on social justice and economic progress.
3) To help its affiliated unions to defend the interest of their members.
4) To provide research and information services to its affiliates.
5) To provide general assistance to transport workers in difficulties.
1.4 The ITF represents the interests of transport workers' unions in bodies that take
decisions affecting jobs, employment conditions or safety in the transport industry, such as the
International Labour Organization (ILO), the International Maritime Organization (IMO) and the
International Civil Aviation Organization (ICAO).
1.5 An executive board meets twice a year and is backed up by a management sub-
committee for day to day administrative matters with a full time General-Secretary being elected
at each congress.
1.6 The basic precept of the ITF is that, to be effective, unions must support each other.
Transport being international and the very nature of the industry make it particularly vulnerable
to pressure form employers and governments. The ITF brings together all workers involved in
transport to provide strength through solidarity -- fishermen, truck drivers, airline pilots, dockers,
railway men and seamen and etc. and can support each other within the ITF.
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1.7 The Federation was first set up in 1896 as a group of European and US trade unionists
in ship and dock work. Two years later it became the ITF. Until the end of the Second World
War it remained European dominated but since then has increased its influence in developing
countries in particular.
1.8 The ITF has an active information section publishing regular seafarer's bulletin and
monthly news and a series of study bulletins on labour related matters. The ITF informs and
advises unions about international developments in transport. ITF also maintain a
specialist education department, dedicated to the development of strong and democratic
transport unions.
1.9 The best known aspect of the ITF's work is its campaign against the FOC. The
campaign is waged jointly by the seafarers' and dockers' affiliates with two main objectives. The
first one is establish a link between the flag of a ship and the domicile of the owners, managers
and seafarers. The second is to protect seafarers on FOC ships from exploitation.
1.10 The practical symbol of this campaign is that more than 2500 FOC ships now sail with
ITF Blue Certificates. These certificates are issued by the Federation to the ship-owners who
have signed an agreement (employment contract) with the crew which the ITF or its affiliates
consider acceptable. Ships without the Blue Certificate may find themselves subject to industrial
action in the ports where ITF inspectors regularly visit ships to check on conditions of
employment.
1.11 At the moment the point of concern for the ITF is the development of the so-called
second registers which the Federation sees as an attempt by the employers to enjoy the
exploitative benefit of FOC without the attached stigma. The ITF may not be popular with some
ship-owners but it claims to fight an honest battle and has had achieved some success in its
control of the worst abuses of labour.
1.12 The fact remains that their almost universal support from shore based transport unions
makes it very simple for them to "blacklist" any ship with which they are in dispute. This started
in 1950 after their Stuttgart Congress, wherein the ITF adopted a 'Plan of Action' which in
principle required all owners to adhere to certain defined minimum conditions. Failure in action
would result in boycott bringing the owner to the negotiating table. Such a ship will remain
immobilised through lack of tugs, unopened lock gates, etc., until the ITF's demands are met.
1.13 In later years the ITF's motive has been called into question in some quarters. The
weakness which seems almost inevitable with any well meaning political body is that sooner or
later hypocrisy and/or extremism start to appear. The impression one gets is that they seem to
believe that by forcing all shipowners to pay at or above a certain scale, the chances of more
work for seamen in the developed world will be improved. In pursuing this course their target is
often on a ship employing men from, say, the Philippines, who may well be enjoying a rate of
pay fully comparable with what they would be getting in their own country.
1.14 Perhaps in truth they want to make Filipino crews an unattractive proposition in the belief
that owners will turn back to recruiting crews from their own countries. Again, the ITF were quick
to 'blacklist' a free flag ship owned by a highly respected private Japanese line which provided
good conditions for its crew but which refused to make contributions of about $230 per crew
member per year into the ITF coffers. Were their efforts always specifically directed at real "rust-
buckets" the world would love them. They loose some of their credibility, however, when they
appear to go for large, properly run ships with foreign crews because these are owned by the
companies with enough money to pay the levies that the ITF imposes upon them.
1.15 According to ITF –“Despite the hardships, many FOC seafarers are too frightened to
protest. Unscrupulous manning agents circulate the names of seafarers who complain to
inspectors. It is still common practice for a ship's captain to write ‘ITF troublemaker’ in a
seafarer's discharge book. With such a mark on their record, a seafarer may never be employed
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again. Some seafarers have even been jailed on returning home. And with even more cheap
sources of labor opening up – notably China – conditions and pay risk becoming worse.”
1.16 The ITF should, however, never be neglected as an entity. Their fund raising from the
affected ships now provides for permanent ITF officials in many major ports and their
intelligence network is up to date.
2. INTERNATIONAL CHAMBER OF SHIPPING (ICS)

2.0 This was originally established in the year 1921 and called the International Shipping
Conference. In 1948 the name was altered to international Chamber of Shipping.
2.1 ICS is an association of national organisation representing private shipowners in various

countries, comprising 50% of the world's active shipping fleet.
3.2 Objectives of ICS are:
(i) To promote interests of its members in matters of general policy.
(ii) To influence framing of policies by co-ordinated representation in the

governments of countries represented by their members.
(iii) To co-operate with other bodies on problems of mutual concern.
3.3 ICS can only make recommendations and suggestions. However it ahs no power to
implement them on its own.
3. INTERNATIONAL SHIPPING FEDERATION

3.0 This is a federation of national shipowners' organizations and is administered by General
Council of British Shipping (GCBS). When it was founded in 1909, it was exclusively a
European Organisation. However, in 1919, with the creation of ILO it mutually altered both the
membership and the scope of the Federation.
3.1 ISF is now an international organisation concerned primarily with the whole and ever-
widening field of industrial relations for shipping. It is basically a consultative and advisory
origination which gives shipowners of different nations chance to exchange views on personnel
and social problems affecting the shipping industry. India is a member.
4. INTERNATIONAL CHAMBER OF COMMERCE (ICC)

4.0 ICC is a worldwide organisation for business as a whole, based in Paris. It works
through a number of commissions covering various aspects of its work. Maritime affairs are the
responsibility of the Maritime and Surface Transport Commission. The commission has been
responsible for establishing Shippers' Councils, the International Maritime Bureau (IMB) and the
Centre for Maritime Co-operation.
4.1 The Commission is unique in the sense that it is the only body which brings together all
those concerned with maritime and international affairs from developed and developing
countries and whether shipowners, shippers, insurers, forwarders, bankers or representatives of
major national and international shipping associations and as observers, intergovernmental
bodies.
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4.2 ICC is the world’s largest business organisation, representing more than 45 million
companies in over 100 countries. ICC’s core mission is to make business work for everyone,
every day, everywhere.
4.3 Through a unique mix of advocacy, solutions and standard setting, ICC promoteS
international trade, responsible business conduct and a global approach to regulation, in
addition to providing market-leading dispute resolution services. Our members include many of
the world’s leading companies, SMEs, business associations and local chambers of commerce.
4.4 ICC represents business interests at the highest levels of intergovernmental decision-
making, whether at the World Trade Organization, the United Nations or the G20 ensuring the
voice of business is heard. It is this capacity to bridge the public and private sectors that sets us
apart as a unique organization, responding to the needs of any player involved in international
commerce.
4.5 ICC also has a long history of formulating the voluntary rules by which business is
conducted every day from internationally recognised Incoterms rules to the UCP 600 Uniform
Customs and Practice for Documentary Credit that are widely used in international finance.
In addition, we specialise in world-class business and legal training and are an industry-leading
publisher of practical tools for international business, banking and arbitration. So, from the small
e-commerce start-up in Istanbul to the multinational software company in Delhi, businesses
worldwide can benefit from ICC’s rules and mechanisms for the conduct of trade.
4.6 The “Incoterms” or International Commercial Terms are a series of pre-defined

commercial terms published by the International Chamber of Commerce (ICC) relating
to international commercial law. They are widely used in international commercial
transactions or procurement processes and their use is encouraged by trade councils, courts
and international lawyers. A series of three-letter trade terms related to common contractual
sales practices, the Incoterms rules are intended primarily to clearly communicate the tasks,
costs, and risks associated with the global or international transportation and delivery of goods.
Incoterms inform sales contracts defining respective obligations, costs, and risks involved in the
delivery of goods from the seller to the buyer, but they do not themselves conclude a contract,
determine the price payable, currency or credit terms, govern contract law or define where title
to goods transfers.
The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide
for the interpretation of most commonly used terms in international trade. They are intended to
reduce or remove altogether uncertainties arising from differing interpretation of the rules in
different countries. As such they are regularly incorporated into sales contracts worldwide.
"Incoterms" is a registered trademark of the ICC. The first work published by the ICC on
international trade terms was issued in 1923, with the first edition known as Incoterms published
in 1936. The Incoterms rules were amended 7 times over the period and the eighth version—
Incoterms 2010 — having been published on January 1, 2011. The ICC has begun
consultations on a new revision of Incoterms, to be called Incoterms 2020.
4.7 The International Maritime Bureau (IMB) is a specialized department of the ICC. The
IMB's responsibilities lie in fighting crimes related to maritime trade and transportation,
particularly piracy and commercial fraud, and in protecting the crews of ocean-going vessels. It
publishes a weekly piracy report and maintains a 24-hour piracy reporting centre in Kuala
Lumpur, Malaysia. The IMB is part of ICC Commercial Crime Services whose other divisions
include The Counterfeiting Intelligence Bureau, The Financial Investigation Bureau and
FraudNet. FraudNet is the world's leading network of fraud and asset recovery lawyers. The
bureau, endorsed by the UN's IMO, was founded in 1981. The body has observer status
with Interpol and a MOU with the World Customs Organization.
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5. INTERNATIONAL MARITIME SATELLITE ORGANIZATION
(INMARSAT)
5.0 Based in London, INMARSAT provides via satellites reliable communication services to
shipping and aviation industries, viz., fax, telex, telephones, distress and safety data. Maritime
distress and safety communications today rely permanently on the capability of a ship in
distress to alert another ship in the vicinity.
5.1 INMARSAT began its operations in 1982 and since then it has made vast strides by
procuring more advanced generation of satellites. It is well linked with international
telecommunication networks of various countries by a system of coast earth stations.
5.2 The organisation is supported by member countries each of which has an investment
share based on its actual usage of the system.
5.3 IMO decision of 1987 to replace the present maritime distress and safety system with
GMDSS(Global Maritime Distress and Safety System) has been significant development in
increasing the role of INMARSAT's satellites for rapid and reliable communications. GMDSS is
a largely automated system and requires ships to carry a range of equipment capable of a
simple operation.
6. INTERNATIONAL LABOUR ORGANISATION (ILO)
6.0 ILO was set up in 1919 as a tripartite organisation with representatives of workers,
employers and governments taking part on its work on an equal footing. It proclaims the right of
all human beings to pursue both their material well being and their spiritual development without
any hindrance. It further states that poverty anywhere constitutes a danger to prosperity
everywhere. In 1969 ILO had the distinction of winning the Nobel Peace Prize.
6.1 The main task of ILO is to impose conditions of life and work by building a
comprehensive code of law and practice. The Conventions adopted by International Labour
Conferences are legal instruments. Their ratification involves a formal commitment by a member
state to apply the provisions.
6.2 In shipping and ports, ILO is concerned with:
(i) Protection of seafarers, dockworkers and fishermen.
(ii) Updating of minimum standards of maritime labour pertaining to wages, hours of

work and holidays, manning, crew accommodation on board recruitment,
repatriation, training, health, etc.
(iii) Promoting research and publishing work.
6.3 The International Institute for Labour Studies, created by ILO in Geneva, specialises in
higher education. The International Centre for advanced Technical and Vocational Training in
Turin provides senior personnel with training at a higher level than they can obtain in their home
countries in vocational training and management development.
6.4 Although ILO cannot dictate action by member states, it however keeps a careful eye on
the way government carry out their obligations.
6.5 The provisions of the Seafarers' Engagement (Foreign Vessels) Recommendation,

1958, and of the Social Conditions and Safety (Seafarers) Recommendation, 1958, and the
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adoption of certain proposals with regard to substandard vessels, particularly those registered
under flags of convenience, that these proposals took the form of an international Convention in
29th October 1976, and now known as C147 - Merchant Shipping (Minimum Standards)
Convention, 1976 (No. 147)
6.6 The Maritime Labour Convention (MLC 2006) is an ILO convention, established in 2006
as the fourth pillar of international maritime law and embodies "all up-to-date standards of
existing international maritime labour Conventions and Recommendations, as well as the
fundamental principles to be found in other international labour Conventions". The other "pillars
are the SOLAS, STCW and MARPOL. The treaties applies to all ships entering the harbours of
parties to the treaty (port states), as well as to all states flying the flag of state party.
The convention entered into force on 20 August 2013. As of September 2018, the convention
has been ratified by 88 states representing over 93 per cent of global shipping.
7. WORLD HEALTH ORGANISATION (WHO)
7.0 The WHO concerns itself with various maritime matters including the health of seafarers,
pollution control of various sorts and quality of coastal waters. It makes regulations to control
passage of diseases from one country to another. Certain inoculations and/or vaccinations are
mandatory, viz., Yellow Fever, every 10 years for persons travelling from East or west Africa.
Without this, countries like the United States will not accept them.
7.1 The International Sanitary Regulation (ISR) stamps are required for all inoculations and
vaccinations. This stamp is given by the doctor giving the injection. (Yellow fever is not under
ISR as it is not prevalent everywhere).
7.2 WHO also regulates cleanliness and health on board a ship. The first person to board a
ship is the doctor called the Port Health Officer (PHO) who issues a Bill of Health on the basis of
which a ship is allowed to enter a port.
8. THE SALVAGE ASSOCIATION
8.0 The Salvage Association is the world's leading organisation of maritime consultancy and
investigative surveyors.
8.1 It was established in London in 1856, as a non-profit making organisation, by a group of

underwriting members of Lloyd's and representatives of marine insurance companies.
8.2 Association's motto is "Seek the Truth" and acts with objectivity no matter who the
instructing principal. It accepts instructions from underwriters worldwide as well as from
shipowners, cargo owners, P&I Clubs, banks, government departments and any one else
interested in maritime trade. Over 12000 cases a year are handled by the Association.
8.3 The Association's principal activity is ship's casualty investigation. It also conducts loss
prevention and pre-risk surveys. Underwriters, in order to minimise the risk, often impose
warranties that The Salvage Association shall approve the voyage. Cargo work is also an
important part of the Association's activities. It is involved conducting General Average, cargo
surveys, and initiates investigations into fraud. It helps out in cases where general cargoes need
to be salvaged and transhipped.
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9. INTERNATIONAL TELECOMMUNICATION UNION (ITU)
9.0 The ITU has its headquarters in Geneva and plays a crucial role in electronic
communications for ships at sea.
9.1 The ITU works closely with IMO, UNCTAD and ILO in maritime matters, particularly with
reference to the allocation of frequencies and regulates payments. Now with the development of
satellites, ITU deals with the allocation of positions for geostationary vehicles in the skies above
the equator. These affect weather forecasting services, navigational and emergency
assistance.
9.2 Around the earth there are 3 satellites, one each on top of the Indian Ocean, Pacific
Ocean and the Atlantic Ocean. A computer in the radio room on board a ship is connected to a
satellite via a dish antenna placed in a huge dome on a ship. The dome points at all times
towards any one on the satellites.
10. INTERNATIONAL HYDROGRAPHIC ORGANISATION (IHO)

10.0 Based in Monaco, IHO specializes in making charts for ships conveying information like:
(i) sea-bed structure,

(ii) light-houses,
(iii) depth of water, etc.
10.1 Each vessel carries around 1000 charts, all made by IHO. Nowadays most countries
make their own charts assisted by IHO.
11. WORLD METEOROLOGICAL ORGANISATION (WMO)

11.0 Meteorology is the service of the atmosphere. It embraces both weather and climate.
Marine meteorology deals with the study of atmospheric phenomena over the oceans and is
divided into tow main branches, mainly climatic and synoptic.
11.1 International co-operation is essential for the collection and exchange of observations
and the issue of meteorological information, not only for shipping and aviation but for all other
purposes. This is fostered by the WMO, headquartered in Geneva, which is responsible for
establishing international standards, procedures and for preparing the code and spefications
which are the international language of the meteorologist.
11.2 The WMO is sub-divided into Regional Associations which study the problems of
particular areas, and into Technical Commissions which are covered with particular aspects of
meteorology, e.g., the Commission for Maritime Meteorology (CMM).
11.3 In order to provide a network of meteorological observations in all oceans, WMO has a
system of (a) selected ships and (b) supplementary ships. These ships make observations at
routine hours and send the coded results to appropriate centres by radio.
11.4 Selected ships give message on all 35 codes as they are better equipped; whereas
supplementary ships give temperature, humidity, pressure, etc. (only for eleven codes out of 35
codes).
11.5 The radio station does not charge anything for the messages transmitted. Messages are
normally sent every 6 hours and if the weather is bad then messages are sent every 3 hours.
These messages are decoded and a weather report is prepared and transmitted to ships.
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12. INTERNATIONAL MARITIME ORGANISATION (IMO)
12.0 IMO is a specialized agency of the United Nations with its headquarters in London
dealing exclusively with maritime affairs. IMO's interest lies mainly in ships used in international
services. Earlier it was called the Inter-Governmental Maritime Consultative Organization
(IMCO). The Convention establishing IMO was drafted by the United Nations Maritime
Conference in 1948.
12.1 IMO's objectives are: To facilitate co-operation among governments on matters

affecting shipping, mainly with safety of navigation and the prevention of pollution of the marine
environment by formulating International Conventions.
12.2 IMO has established Committees on Marine Safety, Protection of Marine Environment,
Law, Technical Co-operation and Facilitation.
12.3 Some of the Conventions formulated by IMO are:
(i) SOLAS: International Convention for the Safety of Life at Sea.

(ii) LL: International Convention on Load Lines.
(iii) CSC: International Convention for Safe Container.
(iv) COLREG: Convention on International Regulations for Preventing
Collisions at Sea..
(v) IMMARSAT: Convention on the International Maritime satellite Organization
and Operating Arrangement.
(vi) STCW: International Convention on Standards of Training, Certification
and Watchkeeping for Seafarers.
(vii) MARPOL: International Convention for the Prevention of Pollution from ships.
(viii) CLC: International Convention on Civil Liability for Oil Pollution.
(ix) Bunker : International Convention on Civil Liability for Bunker Oil Pollution.
(x) Wreck : International Convention on removal of Wrecks.
(xi) MLC : Maritime Labor Convention.
12.4 Altogether IMO has 171 Member States and three Associate Members (Viz. A: Faroe
Islands, Hong Kong and Macao).
13.0 INTERNATIONAL CARGO HANDLING CO-ORDINATION

ASSOCIATION (ICHCA)
13.0 The aim of ICHCA is to facilitate improved cargo handling techniques. It was established
in 1951 and has its headquarters in London. It has an office in Mumbai.
13.1 ICHCA's prime function is to co-ordinate by providing:
(i) An information resource centre.

(ii) A technical advisory service.
(iii) A unique database of cargo handling information.
(iv) Access to internationally recognised experts on cargo handling.
(v) Representations to leading inter-governmental bodies and trade organisations.
13.2 ICHCA is the only trade association representing all modes and phases of the transport
chain and can be truly termed as international, interactive and intermodal.
13.3 In 1973 the Financial Advisory Sub-Committee (FASC) was formed. FASC has
published a number of important reports. Some of these are:
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13.4 Pre-slinging as Strapping of Cargo; Condensation in Containers; Securing of ISO
Containers; the Safe Handling of Flexible Intermediate Bulk Containers (FIBCs).
13.5 ICHCA will play an even greater role in the field of cargo handling in the future.
14. INTERNATIONAL ASSOCIATION OF INDEPENDENT TANKER

OWNERS (INTERTANKO)
14.0 INTERTANKO is a non-profit association of more than 270 independent owners from
major shipping nations. It has its headquarters in Oslo.
14.1 Aims of the Organization are:
(i) To protect and enhance the interest of independent tanker owners.
(ii) To promote interests of members in matters of general shipping policy.
(iii) To co-operate with other bodies on problems of mutual concern and to take part
in discussions with other international bodies and forums to further its objectives.
14.2 INTERTANKO is a very strong body represented at all IMO meetings. Its voice is heard
at UNCTAD deliberations on shipping matters. It maintains a close liasion with (a) Worldscale
Association for updating of tanker freight schedules, (b) International Chamber of Shipping,
(c)BIMCO, and various other national and international bodies.
14.3 Services covered are:
(a) Charter Party conditions.

(b) Freight information.
(c) Prevailing demurrage rates.
(d) Information on Ports.
(e) Safety Information.
(f) Market Research.
15. THE CORPORATION OF (LLOYD'S OF LONDON)
15.0 Lloyd's is an insurance market unique in the world. Almost anything can be insured
there: ships, aircraft, civil engineering projects, oil rigs, refineries, etc.
15.1 Lloyd's is association of insurers. It has its origins in the 17th century when shipowners
and merchants used to meet at Lloyd's Coffee House in Lime Street, London.
15.2 The Corporation of Lloyd's (which has no connection with Lloyd's Register of Shipping)
does not itself accept insurance or issue policies. All the underwriting business is transacted by
members of Lloyd's trading as individuals. The Corporation provided the facilities and members
transact the business. Lloyd's underwriters are individually liable under Lloyd's policies and their
liability is unlimited. The individual generally form groups known as syndicates with an
underwriter acting for each group. The Corporation owns the premises and provides various
departments for the conduct of the business.
15.3 Underwriting membership is open to men and women of any nationality provided they
meet the stringent financial requirements of the Council of Lloyd's.
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15.4 The insurance broker is the key figure in the Lloyd's market. Lloyd's underwriters have
no direct contact with the insuring public and their income is dependent on the initiative of
Lloyd's brokers.
15.5 The Lloyd's broker's prime duty is to negotiate best terms for his clients. He first makes
out a "slip - sheet of folded proper with details of the risk. Next he negotiates rate or premium
with underwriters expert in that particular business. The broker will obtain several quotations
before deciding on the best one bearing in mind what his client will be prepared to pay and what
level of premium is required to get the risk adequately covered in the market. The leading
underwriter, having set the rate, takes a proportion of the risk on behalf of the other underwriters
in his syndicate.
15.6 Armed with the lead, the broker approaches other syndicates as are needed to get the
ship fully subscribed. Large risks are unusually spread over the whole London market, cover
being shared by Lloyd's underwriters and the insurance companies.
15.7 The Corporation is also responsible for the chain of signal stations on the trade routes of
the world and the maintenance of Lloyd's agent in every port of importance. It also published
Lloyd's List, a daily shipping paper and many other technical publications.
16. BALTIC EXCHANGE
16.0 The Baltic Exchange is situated in London is the only Shipping exchange in the world.
Today the membership of the Baltic includes over 600 companies on whose behalf about 2000
individuals are entitled to trade on the floor of the Exchange. Foreign concerns may become
members if they have their office in Britain.
16.1 The Business carried out on the Baltic Exchange provides a vital service for world trade.
Servicing the various trades are brokers. Many merchants and shipowners are members of the
Exchange and have broking staff who act for them. The Baltic Exchange is a private limited
company and on admission members are required to become share holders of the Exchange.
16.2 Shipping is the main activity of the Baltic Exchange. It has been estimated that three-
fourth of the world's tramp market bulk cargo movement is at some stage handled by embers of
the Baltic Exchange.
16.3 The Baltic Exchange publishes the Baltic Freight Index (BFI) daily. There is also vessel's
sale and purchase department. The Baltic International Freight Futures Exchange (BIFFEX)
was opened in 1985 and provides a means by which the elements of the international freight
and shipping industry can protect themselves against adverse price movements.
16.4 The Baltic Exchange is a major earner of foreign exchange for Britain.
17. INTERNATIONAL ASSOCIATION OF CLASSIFICATION SOCIETIES

(IACS)
17.0 The Association was formally established in 1968. It has following three main purposes:
(a) To promote improvement of standards of safety at sea and prevention of

pollution of the marine environment.
(b) To consult and co-operate with relevant international and maritime organisations.
(c) To maintain close co-operation with world's maritime industries.
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17.1 Membership as at 2019 comprises:
(1) American Bureau of Shipping

(2) Bureau Veritas
(3) China Classification Society
(4) Croatian Register of Shipping
(5) Det Norske Veritas } DNV GL
(6) Germanscher Lloyd }
(7) Indian Register of Shipping
(8) Korean Register of Shipping
(9) Lloyd's register of shipping
(10) Nippon Kaiji Kyokai
(11) Polish Register of Shipping
(12) Registro Italiano Navale
(13) Register of Shipping Russia
17.2 A permanent Secretariat was established in 1992. It has an observer status at IMO. It
develops and publishes requirements, guidelines and interpretations covering major
classification matters.
18. FEDERATION OF NATIONAL ASSOCIATION OF SHIPBROKERS

AND AGENTS (FONASBA)
18.0 FONASBA is a non-profit making international representative body of internal
association of shipbrokers and agents.
18.1 Broadly speaking it has following aims and objectives.
(a) To represent shipbrokers and agents at the international level.
(b) To co-operate with other bodies involved in shipping.
(c) To promote the profession of shipbrokers and agents including standardisation of

shipping contracts and documents.
19. BALTIC & INTERNATIONAL MARITIME CONFERENCE/COUNCIL

(BIMCO)
19.0 BIMCO with its headquarters in Copenhagen is basically an association of world's
shipping practioners, shipowners, managers, shipbrokers, ships' agents, chartering agents and
port agents. Membership is also open to P & I Clubs and associations of shipwoners and
shipbrokers. It is the largest private organization in the maritime industry.
19.1 Its objectives are:
(i) To unite shipowners and others in the shipping industry.

(ii) To inform members of unfair practices, charges, etc. and generally pass useful
information.
(iii) To prepare and improve standard forms B/Ls and C/Ps in consultation
(iv) To issue improve shipping documents developed either by itself or by like-
minded bodies.
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19.2 Its services include:
(a) Information on wide variety of topics - ports, congestion, ice conditions,

dangerous cargoes and regulations etc.
(b) Advice of port charges, agency fees, double taxation, etc.
(c) Advice on disputes on C/P matters, legal decisions, etc.
(d) Confidential information on standing of charterers, shipowners and others.
19.3 The name "Conference" in the word BIMCO has now been changed to "Council".
1. Indian National Ship-owners Association (INSA).

2. All India Shippers Council (AISC).
3. Federation of Ship Agents Association of India (FEDSAI).
4. Indian Private Ports and Terminals Association (IPPTA).
5. ICC Shipping Association (ICCSA).
6. Container Shipping Lines Association (CSLA).
7. Association of Multimodal Transport Operators of India, (AMTOI).
SHIPPING ORGANISATIONS: INDIAN

1.0 There are many Indian Shipping Organizations which provide data and interact with
government authorities in matters relating to their interest. These organizations are:
2.0 INDIAN PORTS ASSOCIATION (IPA):
2.1 Indian Ports Association (IPA) was constituted in 1966 under societies
Registration Act, primarily with the idea of fostering growth and development of all Major
Ports which are under the supervisory control of Ministry of Shipping. Over the years,
IPA has consolidated its activities and grown strength by strength and considered to be
a think tank for the Major Ports with the ultimate goal of integrating the maritime sector.
In just a short span of time IPA's proven expertise in ports is nothing but another
milestone.
2.2 Objectives:
 To undertake and promote Techno-Economic Studies and Research into

matters pertaining to the Planning Organization.
 To offer complete solutions to Port Management and to create a resource of
information as a tool for decision making.
 To efficiently promote the use of Work Study, Management Accounting
Strategies and other top-of -the-line tools of Management with a view to
increase efficiency and productivity in ports.
 To bring together various national as well as international organizations
involved in Port and Harbour Operations, Management and allied activities
and to maintain liasion between ports, Ministry of Shipping and other
Government agencies.
 To promote the culture of Uniformity and Standardization in the port
functioning.
2.3 IPA is committed to the transformation of Indian Major Ports into world class facilities for
achieving International Standards in container/ cargo handling and making India as a major
player in the world maritime trade. It is our endeavor to play a supporting role in the various
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policy initiatives of the Ministry of Shipping, in exploring the possibilities of better utilization of
the long coastline of India.
2.4 IPA has also implemented a prestigious Information Technology (IT) project concerning
the Ports viz. Centralized Web based - Port Community System (PCS), which ultimately aims at
paperless regime with efficiency, productivity and cost effectiveness. In addition, IPA has been
conceptualizing Dash Board and B.I. System across the sector, by harnessing the strength of
PCS at Central level and ERP System in Ports. IPA played a significant role in formulating and
launching an ambitious MARITIME AGENDA 2010 which provides a road-map for progress and
development of maritime sector in India for the next decade. IPA is also happy in playing pivotal
role in Indian Ports' Capacity crossing 1.4 billion tonnes.
3.0 THE INDIAN NATIONAL SHIPOWNERS' ASSOCIATION (INSA):
3.1 The Indian National Steamship Owners' Association, subsequently changed to the
Indian National Ship-owners Association, was founded in 1929. It is the collective forum of the
national shipping industry of India. Presently it has 34 ship owning companies as its members
who collectively own a total fleet of 10.08 million dwt comprising 90% of the Indian fleet.
3.2 The year 1948 marked the reorganization of INSA when new rules and objectives were
laid down and several new members were enrolled.
3.3 The aims and objectives as formulated in 1948, and which now govern the functioning
of the Association, are briefly as under:
o To promote the development of national shipping and to secure for it fullest possible
participation in the carriage of cargo, passengers, etc. in the inland, coastal and
overseas trades of India as well as in the cross trades outside India.
o To participate actively in Indian shipbuilding, engine-building, ship repairing, port

facilities, etc. and all allied industries.
o To protect national shipping interests against any encroachment from any outside
sources.
o To take necessary steps to provide proper conditions of service for coasting and
shore personnel of shipping companies and to promote welfare measures for their
benefits.
o To co-operate with other national and international organizations and bodies with
objectives similar to those of the Association.
o To secure adequate representation for the Association in all national and

international, private and public organizations connected with shipping.
o To undertake and arrange for arbitration of all disputes in the shipping industry and
in any other allied fields related to shipping.
o To keep a close watch and take suitable action as may be advisable and necessary
in regard to any legislation that is likely to affect the interests of national shipping in
general.
o To collect and disseminate information in India and abroad in regard to all aspects of
Indian shipping.
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o Generally to do all such acts in order to protect and improve further the interests of
Indian shipping companies, members of the Association and the national shipping
industry deemed necessary.
3.4 Wage negotiations, both for floating officers and crew are also done by INSA on behalf
of the Indian shipping companies. INSA is also very actively involved with various government
authorities for preparations of draft of national shipping policy.
3.5 INSA has representatives on the Boards of Trustees of major ports in India to protect the
interests of the Indian shipping industry.
3.6 INSA Secretariat regularly issues bulletins to keep the members informed about the
latest developments in shipping and about other important matters.
3.7 INSA enjoys the status of a representative spokesman for national shipping at
governmental, inter-governmental and non-governmental forums and in pursuance of all its
objectives, organizes united action to protect and promote the interest of Indian shipping at
national and international levels.
4.0 ALL INDIA SHIPPERS' COUNCIL (AISC):
4.1 All India Shippers' Council was set up in December 1965 and started functioning from
1967. It is a body of exporters which maintains a close liaison with the Ministry of Surface
Transport and the Liner Operators at the various Indian ports.
4.2 AISC represent shippers' interests to ensure adequate and regular frequency of sailings
from various ports. It advocates reasonableness of frequency of sailings, changes in the rates
and other fees like terminal handling charges for containers, demurrage rates, stevedoring
expenses, etc. The Council has its representatives on boards of various Port Trusts to look
after the interest of shippers.
4.3 The President of the Indian National Committee of the International Chamber of
Commerce is the Chairman of the Council.
4.4 The members of the Council are nominated by the following organizations:
(a) One representative by the Federation of Indian Chambers of Commerce and

Industry, New Delhi.
(b) One representative by the Associated Chamber of Commerce & Industry,

Calcutta.
(c) Two representatives by the Western India Shippers' Association, Mumbai.
(d) Two representatives by the Southern India Shippers' Association.
(e) Two representatives by the Federation of Indian Exporters Organisation, New

Delhi.
4.5 The above representatives elect from among themselves the Vice-President of the
Council.
4.6 The council may co-opt not more than 5 members to represent the Directorate General
of Shipping, various Associations, Commodity Boards dealing with the commodities of which
India is a bulk exporter, etc.
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4.7 Assistance to the Council is now being provided by the Chamber of Commerce.
Moreover the Shippers' Council has been recognized by the Government and Shipping
Conferences have started dealing with them directly.
5.0 Federation of Ship Agents Association of India (FEDSAI): FEDSAI is the pan-India
nodal body of various regional ship agents associations.
5.1 Constituent members of FEDSAI are today present in all major shipping hubs in the
country, working closely with local trade as well as statutory authorities like
ports/Customs/TAMP and nodal Ministries. FEDSAI has over the years played a crucial role in
collating the views of regional shipping associations and taking up their issues with the Central
government and the Union Ministry of Shipping. It is presently working closely with the
government and the trade to bring in the much desired legislative reforms in the port/shipping
sector. It is also engaged in dialogue with various chambers of commerce to promote measures
for the protection of trade and commerce.
6.0 Indian Private Ports & Terminals Association - (IPPTA):
6.1 IPPTA is an association of private ports and terminal operators of container terminals
and bulk terminals of India. IPPTA has been formed to address the need to form a strong
representative body of Indian private ports and terminal operators as an industry, which is one
of the successful privatization industries in India today. Members of IPPTA, all existing private
operators cumulatively represent an investment of more than Rs. 10000 crores in port sector.
7.0 ICC Shipping Association

(Formerly known as "The Indian Coastal Conference"):
7.1 The Indian Coastal Conference (ICC) was formed in 1951 by 13 leading Indian shipping
companies as a platform to facilitate and grow the Indian coastal shipping trade. For almost 6
decades now, the ICC Shipping Association (ICCSA) continues to be the representative body
for the Indian coastal shipping industry. With 63 member companies, ICCSA today represents
the interests of the coastal shipping industry at various forums including the Ministry of
Shipping, Directorate General of Shipping, the National Shipping Board, Tariff Authority for
Major Ports, etc.
7.2 ICCSA's prime focus is the development of sea-borne trade along the Indian coast and
in line with that focus, ICCSA welcomes all stakeholders in the Indian coastal trade as
members. This includes ship-owners, ship-managers, freight and logistic companies, shipping
agents, etc.
8.0 Container Shipping Lines Association (India), popularly known as CSLA, is an

eminent association of container shipping lines operating in India which presently has 34
members. The Bombay Chamber of Commerce & Industry as its allied services, provide
Secretarial Service to CSLA.
9.0 Association of Multimodal Transport Operators of India, (AMTOI)
9.1 AMTOI is registered as a non-profit making body under the Indian Companies Act and
its core managing committee consists of seven members. The managing Committee is
supplemented by Special Invitees who are experts in the industry. AMTOI has Extended Board
that has nominated representatives from other trade bodies like CSLA, CFSAI, FEDSAI, INSA,
IPPTA etc.
9.2 AMTOI has always endeavored to have a harmonious maritime community to bring
consensus amongst all segments of the community, whilst making representations to various
authorities and promote Multimodalism in India. AMTOI is working very closely with other Trade
Bodies to formally set up a Confederation of Logistics Associations.
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9.3 Following the enactment of the Multimodal Transportation of Goods Act, 1993, AMTOI
was established in the year 1998.The main objects of the Association are to:
 To organize Multimodal Transport Operators at national level

 To study the issues faced by MTOs and seek resolution with appropriate authority.
 To promote multimodal transport services in Domestic and foreign trade.
 To improve the quality of such services and reduce transaction costs.
 To facilitate Skill Development for Logistics Sector.
 To Promote implementation of Cargo Community System.
9.4 AMTOI also participate in Government Policy Making. Ministry of Shipping, Road
Transport & Highways invites AMTOI to forward their suggestions and representation on various
Expert Groups and committees.
9.4.1 AMTOI views have been sought on various topics such as GATS (General Agreement
on Trade in Services) negotiations for maritime transport services sector. AMTOI has been
involved in the following policies and legislations:
• Deliberations on Shipping Trade Practices Act.

• MMTG Act amendments.
• Drafting of Coastal Shipping Policy.
• Drafting of International Shipping Policy.
• Simplification of renewal process as a MTO with DG shipping.
• Standing Committee for Promotion of Exports, SCOPE Shipping.
• Implementation of Cargo Community System.
• Policy Level Changes to get Registered MTO’s to operate bonded warehouses have
been recommended by AMTOI.
10.0 TRANSCHART:
10.1 TRANSCHART was created in the year ……... It was the chartering wing of the
Government of India, functioning under the Ministry of Shipping (MOS), responsible for finalizing
ship charters for all import and export of Government of India and Public Sector Undertakings
(PSUs) cargoes. TRANSCHART was the single largest Government agency arranging charters
in the country handling large variety of cargoes -- both dry and liquid cargoes.
10.2 Objectives of TRANCHART was:
 To ensure arrival of strategically needed cargoes on time to meet urgent requirements of

the country.
 To charter vessels (both Indian and foreign) at competitive rates by judicial negotiations
of freight rates and terms and conditions, resulting in considerable saving of foreign
exchange for the country.
 The department also ensured that Indian bottoms were given first preference for carrying
public sector companies' cargo subject to their being competitive internationally and thus
supported development of national maritime cargo fleet
 It was suitably empowered to ensure commercial, transparent, non-bureaucratic working
10.3 TRANSCHART was headed by Chief Controller of Chartering assisted by one Deputy
Chief Controller and 3 Chartering Officers and Assistant Chartering Officers under them.
10.4 Public sector companies felt constrained to necessarily charter vessels through
TRANSCHART due to delays in fixtures and lack of full control on chartering the vessels. Over
a period of time public sector companies developed their on-pre-fixture capabilities making
TRANSCHART irrelevant. This historical chartering institution of Government was finally wound
up on ….
ooooooo
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1. State the objectives/functions of the following international organizations involved

in shipping.
2. International Chamber of Shipping.
3. International labour Organization.
4. Federation of National Association of Shipbrokers & Agents.
5. Give full forms of the following organizations & write grief notes on them.
i) AMTOI (iii) INMARSAT (iv) IHO (v) ICC. (vi) ILU ( Vii) ILO
6. What does ITF stand for? State the basic arms of ITF.
7. What do you mean by the "Blue Certificate"? What happens to an owner without
this certificate?
8. Why, according to you the ITF's motives are being questioned in some quarters?
9. Why do the Flags of Convenience countries to fear the ITF?
10. "The ITF should never be neglected." Discuss.
11. What are the aims and objectives of (I) INSA (ii) AISC (iii) IPA
12. Write short notes on (a) CSLA (b) IPPTA
13. In your own words discuss how Indian organizations help to promote interests of
the Indian shipping industry.
14. What are the functions of CSLA?
15. What is the need of a coastal conference?
1. Fairplay Book of International Organizations, 1st Ed., 1990.
2. International Shipping – Bruce Farthing, 2nd Ed., 1993.
3. Containerisation & Multimodal Transport in India -- Dr. K.V. Hariharan, 3rd Ed., 2000.
(Read chapter 2)
4. Economics of Shipping & Other Papers -- Dr. S. N. Sanklecha, 1st Ed., 1981.
5. INSA Annual Review.
*****************************
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LESSON 11
SHIP BUILDING, SHIP REPAIRS & SHIP BREAKING

A. SHIP BUILDING:
1.0 World Shipbuilding Scene:
1.1 If we look at the global shipbuilding scene, we will see that domination of shipbuilding
has shifted from West to East as follows:
Period Major Shipbuilding Country

Mid 19th Century US
Mid 19th Century to WW2 UK
From WW2 to 1950s West Europe
1950s to 1990 Japan
1990s to 2005 South Korea
2005 to present South Korea, China, Japan
1.2 It will be interesting to explain further. After the Second World War, shipbuilding (which
encompasses the shipyards, the marine equipment manufacturers, and many
related service and knowledge providers) grew as an important and strategic industry in a
number of countries around the world. This importance stems from:
 The large number of skilled workers required directly by the shipyard, along with
supporting industries such as steel mills, railroads and engine manufacturers; and
 A nation's need to manufacture and repair its own navy and vessels that support
its primary industries.
1.3 Historically, the industry has suffered from the absence of global rules and a tendency
towards (state-supported) over-investment due to the fact that shipyards offer a wide range of
technologies, employ a significant number of workers, and generate income as the shipbuilding
market is global.
1.4 Shipbuilding is therefore an attractive industry for developing nations. Japan used
shipbuilding in the 1950s and 1960s to rebuild its industrial structure; South Korea started to
make shipbuilding a strategic industry in the 1970s, and China is now in the process of
repeating these models with large state-supported investments in this industry. Conversely,
Croatia is privatizing its shipbuilding industry.
1.5 As a result, the world shipbuilding market suffers from over-capacities, depressed prices
(although the industry experienced a price increase in the period 2003–2005 due to strong
demand for new ships which was in excess of actual cost increases), low profit margins, trade
distortions and widespread subsidization.
1.6 All efforts to address the problems in the Organisation for Economic Cooperation and
Development (OECD) have so far failed, with the 1994 international shipbuilding agreement
never entering into force and the 2003–2005 round of negotiations being paused in September
2005 after no agreement was possible. After numerous efforts to restart the negotiations these
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were formally terminated in December 2010. The OECD's Council Working Party on
Shipbuilding (WP6) will continue its efforts to identify and progressively reduce factors that
distort the shipbuilding market.
1.7 Where state subsidies have been removed and domestic industrial policies do not
provide support in high labor cost countries, shipbuilding has gone into decline. The British
shipbuilding industry is a prime example of this with its industries suffering badly from the
1960s. In the early 1970s British yards still had the capacity to build all types and sizes of
merchant ships but today they have been reduced to a small number specializing in defence
contracts, luxury yachts and repair work. Decline has also occurred in other European countries,
although to some extent this has reduced by protective measures and industrial support
policies.
1.8 In the U.S.A, the Jones Act (which places restrictions on the ships that can be used for
moving domestic cargoes) has meant that merchant shipbuilding has continued, albeit at a
reduced rate, but such protection has failed to penalize shipbuilding inefficiencies. The
consequence of this is that contract prices are far higher than those of any other country
building oceangoing ships.
1.9 The shift is shipbuilding pattern is evident as below:
Year Market share of new orders

1960 EU 66%, Japan 22%
1990 EU 18%, Japan 43%, Korea 22%
2000 Korea 39%, Japan 38%, China 6%
2015 Korea 37%, Japan 15%, China 33%
2018 Korea 40%, China 36% and Japan7% totals upto
83%
2.0 Today, China, Japan and South Korea dominate world shipbuilding with these three
countries put together contributing 83% of the total world new buildings. This comprises of
bulk carriers, container vessels and tankers.
2.1 China was in third place in 1996. To strengthen and improve its position, further China
collaborated with major Japanese shipyards (Hitachi, Mitsubishi, Mitsui, Sumitimo, IHI, and
Oshima) for construction of vessels.
2.2 Yards in Indonesia, Malaysia , Philippines and Singapore are emerging as serious
contenders for construction of samll to medium sized tonnage.
3.0 Only the market for cruise ships, which is dominated by EU yards, shows some higher
degree of concentration.
4.0 List of the largest shipbuilding companies in 2016 – Wikipedia (only companies with
revenue of $5 bln. and more are listed):
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4.2 The largest shipbuilding nations (based on completions) in terms of Gross Tonnage for
2018 are:
1. South Korea (49,600,000 GT)

2. China (43,900,000 GT)
3. Japan (13,005,000 GT)
4. Others (5,000,000 GT)
4.3 The table below gives you an idea of world orderbook, deliveries and contracts as of
September 2018 as per OECD Q2 report:
5.0 The European shipbuilding industry is a dynamic and competitive sector both in the
EU and on a global scale. It has great importance from both an economic and a social
perspective, and also involves other areas including transport, security, research and the
environment. The EU promotes its development and addresses competitiveness issues the
sector is facing.
5.1 Shipbuilding is an important and strategic industry in a number of EU Member States.

Shipyards often play a significant role for the regional industrial infrastructure and, with regard to
military shipbuilding, for national security interests. The European shipbuilding industry is the
global leader in the construction of complex vessels such as cruise ships, ferries, mega-yachts
and dredgers. It also has a strong position in the building of submarines and other naval
vessels. Equally, the European marine equipment industry is world leader for a wide range of
products from propulsion systems, large diesel engines, environmental and safety systems to
cargo handling and electronics. There are around 150 large shipyards in Europe, with around 40
of them active in the global market for large sea-going commercial vessels.
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5.3 Historically, the industry has suffered from the absence of global rules and a tendency of
(state-supported) over-investment due to the fact that shipyards offer a wide range of
technologies, employ a significant number of workers and generate foreign currency income (as
the shipbuilding market is dollar-based and a global one). Many of the resulting problems are
still troubling this industry and the Commission is actively addressing the issues through a
variety of policy measures.
6.0 Indian Shipyards:
This is a list of notable shipbuilders and shipyards located in India and brief about them:
6.1 Mazagon Dock Limited, Mumbai: (Majhagānv Dawk Limiṭeḍ), formerly called Mazagon
Dock Limited, is a shipyard situated Mazagaon, Mumbai. It manufactures warships and
submarines for the Indian Navy and offshore platforms and associated support vessels
for offshore oil drilling. It also builds tankers, cargo bulk carriers, passenger ships and ferries.
The shipyards of MDL were established in the 18th century. Ownership of the yards passed
through entities including the Peninsular and Oriental Steam Navigation Company and
the British-India Steam Navigation Company. Eventually, 'Mazagon Dock Limited' was
registered as a public company in 1934. The shipyard was nationalised in 1960 and is now
a Public Sector Undertaking of the Government of India.
6.2 Cochin Shipyard Ltd., Kochi:
 Cochin Shipyard, a PSU, was conceived of in the year 1969 when a team surveyed various
locations in India before selecting Cochin for the launch of the first Greenfield Shipbuilding
Yard in the country. The yard facilities in the first phase were completed by 1982. The yard
was designed and constructed under technical collaboration with M/s Mitsubishi Heavy
Industries (M.H.I), Japan. The company was legally incorporated in the year 1972.
 The yard commenced the shipbuilding operations in 1978, shiprepair in 1981, Marine
Engineering Training in 1993 and Offshore Upgradation in 1999. Cochin Shipyard’s recent
success in securing export orders have been achieved through consistent improvement in
productivity and also aggressive marketing undertaken in the last few years . Shipyard has
built various types of ships like Bulk carriers tankers and platform supply vessls and anchor
handling towing vessels.
 CSL has established tie-ups with select specialist firms from near-east, far-east, South-east,
Europe and USA for technology transfer & material packages for shipbuilding, shiprepair,
platforms, rigs & upgradation of yard facilities.
 CSL has successfully completed major maintenance and upgrade of Mobile Offshore Drilling
Unit (MODU) Sagar Vijay, Mobile Offshore Drilling Unit Sagar Bhushan and Jackup rig Sagar
Kiran.
 Recently in 2018 CSL has taken Hughes dry dock from MBPT for operation.
 Cochin Shipyard is currently building India's first indigenous aircraft carrier. INS Vikrant,
(formerly, the Project 71 "Air Defence Ship") is the first aircraft carrier of the Indian Navy to
be designed and built in India. The carrier will be the largest warship built by CSL. The
construction is expected to be completed by 2020.
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6.3 Hindustan Shipyard Limited, Visakhapatnam: Founded as the Scindia Shipyard, it
was built in 1940 by industrialist Walchand Hirachand as a part of The Scindia Steam
Navigation Company Ltd. Shipyard had built many types of vessels and used to carry out
repairs to many ships. However, later on the government of India decided to nationalise the
Scindia Shipyard, as it was a sensitive and strategic sector related to defence sector of the
country. The shipyard was finally nationalised in 1961 and renamed Hindustan Shipyard Limited
(HSL). In 2010, HSL was transferred from the Ministry of Shipping to the Ministry of Defence.
The yard played a critical role in the development of nuclear-powered, Arihant class submarine.
6.4 Garden Reach Shipbuilders and Engineers, Kolkata:
 Garden Reach Shipbuilders & Engineers (GRSE) is a government owned shipping

establishment that comes under the Ministry of Defence Production. It was until recently
known as Garden Reach Workshop. Over the years it has gained wide range of
experience in building modern warships of modern warships and commercial vessels. It
is the leading shipbuilding yard for the Indian Navy. It is one of the few multi-
dimensional shipyard around, which can build most kind of vessels.
 Though GRSE builds mainly for Indian Navy, quite a few civil vessels -- barges,
slipways, harbour craft, fishing trawlelrs, tugs, launches, dredgers and merchant ships --
have been built by them. GRSE also turns out offshore platform support-cum-standby
vessels.
6.5 Goa Shipyard Ltd.: Goa Shipyard Ltd. is an Indian Government owned ship building
company located on the West Coast of India at Vasco da Gama, Goa. It was established in
1957, originally by the colonial government of the Portuguese in India as the "Estaleiros Navais
de Goa". it was requisitioned to manufacture warships for the Indian Navy and the Indian Coast
Guard.
6.6 Naval Dockyard, Mumbai: The Yard was established in 1735 by the East India
Company, builds Naval vessels and repairs to War ships. Now owned by GoI.
6.7 Naval Dockyard (Visakhapatnam) is the Yard owned by GoI, builds Naval vessels and
repairs to War ships.
6.8 Shalimar works is a public sector shipbuilding company of West Bengal, India. It owns
a small shipyard on the right bank of the Hooghly River at Shibpur, Howrah. The origin of
shipyard can be traced back to 1885.
6.9 Hooghly Dock & Port Engineers Ltd. , Howrah district, Kolkata: The Government of
India is planning to divest its majority stake in Hooghly Dock & Port Engineers Limited (HDPEL).
The government also plans to bring in a strategic partner with a view to reviving HDPEL. The
plan is to lease out HDPEL's assets to the joint venture company in which a company will hold a
majority stake of about 76 percent and HDPEL will hold about 26 percent.
6.10 Pipavav Shipyard (currently Reliance Naval and Engineering company Ltd.:
 R-Naval is the first private sector company in India to obtain the licence and contract to build
warships. From 2011, till January 2015 Pipavav Shipyard delivered 6 new
build Panamax Ship of length 225 metres, 5 new build Offshore supply vessels of length 59
metres and 2 new build Barges. This shipyard has repaired and delvered 6 Jackup rigs of
Gross Tonnage in between the range of 6000 to 12000 Tonnes, 1 Pipe Laying and Heavy
lifting Accommodation Barge, 1 Offshore supply vessel and 1 Coast Guard Ship.
 In June 2010, PSL was awarded a ₹26 billion (US$380 million) contract to build five offshore
patrol vessels for the Indian Navy.
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 In July 2015, Pipavav shipyard was chosen for a 'Make in India' naval frigate order. The
order value exceeds more than USD 3 bn. This order is being termed as the private sector's
biggest-ever warship-building project.
 On 13 February 2017, Reliance Defence and Engineering Limited (RDEL) has signed the
Master Ship Repair Agreement (MSRA) with the US Navy to maintain the vessels of its
Seventh Fleet operating in the region, with the company estimating revenues of about Rs
15,000 crore ($2 billion) over next 3 –5 years. The Seventh Fleet’s area of responsibility
includes the Western Pacific and Indian Ocean and at any given time there are roughly 140
ships and submarines, 5070 aircraft and approximately 20,000 sailors under its command.
Currently, these vessels visit Singapore or Japan for such works.
6.11 Bharati Shipyard Ltd.: BSL was founded in 1973 in Ratnagiri, Maharashtra by Prakash
C. Kapoor and Vijay Kumar, graduates of the Ocean Engineering & Naval Architecture program
at Indian Institute of Technology, Kharagpur, as well as colleagues at Mazagon Dock Ltd. The
company went public in December 2004, with listings on the Bombay Stock Exchange and
the National Stock Exchange. BSL expanded with a large shipyard at Dabhol and had built
many offshore vessels. But now BSL is in Financial Crisis.
6.12 ABG Shipyard Ltd is a part of the ABG Group of companies with diversified business
interests. Established in 1985, it is headquartered in Mumbai. It has shipbuilding operations
in Surat and Dahej in Gujarat. Following its acquisition of Western India Shipyard Limited in
October 2010, it operates a ship repair unit in Goa which is the largest ship maintenance facility
in India. Shipyard had built many small crafts and tugs. But now in financial crisis.
6.13 The Kattupalli Shipyard cum Captive Port Complex is a large shipyard project
at Kattupalli village near Ennore in Chennai, being built by L&T Shipbuilding Ltd. Adani ports
and special economic zone (APSEZ) acquired kattupalli port from L&T in June 2018 and
renamed it as Adani Katupalli Port Private Limited (AKPPL).
It is planning to compete with Japanese and Korean shipyards in building "specialised ships,"
such as large-size warships, car carriers, submarines, naval offshore patrol vessels, fast patrol
vessels and corvettes. After Colombo and Singapore, Kattupalli will be the third major
international destination for ship repairs in the region.
The shipyard-cum-minor port complex was officially inaugurated on 30 January 2013.
6.14 Tebma was incorporated in 1984 and commenced operations in 1987. It has shipyards
at Malpe in Karnataka, Kochi in Kerala and Chengalpet in Tamil Nadu. On 24 November
2010, Bharati Shipyard acquired a 51 per cent stake in the Tebma Shipyard for a price
of ₹757.5 million (US$11 million) through a fresh issue of capital at a price of Rs 19.20 per
share (face value of Rs 10). Tebma in 2011 signed a deal with Vosta LMG, one of the world’s
largest dredging technology firm, to build dredgers. In 2015, it delivered Dredger 1; the
1st dredger for exclusive use by India Navy.
6.15 Timblo Drydocks Private Ltd. is a privately owned shipbuilding company based
in Goa, India. Timblo manufactures various type of inland vessels such as twin screw dry cargo
barges, pontoons, dredgers, passenger launches, small floating jetties, etc.
6.16 Western India Shipyard Limited was registered in 1993 and has a dedicated
composite ship repair yard at Mormugao Harbour at Goa under a 25 year licence agreement
with the Mormugao Port Trust. It was taken over by ABG Shipyard Limited, It caters to repair
of passenger ship, tanker (ship), cargo ship, tranship, dredgers, fishin trawler barge, Offshore
support vessel, warships of Indian Navy and Coast Guard and oil rigs.
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7.0 PROBLEMS ASSOCOATED WITH THE INDIAN SHIPBUILDING INDUSTRY:
7.1 Indian shipbuilding is vital to Indian industries from the point of view of self-reliance and
conservation of foreign exchange. At present it has shipbuilding industry in India lags behind in
research, planning, availability of raw materials, lack of ancillary industries, etc. Other Asian
countries have a big advantage over India having facilities to produce ships quickly and
efficiently by using latest technology.
7.2 Shipbuilding being global in nature, Indian shipyards face fierce competition from
abroad.
7.2 Problems faced by shipbuilding industry in India can be summed up as follows:
1. Lack of managerial finances.

2. Low productivity and efficiency.
3. Lack of advanced research.
4. Lack of proper planning.
5. Lack of raw materials.
6. Lack of ancillary industries.
7. Lack of technical know-how.
7.3 Consequently this sector in India has been passing through a crucial phase. Shipbuilding
is an assembly industry where ships are tailor made to meet the client’s requirements.
Development in many countries like Japan, Korea etc. can be attributed mainly to their
shipbuilding industry. There are about 30 shipyards in India capable of constructing ships of any
type. Year 2002 to 2007 was a Golden period for the Indian shipbuilding sector when Indian
shipyards bagged orders for more than Rs 25,000 Crores and order book position of Indian
shipyards swelled from a mere 0.01% to 1.24% of Global shipbuilding. But there is an immense
potential for the ship builders in India in making OSV-s and also Naval crafts – as oil exploration
will remain a high priority for they Indian Government.
7.4 This was mainly due Govt. support provided to the Indian shipyards in the form of
shipbuilding subsidy. In addition to the growth in order book, subsidy scheme was also catalyst
to attract large capital investment of more than Rs 30,000 crores in setting up new shipyards as
well as modernization of existing shipyards. In addition, a number of global and national players
engaged in manufacturing marine engineering product started to set up ancillary base in India.
On the whole, shipbuilding subsidy scheme of 2002 can be considered as a highly successful
policy intervention by the Govt. which helped to develop infrastructure and capacities in the
shipbuilding sector.
7.5 According to a study carried out by KPMG in 2007 the ratio of direct employment in
shipyards and indirect employment in ship ancillary industry is 1:6. National Manufacturing
Competitiveness Council (NMCC) has recognized the importance of shipbuilding industry and
urged Ministry of Shipping to take necessary steps to revive shipbuilding sector in India. Ministry
of Shipping is also seized up of the matter and is considering necessary steps.
7.6 Today, the industry is surviving on orders won during the subsidy scheme of 2002-2007.
These orders will be fully executed by 2014-2015 after which the industry will face a major
challenge unless urgent measures are taken by the Govt. to assist the shipbuilding industry win
new orders and develop scale to reach a critical mass. This will in turn enable development of
the entire shipbuilding eco-system. It is only when the entire eco-system develops will the
shipbuilding industry in India be able to develop the necessary cost competitiveness with
respect to foreign yards and outbid them in domestic and export markets. This will also affect
ship ancillary industry which is dependent on shipyards’ orders.
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7.7 To enable such a cost competitiveness and development of the shipbuilding eco-system
in India, it is essential to provide the shipbuilding industry with the necessary fiscal and
regulatory support measures for operational improvement and cost reduction. Some of the
urgent steps suggested by the Shipyards Association of India for the development of
shipbuilding industry in the coming year are given below:
 To provide Financial assistance to Indian shipyards in the form of Shipbuilding

Subsidy to bring them at par with their foreign counterparts.
 To provide working capital to Indian shipyards at lower rate of interest as available to
the foreign shipyards (2-3%).
 Exemption of Service tax on Ship repair and sub contractors of shipyards.
 Grant of SEZ status to all shipyards.
 Indian shipyards should get right of first refusal before import of vessels.
 Movement of coastal cargo reserved for ‘Indian built Indian flag vessels’ (similar to
Jones Act in US).
 Urgent Govt. action is needed to protect shipbuilding and ship ancillary industry in
India before it is too late.
7.8 Shipyards Association of India is in continuous dialogue with the Ministry of Shipping in
this regard. With the proper and timely Govt. intervention, Indian shipbuilding industry can still
achieve the target of 5% of Global shipbuilding.
7.9 In Feb 2019, in a big step to promote the Make in India initiative and incentivize ship
building activity in the country, the Ministry of Shipping has revised its guidelines for chartering
of ships by providing Right of First Refusal ( RoFR) to ships built in India. But Delhi high court
has quashed a notification under the “Make In India” program which provided preferential
commercial treatment to Indian Built Ships. (June 2019)
8.0 INDIAN NATIONAL SHIPOWNERS ASSOCIATION (INSA):
8.1 INSA has recommended to the Government that public sector yards should concentrate
more on ship-repairs which is profitable and reduce shipbuilding activity which is a loss-making
proposition for Indian shipyards.
8.2 Shipping is a highly capital intensive industry requiring injection of large capital for
modernisation/renewal of business activities. Expansion of the fleet requires further outlays by
way of equity and borrowing. The ship replacement costs are enormous, more so when
converted into Indian Rupees.
8.3 Moreover a few shipping companies go in for new construction as it is not a viable
proposition at the prevailing freight levels and they prefer to purchase second hand vessels of
8 to 10 years’ old ships in good condition at lower investment cost. On the other hand, it is
recommended that subsidy should also be extended to smaller shipyards in the country who
build smaller size vessels at competitive cost as a measure of assistance to coastal shipping.
9.0 The Committee of Secretaries (CoS) of relevant Government ministries in 1989 had
recommended that 40% subsidy be provided to the industry on International Parity Price (IPP).
However, CoS recommendations were not accepted fully by the Cabinet.
9.1 Other CoS recommendations for the shipbuilding industry included:
1. 100% Export Oriented Unit (EOU) benefits.

2. Duty free imports up to 50% of the contract price.
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9.2 Owing to lack of proper government policy supporting shipbuilding industry, many of the
yards face imminent closure. Shipbuilding is treated as an export industry by all foreign
governments and is fully exempt from incidence of local taxation, but the Indian shipbuilding is
not treated as such. The local taxation on ships is approximately 40% of the cost of a ship.
Hence, government should give a subsidy of 40% on IPP of which 30% should be paid by
government and 10% by buyer. Other cases of unfair competition is that shipowners can import
vessels without payment of import duty. Further, Indian shipbuilding industry approximately pay
18.75% interest on bank overdraft facility for working capital on rupee borrowings and 23.5%
interest on dollar borrowings, whereas OECD (Organisation for Economic Co-operation &
Development, Paris) countries pay 6 to 7%. In some cases as in Japan and South Korea, it is
below 5% due to subsidy on bank interest rates.
9.3 Besides, foreign governments give substantial direct and indirect subsidies to their
shipyards. In UK, China and Taiwan there is no upper limit on the grant of subsidy their
shipyard. The only criterion is to secure the export order. But the Indian shipbuilders say that
the subsidy provided the government are meagre. The subsidy is rarely received, and if at all
received, because there is no nodal agency to disburse the funds.
9.4 A panel set up by MoST (Ministry of Surface Transport) has projected a total outlay of
US$ 181.76 million for development of shipbuilding and ship repair facilities in India in the Ninth
Five Year Plan (1997-2002). This will have a foreign exchange component of US$ 93.57
million.
9.5 The Government had set up a high power committee to evolve a progressive national
shipbuilding policy and provide an impetus to the efforts to revive domestic shipbuilding under
the Chairmanship of the Director General of Shipping. The Apex Committee -- comprising the
Joint Secretaries (of Shipping, Ports and Navy), representatives of Indian Shipbuilding
Association, the Shipyards Association of India, Hindustan Shipyard and Cochin Shipyard Ltd. --
had been mandated to submit a comprehensive report on the lines of the new shipping policy as
soon as possible.
10.0 The Maritime Agenda 2020 mentions as its Vision the following: :
10.1 With respect to Indian Shipbuilding and Ship Repair Industry,following is envisaged :
“To have a well developed shipbuilding and ship repair industry of international standard
in India which will be self sufficient in buildingand repairing commercial vessels required
by the country by 2020 and generate huge investment and employment opportunities.”
10.2 Following targets can be set for the Indian Shipbuilding industry:
 To achieve a global market share of 5% by 2020.

 To develop a strong ancillary base in the country by 2020
 To generate additional employment for 2.5 million persons (0.5million direct and 2.00
million indirect) by 2020 in the core shipbuilding as well as the ancillary and
supporting industry sector.
 To develop strong R&D facilities and design capabilities for the commercial
shipbuilding.
 To be self-sufficient in ship repair requirements of the country and to emerge as a
dominant ship repair centre replacing Colombo, Dubai, Singapore and Bahrain.
 To achieve a share of 10% by 2020 in global ship repair industry.
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B. SHIP REPAIR MARKET IN INDIA:
1.0 Ship Repairing in India dates back to the first dry dock that was built at Bombay port in
1750 and second at Calcutta port in 1781. For about two decades immediately after the
independence, the Indian ship repair industry made a booming business. The potential size of
the ship repair industry in India is around Rs.44 billion. However, only a small percentage of this
business equivalent to Rs.10-12 billion is executed by Indian ship repairing industry.
1.1 There are total 35 SRUs (ship repair units) registered with the directorate- General of
shipping, Government of India, of which only 7 SRUs have been given the approval as SRUs.
The major SRUs in the country are CSL, HSL, Western India shipyard, MDL and ABG shipyard.
Western India Shipyard is the only shipyard, which is dedicated to ship repairing activity.
1.2 With the growing fear of pollution and stricter norms and regulations, ship-repairing
services are in demand. Indian shipyards have the competitive advantages like low labor costs,
availability of trained and skilled labor force and proximity to international shipping routes
required for getting success in business.
1.3 The ship repair market in India, which was at Rs. 2,596 crores in 2010, has the potential
to touch Rs.4, 763.40 crore by 2015. In turn, it will help to employ around 25000 people for the
ship repair industry.
2.0 Ship repair process:
2.1 Ship repair is generally considered as an evergreen industry, both globally as well as
Ship being a floating structure requires regular inspection and maintenance of equipment and
machinery for smooth and safe functioning during ocean voyage also during cargo handling
operating at ports. Ships are also generally governed by scheduled periodic repairs for which
the classification society and other statutory bodies have formulated guidelines for periodic
surveys.
2.2 Hence, ship repair yards generally have continuous and consistent flow of business,
which makes ship repair revenue generation industry. Ship owners should also understand that
selling a ship is risky as it gives birth to a competitor. So they should either break it or repair it.
Which will also increase the market for ship breaking and ship repair yards.
2.3 The global Ship repair market for the eleventh five-year plan (2007-2012) was to be
worth $10 billion to $12 billion, in which India has a share of just about $ 100 million. The ship
repair industry in India will also get business from the Indian shipping industry, which has about
50% of ships owned, older than 20 years. As the older ships require more frequent and
extensive ship repair and maintenance.
3.0 Market potential:
3.1 The Indian flagged ships are expected to reach 12 million GT. This boom in shipping,
coupled with greater demand for safety of sea, stringent inspection etc which leads to demand
for suitable repair & dry dock facilities in India. While shipping industry has grown and so has
shipbuilding, the reverse is happening in ship repair where there is probably a slight decline as
many ship repair yards in china and other places that are doing ship repairs.
3.2 In India also yards like ABG, Alcockashdown and Bharti have reduced or stopped their
ship repair activities. Ship repair work by nature is labor-intensive and not prone to automation
and India has an abundant supply of this kind of skilled and low-cost labor. It is also fact that
large number of workers in ship repair yards in Singapore, Dubai & Colombo are of Indian
origin. Most of these workers acquire their basic skills in Indian training institute and shipyards
and then move abroad for better opportunities and higher wages.
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3.3 India is located strategically on the international trade route, the country can offer ship
repair and maintenance services to ships plying from west to East in the trade route which will
increase market potential for ship repair business as shipowners may prefer to repair their ships
without deviating from their trade routes. Recently Pipvav Ship yard has also opened branches
in Mumbai / JNPT.
3.4 So they should find the nautical distance from the main line sea routes so that the ships
can touch Indian bases for repairs.Therefore, with proper policy and supportive measures India
can become a leading ship repair nation by offering the most cost-effective repair solutions.
3.5 The foreign ship owners will be interested if the ship repair is proper and meets the
demands of the class of the ship. Also Indian ship repair yard should repair a ship in less time
by enabling more labors and worker to work. Shiprepair yards do not only repairs ships, it also
looks after tugs-floating rigs / platforms & research vessels. So the industry should focus on that
area too.
3.6 Old materials from Alang can be used like Pumps, generators,some other fittings etc.,
which will decrease the cost of the materials and also decrease the time taken for ship repair.
Big shipyards can fight recession as it enhances immediate cash flow in ship repairs whereas
ship building cash flow is slow. This will overall generate employment and which results in
increase in economy of the country.
4.0 Ship repair -challenges:
4.1 Indian ship repair yards take more time in repairing a ship. If Indian yards can match the
repair time of other countries yard, then India can enjoy competitive advantage in terms of
mobilization and demobilization cost of the ship.
4.2 The introduction of service tax has imposed an unbearable burden on the ship repair
industry. 12.36% cost increases due to tax which makes India uncompetitive as compared to
Singapore, Colombo & Dubai.
4.3 The present situation is that virtually no Indian shipping company is getting its ships
repairs done in India. The only ships that are being repaired are those which cannot be sent
abroad due to some or other reason like Indian navy, Indian coast guard, dredgers of DCI, few
SCI ships.
4.4 In order to promote and encourage shipyards to take an speedy and comprehensive
ship repairs, it would be desirable to make available soft loans towards establishing additional
infrastructure facilities.
4.5 Priority of ports movement are always given to cargo vessels rather than repair vessel,
which results in time lost for vessels undergoing repairs not being able to sail after completion.
In this area where due importance should be given.
4.6 Summary: The successful shipbuilding industrial development of Japan, China & Korea
has not happened by chance but by carefully crafted policy where the government has provided
the core administrative guidance and support. Such integrated policy initiative would be required
for the revitalization of the Indian ship repair industry as well so that conditions are created for
the Indian firm to become technological leaders.
4.6.1 The promotion of Indian ship repair industry is required for three main reasons.
Firstly, the labor intensiveness of the industry will act as a conduit for providing
employment to the youth of the country. Secondly, the growth of the industry will
result in growth of industry like steel, electronics, chemicals etc. Thirdly, it will lay
the foundation for the shipbuilding& repair industry.
4.6.2 Ship repair facility please also see Indian Shipyards.
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5.0 FACILITIES AT THE PORTS:
5.1 MUMBAI PORT
5.1.1 The port had 2 dry docks, the Hughes Dry Dock in Indira Dock and Merewether Dry
Dock in Prince's Dock. The existing facilities provide all major services for repairs to the
ships. The Hughes Dry Dock pumps have been electrified and are used also for impounding
water to an extra height of 1.20 m so that the depth of water at all berths inside Indira dock can
be increased from 9.30 m to 10.50 m. During fair weather seasons the depth of water level can
be increased even upto 11.50 m. At Hughes Dry Dock 24 welding plants of 415 V - 80 V - 300 A
capacity and 8 Oxy-Acetylene outlets have been provided.
5.1.2 Hughes Dry Dock is about 305 m x 30.5 m. with one 20-ton electric mobile crane and
one 1.5 - tone fixed hydraulic crane. Merewether Dry Dock is about 125 m x 20 m with one 1.5-
ton fixed hydraulic crane. The facilities in the Dry Docks are being modernised.
5.1.3 Vessels upto max. 650' length and 85' beam can be berthed at Hughes Dry Dock, and
vessels of 500' length overall and 61' beam can be berthed at Merewether Dry Dock.
5.1.4 Major repairs can be carried out at Mumbai Port with excellent facilities available.
Repairs to vessels are carried out in wet docks, dry docks or at anchorages. Repairs to laden
vessels can be carried out at berths during cargo operation or to ships berthed exclusively for
carrying out repairs depending upon the nature and urgency of repairs. In case of work of
hazardous nature, the ship's agent is required to indemnify MBPT for any loss, accidents,
damages, claims, etc. Of course permission is required from various port authorities, such as
Traffic Manager/Deputy Manager, Chief Mechanical Engineer, Port Safety and Fire Officer, etc.
Permission of the Deputy Conservator or his authorised representatives is necessary for
conducting underwater repairs which are permitted only at the dry docks. Further details may be
had from the Mumbai Port Trust website.
5.1.5 In 2018 Hughes dry dock is handed over to CSL for operations.
5.1.6 Merewether Dry Dock and Prince's Dock. is filled and reclaimed for new ferry and car
terminal.
5.2 KANDLA has a maintenace jetty for maintenace of crafts equipped with a steel dry dock
of vessels having displacement up to 2700 tons, max. length 100 metres, beam 15 metres and
draft of 4.5 metres. There is a 10-ton wharf crane on the jetty. Minor repairs including chipping
and painting can be attended to at the port of Kandla.
5.3 MARMUGAO: A major ship repairing complex with dry docking facilities has been set up
by WISL (see above). Facilities for floating repairs as well as chipping , painting and tank
cleaning are provided by a number of specialised private firms as well as Goa shipyard Ltd. At
Goa.
5.4 PARADIP: A 500-ton slipway is available for maintenance and repairs of small crafts and
barges. There is a centrally equipped workshop to take care of ships' requirements. Dry dock
facility is likely to come up soon by participation of the private sector enterprises in ship repairs.
5.5 KOLKATA: Five dry docks (KP Dry Docks I, II & III and NS Dry Docks I & II) with lengths
varying form 102 metres to 172 metres and beam varying from 14.6 metres to 22.8 metres can
be accommodated for undertaking all major surveys and underwater repairs.
5.6 HALDIA: A proposal for a ship repair complex in the private sector is in the making.
5.7 VISAKHAPATNAM: Facilities for dry docking for port crafty are available.
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5.8 At Vadinar, Bedi Bunder, Karwar, Okha, Porbandar, Sikka, Veraval and Kakinada, minor
repairs can be carried out. Bhavnagar has better facilities which include chipping and painting.
5.9 The PIPAVAV PORT in Gujarat will be the first private sector 21st centurey port. Once in
full swing, it will provide he largest range of services, including modern ship repairs. Also Aligarh
near Mumbai, is planning sophistricated ship-repair facilities with private sector participation.
5.10 Western India Ship Yard at Paradip in Orissa is expected to work up to full capacity in
ship-repairing any time from now
6.0 There is vast scope for building up ship repair-industry specially in India where
labour is cheap. If the industry is competitive it can be profitable and attract foreign capital.
6.1 Shipowners Indian as well as foreign, are prepared to give Indian Shipyards work,
provided the following criteria are fulfilled:
(i) Competitive Cost,

(ii) Quality control and experienced manpower,
(iii) Reliable managements looking for repeat business,
(iv) Speedy work without endangering safety standards,
(v) Good work without endangering safety standards,
(vi) Ability to deal with unexpected problems including additional jobs which often
noticed in the course of the regular repair work, without undue loss of time and
at a price level in line with that was already quoted before the vessel is entrusted
to the yard.
6.2 additionally in the report of the National Shipping Policy Committee, the Committee had
suggested that the repair facilities in and around the ports should be taken up in right earnest
and on a priority basis. In view of the liberalisation policy, the Ministry of Surface Transport
(MoST) has instructed the various States Government to make land and water front available to
private enterpreneurs who are interested in setting up ship repair facilities in the proximity with
the budgetary support from the Central Government.
6.3 SCI, the country's largest shipowner, has been using Indian yards for carrying out to all
its OSVs and passenger ships. It is usually larger vessels like bulk carriers, tankers, gas and
acid carriers that are sent overseas for repairs as other facilities to repair are mostly not
available such type of vessels just don't exist in India.
6.4 Ship repair facilities the world over and specially in India are inadequate. All the Indian
ship repair yards can meet only 50% of the Indian merchant shipping repair needs.
6.5 The Government should create free port zones for repair yards like those in Singapore
and Dubai. Manufacturers of paint, steel, electric fittings, the entire range of ships equipment
and machinery should be permitted (in the free port zones) to keep their stocks for off-the shelf
sales to the shipyards. This will reduce inventory and operations cost of the shipyards
substantially.
6.6 The Ship Repairers Association has created a forum where problem of ship repairers
can be raised and collectively tackled.
6.7 Competitors for India's repair business are Bahrain, Dubai, Sri Lanka, Malaysia and
Singapore. .
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C. SHIP BREAKING:
1.0 INTRODUCTION :
1.1 During times of depression a shipowner can lay up his vessel; but even here his costs
may be considerable, for example, a vessel with daily running costs of Rs. 50,000/- still has
running cost of approximately Rs. 16,000/- a day when laid up. This is the reason why
shipowners may, when markets are low, accept freights below the ship's actual running cost as
it may be less of a loss than laying up.
1.2 The returns from shipbreaking come mainly from the re-rollable steel, non-ferrous steel,
and secondly from other metal products such as stainless steel, machinery, cranes, engine
parts, brass, windlass, wood, fuel on board, furniture, etc. etc. Shipbreaking is a tough and
difficult job. The industry is highly labour intensive. Hundreds of labourers are required to
dismantle and separate the parts from one another. It is, however, a very lucrative business.
1.3 Ships are sold on the basis of light displacement. Light displacement is the weight of the
hull of a ship together with her gear and machinery, with boilers filled to working level, but no
ballast.
2.0 INTERNATIONAL SCENE:
2.1 In 1945-80 major shipbreaking regions in the world were USA, Portugal, Spain and Italy.
From 1980-1988 shipbreaking was dominated by Taiwan, China and South Korea. Taiwan
introduced high-tech and sophisticated methods and beached ships in a short time period.
Owing to rise in costs by early 1990s, Taiwan and South Korea reduced the emphasis on the
shipbreaking industry, but China was still around, though its operations were limited due to
foreign exchange problems. As a result of this the Indians (at Alang), the Pakistanis (at Gadani
Beach) and the Bangladeshis (at Chittagong) got a sudden boost in the shipbreaking industry.
2.2 China, Vietnam and the Philippines are now planning to grab a major share of the global
shipbreaking business in Asia.
2.3 Once USSR vessels were sent to Alang, but with the breakup of the Soviet Union, China
is now a favoured nation. Since China is facing foreign exchange problem, India can recover
its earlier position.
2.4 There are about 60 shipbrokers in the world specialising in shipbreaking. London is a
major market. These brokers float their enquiries. Prices are usually settled on the basis of
light dwt tonnes and ownership without seeing the ship. British and U.S. controlled ships tend to
have a larger percentage of metals, while Japanese ships are considered technically more
sound and contain more steel.
2.5 At present the world demand for shipnbreaking is 4 million tones every year. Experts
believe that India can capture 2.4 million tonnes but the key to success is the provision of much
better facilities and a further liberalisation of central economic policies.
2.6 Ship demolition has evoked the interest of the Japanese government because of the
rising demand for shipbreaking yards. Particularly due to insistence of IMO, within the next 20
years all single hull oil tankers have to be converted into double-hulled tankers or be scrapped.
Accordingly, by the year 2021 the world's shipowners need to scrap more than 10 million tonnes
every year, whereas the present shipbreaking capacity worldwide is not more than 2 million
tonnes.
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3.0 INDIAN SCENE:
3.1 The shipbreaking (or ship demolition) sector is an area where India is a major player.
Indian shipbreaking operations are however, primitive. Vessels are driven onto the beach
whereas they are dismantled by cheap labour with a blow torch and a gas bottle. Cranes are
shared between different facilities.
3.2 Apart from Alang (discussed below) significance are breakers sited in Jamnagar,
Sachana, Mumbai and Calcutta, although these tend to be focused on smaller ships. Also
planned are six plots at the east coast site near Kakinada.
3.3 Operations are primitive and hazardous. Risks include (i) fires, (ii) being crushed by
falling plates or other objects, and (iii) being injured by snapping wires.
3.4 Liberalisation process in India has brought rewards as well as risks to the shippbreaking
industry viz.,
(i) The Merchant Shipping Act, 1958, was amended to enable shipbreakers to
import ships without hindrance.
(ii) The Government has decanalised imports of scrap. End users can now obtain
better quality packaged scrap from Europe, Far East or USA.
(iii) A number of 70 new entrants have entered the market since March 1995, being
attracted by low capital investments, thereby increasing competition amongst
shipbreakers.
(iv) Rent, previously Rs.140/- per sq. metre at Alang, has risen to Rs.770/- per sq.
metre. Prices of plots in other shipbreaking sites in Gujarat have risen by as
much as 100%.
3.5 The price of raw materials (example, Oxygen and LPG) is rising rapidly and eating into
the working capital. India’s shipbreaking may become less competitive in the years to come.
Major competitors are also low regions, such as China, Pakistan and Bangladesh.
3.6 A ship of 5000 tonnes needs 200 men and takes 65 days to be broken. Average per day
production is 80 to 100 tonnes. India takes 8-10 months to break a VLCC, as compared to 2 to 3
months in rival countries. Efficiency increases with ships above 10,000 tonnes. Clearly the
bigger the ships the greater the profits for shipbreakers. But India has been traditionally a centre
for breaking ships of low tonnage.
3.7 Shipbreaking industry is providing a gain of more than $133 million by bridging the gap
in domestic production of rolled steel.
3.8 In 1996 five large ships varying from 39000 to 51000 tonnes were beached but this was
well short of tonnage which has gone to china, Bangladesh, Pakistan and Taiwan in recent
times.
3.9 With the purchase of vessels for scrapping being readily available in the near future, the
shipbreaking industry which is already significant in India with as many as 200 units, may show
a rapid growth provided it is backed up to by adequate and suitable infrastructure existing for
the purpose.
3.10 The Minerals & Metals Trading Corporation (MMTC) is planning to enter the field in a
big way in collaboration with a reputed private sector party and plans for this are taking shape.
3.11 The chances of India overtaking other countries like China and Pakistan in shipbreaking
are considered quite good. Sources indicate that in 1993-94 some 175 ships of all types/sizes
were beached, mostly at Alang.
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4.0 ALANG:
4.1 Gujarat has a very long coastline of nearly 1600km. The sea coast is dotted with a
number of natural seaports and good sea beaches ideal for shipbreaking. A survey of the sea
coast was carried out by Gujarat Maritime Board and a few sites such as Porbandar, Sachana,
Mandvi, Alang, etc. were identified for shipbreaking. Of these sites, Alang was selected as the
best suitable location in Gujarat. Alang beach, an 8 km expanse along the Gulf of Khambatta,
in Bhavnagar district, was accordingly decided to be developed as a shipbreaking site and the
first ship M.V. Kota Tanjong was broken in Alang in February 1983.
4.2 Alang has since become the largest shipbreaking yard in the country. In 1983 the steel
yield from Alang was about 25,000 tonnes. The same village has now surpassed 1.2 million-ton
mark as at November 1994. From breaking 5 ships in 1982, Alang took a long leap to breaking
175 ships in 1993-94. As of today there are about 160 plus beaching points thus the number of
ships dismantled is huge.
4.3 Alang is plagued with infrastructural bottlenecks hampering shipbreaking operations.
According to a report, the potential of the Alang shipbreaking yards had not been utilized
properly on account of ineffective shipbreaking process and lack of co-ordination between
government agencies. Owing to the failure of the Gujarat Government to bring about an
improvement in the overall infrastructure, the yard could close down in the next 10/15 years.
Living conditions of the labourers at Alang is pathetic.
4.4 Environmentalists have been clamouring for the closure of the Alang shipbreaking yard
for years, on the plea that shipbreaking activity has posed a threat to the marine environment.
4.5 The earlier state governments in Gujarat restrict capacity of each plot at Alang to 6000
tons of scrap production per year making the industry to remain small scale. The situation
improved in 1989 when quantitive controls were removed.
4.6 Earlier the industry in Alang was free of controls, but now Gujarat Maritime Board is in
full control and new plots of land are being auctioned. The 10- year lease period is under
criticism from iron and steel scrap dealers who are demanding a 99-year lease.
4.7 India’s largest demotion company Anik Ship-breaking Industry Ltd recently secured ten-
year lease on 10 VLCC plots at Alang and is now planning to become the only shipbreaking and
rerolling company listed on the Mumbai Stock Exchange. The Company’s re-rolling mill, 50km
from Alang, is due on stream very soon.
4.8 Alang has brought an economic boom to the whole of the nearby coastal area of
Bhavnagar. Alang Shipyard was and is still the busiest graveyard for ship demolition.
4.9 Surprisingly Alang’s progress has been achieved as a demolition industry despite lack of
infrastructure. Alang has to thank the joint efforts of about 15,000 migrant workers from other
states and the entrepreneurial skills of the people of Gujarat.
4.10 If given the right conditions, infrastructure and resources, Alang could go on to capture
the world ship-scrap market.
5.0 HONG KONG SHIP RECYLING CONVENTION & ITS IMPACT:
5.1 The Hong Kong International Convention for the Safe and Environmentally Sound
Recycling of Ships, 2009 (the Hong Kong Convention), was adopted at a diplomatic conference
held in Hong Kong, China, from 11 to 15 May 2009, which was attended by delegates from 63
countries.
5.2 The Convention is aimed at ensuring that ships, when being recycled after reaching the
end of their operational lives, do not pose any unnecessary risks to human health, safety and to
the environment. The Hong Kong Convention intends to address all the issues around ship
recycling, including the fact that ships sold for scrapping may contain environmentally
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hazardous substances such as asbestos, heavy metals, hydrocarbons, ozone-depleting
substances and others. It also addresses concerns raised about the working and environmental
conditions at many of the world's ship recycling locations.
5.3 The effect thus will be that the control on the environmental impacts will be far more
stringent – which may at times deter the ship sellers to shy away as they may look for best
prices and the buyer for the best gain with slack regulations.
6.0 PIPAVAV:
6.1 Gujarat Pipavav Port Ltd. is a joint venture between Gujarat Industrial Development
Corporation and Seaking Engineers Ltd and one of the finest ports in West Coast with natural
draft (at Pipavav district in the State of Gujarat.)
6.2 In February, 1996, Japan’s Overseas Economic Co-operation Fund signed a contract
with the Indian Government to provide 7 billion Yen (66 million dollars) soft loan to build the
world’s first VLCC dry dock shipbreaking facility. The project is expected to be operated by end-
2000 at Pipvav Port in Gujarat. Two docks are to be build, each capable of taking 2 VLCCs at a
time.
6.3 Pipavav might a modern environmental friendly shipbreaking yard using the latest laser
technology to break vessels, with a capacity to break vessels totaling upto 5 lac tonnes per
annum. VLCCs and ULCCs, tankers, aircraft carriers and other large vessels are proposed to
be broken up at Pipavav. The project progress to break 45 ships in its own 15 yards and 180
ships in 60 yards leased to others for breaking small ships averaging 5000-6000 light dwt tons
by the conventional breaking methods, totaling 10 lac tonnes of steel scrap for India. But it is
presently not being followed up.
ooooo
1. Write a short note on the present day world shipbuilding scene.

2. Name the major Indian shipyards stating their location and capacity.
3. Write short notes on (a) Hindustan Shipyard Ltd (b) Cochin Shipyard (c) Garden Reach
Shipbuilding and Engineering Ltd.
4. Write a short note on the problems faced by Indian shipbuilding yards. How is the
government trying to bail them out?
5. Give full forms of MoST, OECD, GRSE, WSL, CSL, CIL.
6. Write a note on ship repair yards.
7. What are the facilities available at Mumbai Port for ship repairs? Briefly mention
facilities for repairs available in other Indian Ports.
8. How should the government help out ship repair yards?
9. What is the need of shipbreaking? Write a short note on the international and Indian
shipbreaking scene.
10. Where is the largest group of shipbreaking yards in the country? Name their strengths
and weaknesses.
11. What is the Ship Recycling Convention? How can it affect the ship breaking industry?
FURTHER RECOMMENDED READING
1. Shipping and Shipbuilding Industry in India – DEV RAJ, 1990.

2. The LINK – Global Trade and Freight Review, monthly published by EXIM INDIA,
Mumbai. Issues cover relevant topics.
***************
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LESSON 12
TECHNOLOGICAL DEVELOPMENTS IN SEA TRANSPORT
1.0 Introduction:
1.1 To understand the impact of ship technology, we need to look at the overall port
business scenario. The globalization has been undergoing faster changes over the last two
decades and most of us expect that the global business environment will undergo greater
change over the coming decade than it did, over the last one hundred. Simultaneously the
development of diesel engine brought about a revolutionary change in sea transportation. The
Second World War witnessed the numerous applications of instrumentation and control
engineering. This technology has been simultaneously utilized by the ship building industry and
used in creating faster and better ships.
1.2 These changes have been and will be precipitating a radical shift in the business
operations of global firms, especially with regard to the role of logistics. Port, as we understand
is a critical link in the integrated international logistic chain. Thus the effects will be quite evident
in these areas.
1.3 The global trade too developed from the 1960s with many countries gaining
independence from their colonial masters and thus contributing in the trade with export of raw
materials and import of finished goods, machinery parts and food stuff etc. The developing
countries also started their own national shipping lines for taking a slice of the trade. The
shipping industry therefore looked forward to innovations and large-sizing of the carriers. In this
regime the Arab-Israeli War resulted in the closure of Suez Canal. This forced the shipping to
move a longer route around the Cape of Good Hope in Africa. Due to the economics of scale, it
made sense increasing the sizes of vessels as cost of transportation of cargo, in dollars per ton
terms, reduced substantially.
1.4 From that time onwards there has been tremendous increase in parcel sizes of dry and
liquid bulk with burgeoning demand. Business wanted to get the benefit of economies of scale.
Since the end of the 1980s, global firms have been steadily reducing their number of national
warehouses, consolidating them into regional distribution centers that serve a much wider
geographical area. The centralization of inventories marks the culmination of a succession of
logistics strategies based on local distribution systems over the last decade. These have
certainly influenced the global container logistics.
1.5 Experiences in Europe demonstrate that consolidating inventory in fewer locations can
substantially reduce total inventory requirements, resulting in enhanced competitiveness.
Therefore they are keener on larger parcel load after realigning the supply chain through
appropriate production and delivery schedules.
1.6 Indeed, the advantage of managing worldwide inventories on a centralized basis is

widely recognized, though such centralized systems may lead to higher transport costs. Reason
is that products inevitably must travel greater distances, and increased speed of movement is
necessary in ensuring short lead times for delivery to the customer. The reduction in sea
transport cost through improved technology & optimized ship management remains a challenge
for the ship owner and the port – both.
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1.7 The continuous development of maritime legislation, especially in light of various
accidents and adoption of conventions of the IMO thereafter, resulted in better ships being built.
The double hulled tankers are expected to reduce the extent of pollution damage in the event of
grounding or serious accidents. Similarly special ships have been designed for special cargoes
and specific purposes. Chemical carriers, refrigerated vessels, off shore supply vessels, open
hatch vessels for carrying newsprint, RORO vessels which can carry containers; cars etc. are
some examples of inventions and technical innovations.
2.0 Economies of Scale:
2.1 Various cost cutting measures are automatically brought about as the scale of operation
grows & simultaneously giving rise to specialization of workers. With specialization they become
efficient and fast. The other area is mass production and distribution which we also find in
supermarkets. This reduces cost substantially. Similarly the Economies of Scale has influenced
shipping largely.
2.2 In shipping economies of scale are basically derived from what is known as Cube Law
or 2/3 rule. It says:
“When cubic capacity of vessels is increased, provided ratio between the length, breadth
and depth remains the same, the area will increase as its cube. Provided the thickness
of the structural material (here steel) is not increased, the capital cost will increase much
less than the capacity.”
2.3 In practice there is variation to this theory:
a) The ratio of length, breadth & depth is not always constant. As the size of ship goes
up, due to structural reasons length cannot be increased very much. Similarly draft
restrictions in many ports – limit the parcel size.
b) While increasing size, the thickness of the steel goes up. Sometimes – high tensile
steel has to be used. Thus goes up the cost.
2.4 Hence broadly speaking, the Economies of Scale can be defined as:
“As the size of ship increases, other things being equal, cost for transporting one
ton of cargo reduces. The cost per ton mile also reduces.”
2.5 Though there are some finer points against such propositions, broadly the benefits to
owners are:
1. Less crew costs: Larger ships do not necessarily need crews to be increased in
simple proportions. The benefit can be summarizes as crew cost becoming about 15 to
20% of the ship-owner's total cost.
2. Fuel cost is reduced as the larger ships consume less fuel per cargo ton mile. This is
a major development, which has given birth both to faster Mega-Container ships as well
as slower Mammoth Tankers.
3. Construction cost per DWT of building a ship reduces as the ship size increases.
2.6 The other benefits of economy of scale to the business could be:
1. Reduced freight rate offered by the ship owners – leading to overall increase in trade
2. Due to faster transport of goods the inventory level in production centers have come
down
3. Bigger ships have created better technologies and enhanced scope of employment in
ancillary industries
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3.0 Change in ship sizes- a brief:
Before describing the after impacts – we can have a quick look at the growth of sizes in two or
three most other important sea trades.
3.1 Dry Bulkers:
3.1.1 A bulk carrier or bulker is specially designed to transport unpackaged bulk cargo, such
as grains, coal, ore, bauxite and cement in its cargo holds. Since the first specialized bulk
carrier was built in 1852, economic forces have fuelled the development of these ships, causing
them to grow in size and sophistication. Today's bulkers are specially designed to maximize
capacity, safety, efficiency, and to be able to withstand the rigors of their work. Today, these
bulkers make up 15% - 17% of the world's merchant fleets and range in size from single-hold
mini-bulkers to mammoth ore ships able to carry 400,000 metric tons of deadweight (DWT).
3.1.2 A number of specialized designs exist: some are self unloaders and some depend on
port facilities for unloading, and some even package the cargo as it is loaded. Over half of all
bulkers have Greek, Japanese, or Chinese owners and more than a quarter are registered in
Panama. Korea is the largest single builder of bulkers, and slightly over 80% of these ships
were built in Asia.
3.1.3 A bulk carrier's crews can range in size from three people on the smallest ships to over
30 on the largest. Since bulk cargo can be very dense, corrosive, or abrasive it can present
safety problems like cargo shifting, spontaneous combustion, and cargo saturation which can
threaten a ship. The IMO has defined the BLU code meant to guide such vessels to safely load
& stow the cargo to avoid eventualities. The use of ships that are old and had corrosion /
structural problems had been linked to the spate of bulker sinking in the 1990s. New
international regulations have since been introduced to improve ship design and inspection.
3.1.4 Handysize and Handymax ships are general purpose in nature. These two segments
represent more than 70% of all bulk carriers over 10,000 DWT and also have the highest rate of
growth. This is partly due to new regulations coming into effect which put greater constraints on
the building of larger vessels. Handymax ships are typically 150–200 m in length and 52,000 –
58,000 DWT with five cargo holds and four cranes. The size of a Panamax vessel is limited by
the Panama canal's lock chambers, which can accommodate ships with a beam of up to 32.31
m, a length overall of up to 294.13 m, and a draft of up to 12.5 m. however this limitation will
soon be over as the lock sizes are being enhanced.
3.1.5 Capesize ships are too large to traverse the Panama Canal and must round Cape Horn
to travel between the Pacific and Atlantic oceans. Earlier, Capesize ships could not traverse the
Suez and needed to go around the Cape of Good Hope. Recent deepening of the Suez Canal
to 66 ft (20 m) permits most Capesize ships to pass through it. Capesize bulkers are
specialized: more than 90% of their cargo is iron ore and coal. Very large ore carriers and very
large bulk carriers are a subset of the Capesize category reserved for vessels over 200,000
DWT. Carriers of this size are almost always designed to carry iron ore.
3.1.6 There are also other categories as diverse as the following – sometimes categorized on
regional basis:
Kamsarmax: LOA is 229 which are larger than Panamax, vessels and these are suitable
for berthing at the Port of Kamsar.
Newastlemax: Refers to the largest vessel able to enter the port of Newcastle, Australia
having a capacity of about 185,000 DWT.
Setouchmax: About 203,000 DWT, being the largest vessels able to navigate the
Setouch Sea, Japan.
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Seawaymax: LOA is 226 m max. This refers to the largest vessel that can pass through
the canal locks of the St Lawrence Seaway (Great lakes, Canada).
Malaccamax: LOA is 330 m / draft 20 m and 300,000 DWT, Refers to the largest vessel
that can pass through the Straits of Malacca.
Recent addition being Valemax (more than 4, 00,000 DWT)
3.2 Tankers:
3.2.1 We have covered the different aspects of liquid cargo loading & planning in two
chapters. Thus without further discussion the details are provided for understanding the growth
of the sizes. However here is a description of world's largest tanker. When it left the shipyard in
1979 it was called the Seawise Giant, in 1989 the name was changed to the Happy Giant and in
1991 its name was again changed to Jahre Viking. In 2004 the ship was turned into a static,
permanently moored storage tanker and renamed as Knock Nevis. The table below provides a
summary of the incremental dimensions – basis increase in DWT in tankers.
3.2.2 Tankers used for liquid fuels are classified according to their capacity. In 1954, Shell
Oil developed the average freight rate assessment (AFRA) system which classifies tankers of
different sizes. To make it an independent instrument, Shell consulted the London Tanker
Brokers’ Panel (LTBP). At first, they divided the groups as:
3.2.3 General Purpose for tankers under 25,000 tons deadweight (DWT) & Medium Range for
ships between 25,000 and 45,000 DWT whereas Large Range for the then-enormous ships that
was larger than 45,000 DWT.
3.2.4 The ships became larger during the 1970s, and the list was extended, where the tons
are long tons:http://en.wikipedia.org/wiki/Tanker_%28ship%29 - cite_note-3
General Purpose tanker 10,000–24,999 DWT
Medium Range tanker 25,000–54,999 DWT

Long Range 1 (LR1) 55,000–79,999 DWT
Long Range 2 (LR2) 80,000–159,999 DWT
Very Large Crude Carrier (VLCC) 160,000–319,999 DWT
Ultra Large Crude Carrier (ULCC) 320,000–549,999 DWT
4.0 Container vessels – impacts:
4.1 Containers infused revolutionary logistics. Multi-purpose vessels evolved into cellular
containers vessels to load various container sizes and types, namely 20 feet, 40 feet, Reefer,
Flat Rack, Open Top, and Tank Container etc. One of the effects of the increasing size of
container ships is the reduction in the unit costs. This reduction in unit costs for container
carriage added to overcapacity on some routes and the efforts made to reduce the carriage of
empty containers which means more and more bulk cargoes are being moved in containers.
4.2 The emergence of large-sized ships has two significant effects on international shipping,
since ship size not only determines competitive power in the shipping industry, but also
becomes a major criterion in determining the size of a port. Thus, the issue of ship size has
important implications for both shipping and ports, and obviously for international logistics as a
whole.
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4.3 The Post-Panamax container vessel with a capacity of 4,000 TEU first appeared in
1988, and the Post-Panamax vessels over 6,000 TEU-capacity came to service at the end of
1996. Now the full 18000 TEU container vessels are in service here while the 19,200 TEU
vessels will soon be in service. Until recently, 8000 TEU was regarded as the maximum vessel
size using just one engine. With new developments in engine design, including the adding of
four cylinders to create 16 cylinder units, however, single engine vessels of up to 10,000 TEU
can now be built.
4.4 Over the last few years we have seen changes in the service patterns of the liner
shipping industry, changes that resulted from the introduction of larger vessels and carrier
alliances. The average size of vessels employed in Asian container trade has increased from a
moderate parcel load of 2500 TEU in 1992 to 8000 TEU in 2012. Hub port economics suggest
that the use of larger vessels will promote load centering by reallocating shipping services
among existing mainline ports; concentrating more ship calls at the major hub ports and
providing better services (e.g. faster transit times); and eliminating or reducing the number of
calls at secondary ports where multiple liners formerly called.
4.5 A growing proportion of these bigger vessels will be operated mainly as part of carrier
alliances, and the alliances will serve to consolidate port operations. This situation is similar to
that of the mid-1980s, when carriers first introduced 3rd generation container vessels in liner
trades. Today, the force driving the concentration process is the carriers themselves, which
have the ability to exert substantial influence over ports. Thus a question arises as to future for
hub port economics.
4.6 A close look at developments in the Asian shipping system over the last several years
reveals that the emergence of mammoth alliances, with 70-100 container vessels of different
sizes at their disposal, has enabled the number of service routes in the Asian region to increase
up to 50, allowing wide coverage that reaches every corner of Asia. Carriers developed
itineraries enabling them to take advantage of economies of ship size and fulfill frequency
requirements of a trade, linking the main cargo concentrations within the route in question with
direct calls, and without too many intervening ports. As a consequence, the average number of
calling ports has decreased in trans-Pacific trade and also in Asia-Europe trade. As a
consequence of the service reorganization, the maximum frequency of weekly sailings has
increased substantially on Asia-Europe routes.
4.7 Maersk, Seaspan and some other container shipping companies are focusing on
building super-sized container ships with the capacity to hold from 10,000 to 18,000 containers
per vessel. These will dwarf mostly used container ships that have capacities of between 3,000
and 8,000. Defined as triple-E, these ships combine economies of scale, energy efficiency and
environmental controls. Each ship is 400 meters (1,312 feet) long and requires 50% of the fuel
currently consumed by the largest container ships. The ships are also designed to be 35
percent more energy-efficient because engine waste heat is recaptured and used to power the
ship.
Largest Container ship “ OOCL Hongkong” was Constructed by the Samsung Heavy Industries,
Geoje shipyard, it has a carrying capacity of 21,413 TEU. With a length of 399.87 meters,
breadth of 58.8 meters and a depth of 32.5 meters, it is the largest container ship ever built. She
is the lead ship of the G-class, of which five other ships were built and was delivered in May
2017, only two months after the christening of the first ship to break the 20,000 TEU barrier,
the MOL Triumph. The six ships of the G-class were built within the same year at the same
shipyard. MSC has ordered container ship of capacity of 23000 TEUs.
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4.8 Today two more concepts have come up due to the intervention of the IMO – these are
EEDI and EVDI (engine efficiency design index & existing vessel design index) – the former is
to be used for ships being ordered from 2013 and the other being the regulation for retrofitting
the existing vessels having residual economic life. This new breed of container ship is not
capable of using existing canals like the Panama and Suez and will principally operate on trans-
oceanic routes between China, the United States and Europe.
4.9 In consolidating their fleets Seaspan and Maersk will reduce the carbon footprint of their
operations. This will help container operators to meet the goals of the Clean Shipping Project,
an industry, sea port and government-sponsored initiative started in the North Sea (off Europe's
coast) and focused on corporate social responsibility related to conservation and environmental
concerns.
5.0 Block Chain Technology:
5.1 A blockchain is, in the simplest of terms, a time-stamped series of immutable record of
data that is managed by cluster of computers not owned by any single entity. Each of
these blocks of data (i.e. block) are secured and bound to each other using cryptographic
principles (i.e. chain).
5.2 A blockchain is a growing list of records, called blocks, which are linked
using cryptography. Each block contains a cryptographic hash of the previous
block a timestamp, and transaction data (generally represented as a Merkle tree). By design, a
blockchain is resistant to modification of the data. It is “an open, distributed ledger that can
record transactions between two parties efficiently and in a verifiable and permanent way
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6.0 Emission Control area:
6.1 Diesel fuel contains sulfur, which derives from the original crude oil source and can still
be present after refining. After combustion in the engine, this sulfur forms particulates that are a
primary contributor to air pollution and the cause of harmful corrosion in the engine.
6.2 Before global efforts to improve air quality and remove sulfur from fuel came about, high
levels of detergent additives were a necessary component of engine oil to protect engine parts
from the damage caused by sulfur. Detergency was so important that a common way to
interpret engine oil performance or oil life was by measuring the level of detergents in an oil by
the total base number (TBN)
6.3 The oxides of sulphur (SOx; SO2 + SO3) emissions are a direct result of the sulphur
content of the fuel oil. During the combustion process this fuel-bound sulphur is rapidly oxidised
to sulphur dioxide (SO2). A small fraction of the SO2, some 3-5% may be further oxidised to
sulphur trioxide (SO3) within the combustion chamber and exhaust duct. The actual amount
depends on the combustion temperature and pressure, excess air and fuel sulphur content. The
process is promoted by the presence of iron and vanadium oxides which act as catalysts. In the
exhaust gases, a reaction occurs between the SO3 and water vapour to form sulphuric acid
(H2SO4). Above 450°C the H2SO4 will be almost completely disassociated, but as the
temperature decreases an increasing proportion will be present as an acid vapour. As this
vapour cools and is exposed to relatively cool surfaces, it condenses at the prevailing dew
point. Thus SO2 and SO3 which goes in to air, comes down as Acid rain.
6.4 Limiting the maximum Sulphur content of the fuel oils, The International Maritime
Organization (IMO) has set a limit of 0.50% m/m (mass by mass) for sulphur in fuel oil used on
board ships operating outside designated Emission Control Areas (Regulation 14
of MARPOL Annex VI) with effect from 1st January 2020.
6.5 Emission Control Area (ECA):
• Baltic
• North American Area
6.6 Sulphur content % in Fuel oil Limits are as under:
Outside ECA In ECA

• 4.5% prior 01.01.2012 1.5% prior 01.07.2010
• 3.5% after 01.01.2012 1.0% after 01.07.2010
• 0.5 % after 01.01.2020 0.1 % after 01.01.2015
7.0 Issues impacting ports:
7.1 The driving force for changes in port infrastructure, superstructure and operations have
been mostly due the changes in certain aspects of ship technology coupled by changes in ship
management's attitude and their expectations from the ports.
7.2 The ports began their journey from river side jetties or small dock systems having
multiple piers – to accommodate a large number of smaller ships on lean aprons and at times
cranes directly putting cargo at the transit shed gate. With increase in shape and weight of
cargo soon it became clear that ports need to reorient topography and layout quickly. The
closed lock gate systems soon proved to be a major deterrent. The most rational alternative was
to move the port facilities sea-wards with natural availability of deeper drafts.
7.3 The other change that needed realignment was the yard layout and restructuring of the
warehouses. The transit sheds were initially very close to the apron – rather within the reach of
the shipboard cranes. The model followed by most of the older ports (say created between 1920
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and 1930s) was to use as many cranes /derricks to enhance productivity of gangs on shore.
The output was meager – looking at the entire manual process (from ship's hold to the transit
shed storage area). But soon the cargo shapes, structures & weights changed much. The
palletisation movement started in mid 1960-s evolved into established container movements
from late 1970-s. evolved at many ports the transit shed structures were demolished to ease
handling by increasing apron area.
7.4 The need for larger yards was felt; which is in line with the theory that the ports need to
grow in a transverse fashion. The larger and heavier loads needed yards with greater load-
bearing capacity as the equipment were more robust and with much greater tare than their
earlier counterparts (even some of them were electrically driven semi-portals with one portion
balanced on the two or three storied transit shed wall) in addition to the yard cranes on rails.
7.5 What we might lose sign of; is that soon the ports found that they are short of berths – as
the cargo pattern and the ship arrival frequency changed. Some ships also had different hatch
alignment (with or without cranes) and also larger beams. The cranes with lesser outreach and
SWL (safe working load) had become a restraining factor; which needed additions of newer
variety of large capacity mobile cranes which could be shifted at will to take care of the structure
and stowage of vessels. The consequent impact upon the port was to strengthen the quay
(unless it had the inbuilt capacity). In some ports the quay walls had been built as “monoliths”
with large loadability. In other cases (when it involved large increase in crane weight)
considerable civil engineering expense had to be undertaken to take care of the additional load
(in charging large dynamic loads). In the process a general cargo berth was used partially as a
multi-purpose berth.
7.6 An interesting trend that was apparent was the standardization of equipment. With
containers gaining prominence – the spreaders were the first to be standardized. But the main
equipment like RMQC (Rail Mounted Quay Crane), RMG (Rail Mounted Gantry) and the RTG
(Rubber Tyred Gantry) – all became standardized thereafter, similar to ISO container sizes. The
ships in the mean time evolved from feeder variety to ocean liners (commonly termed as Main
Line Vessels). Thus the installation of these equipment to match the expectation of the ship-
owners, indirectly defined the size and layout of the terminals which has been detailed in later
chapters.
7.7 Larger ships needed faster and more accurate handling – especially in container vessels
– thus needing appropriate process control, streamlined operations ( through proper allocation
of yard equipment), trained personnel and finally costly Terminal Operating Software ( like
NAVIS®) to be installed. Recently ports are also using software for monitoring and controlling
operations at bulk terminals as well.
7.8 As ship draft increased, depth of water in ports became a problem; more so for the dock
systems created in the beginning of last century. The gate also has fixed dimensions – which
were difficult; if not impossible to be increased in size. Therefore many such ports had to be
content with single digit draft inside inner locks (especially in India). The demand for larger ships
was drafts above 15 meters in general. But the trend of creation of satellite ports away from the
older location gained ground. For large ships to maintain the same schedules as their smaller
country ports handling speeds needed to be increased. From this it follows that the terminal
area was to be increased and the inland distribution facilities improved. The inland distribution
improvement also demands that the port evacuation system should be aligned to that.
7.9 Apart from railway movement – the road movement also grew. The size of trucks even
grew up to 8 or 9 times the older carrying capacity – which needed internal roads to be
strengthened & aligned with due traffic flow analysis. The gate planning needed many outlets
whereas in older ports these were few. To accept cargo faster for different berths – the gate
allocation also differed.
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7.10 Increasing the size of ships may well also increase the peaking factor which can be a
serious operational problem. There are times when seasonal cargo peaks and also in hub ports
– the disruption in any of the feeder ( or even main line port) can cause a havoc in terms of yard
management. Thus the “safety factor” needed to be enhanced. Thus adding cost for a centre
port.
7.11 One very rare but important issue is that larger and bulkier ships bring with them the
chances of accidents with expensive port facilities which might mean claims of much greater
dimensions. Though these days the International Conventions leading to ISM Code has
standardized the safety measures to a great extent there has been a Port State requirement of
P & I insurances for Wreck Removal & Oil Pollution (approximately of USD100 million). May be
these will be revised for larger amounts.
8.0 Synopsis:
8.1 We have seen how the changing ship sizes have impacted the evolution of ports and
port technology. Like the ports they call on, ships will undergo dramatic changes throughout the
21st century largely driven by rising energy costs and concerns about atmospheric pollution and
climate change. The impact of these new designs will be on shipping lanes as well. With larger
ships incapable of using the Panama and Suez Canals, investment in new canals has become
a priority and possibly this is the reason; why work in these areas are going full steam. Finally
we may have to look at how climate change will alter existing routes as Arctic ice melts and sea
levels rise.
8.2 Presently container and bulk carrier ships are fossil-fuel dependent. These include
heavy fuel oil, marine gas oil, gas-to-liquid fuel, and liquefied natural gas. Increasingly the
marine shipping industry is addressing the issue of marine pollution including emissions. Many
ships today use exhaust abatement technology consisting of open-loop scrubbers and catalytic
reduction similar to the technology deployed with automobiles running internal combustion
engines. Additionally these vessels shall be preferring ports that shall provide shore power
which is obviously green.
8.3 Ship emissions using heavy fuel oil contribute to acid rain while liquid natural gas
decreases acidification by as much as 90% not taking into consideration the production
processes required to make the fuel. None of the fossil fuels used by marine ships today can be
described as carbon neutral with the highest global warming potential connected to gas-to-liquid
fuel. Options are being considered for going nuclear – the first nuclear reactors were not built to
generate power for mass consumption. They were built to be the power plants for naval ships.
The first of these was the USS Nautilus, a submarine completed in 1955.
8.4 With no need for oxygen to feed fuel-based engine technology, nuclear submarines
could remain submerged for days running at very high-speed. Today there are approximately
140 nuclear- powered ships in service with on-board small nuclear reactors. There have been
some pioneering merchant ships that used nuclear power plants such as the NS Savannah. But
these have proven commercial failures with a few exceptions. It seems, however, that any
nuclear power accident leads to global condemnation of the technology. As a result of the
Fukushima post-tsunami disaster in 2011, several projects involving large Chinese shipping
companies, building nuclear-powered container ships have been put on hold.
8.5 However the most promising projects are in the following ship categories: large, long-
distance bulk carriers that travel between dedicated ports with the infrastructure to support
them, passenger cruise ships that combine nuclear with diesel back up, large tug boats capable
of trans-oceanic hauling of conventional ships, and high-speed bulk carriers.
8.6 DNV, a Norwegian company, is building propulsion systems that combine electric drives
with diesel, liquid natural gas and fuel cells. The Quantum 9000 is a container ship designed to
reduce its environmental footprint while capable of passing through the expanded Panama
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Canal possibly opening in 2014. More than 330 meters (1,030 feet) in length, this ship reduces
CO2 by 30%, nitrous oxide (N2O) by 80%, and sulfur dioxide (SO2) by 95%. Some
manufacturers are combining solar with conventional power plants on ships. The M/V Auriga
Leader is a new class of cargo ship that deploys 328 solar panels to provide energy for the
ship's main electrical grid. The shipbuilder, NYK, has developed prototypes for an even more
advanced modular hybrid container ship, the NYK Super Eco Ship. The ship is designed to
produce 70% less CO2 emissions than current commercial vessels.
8.7 CargoXpress is a small-port container ship that combines sail and solar or sail and gas
turbine technology. The air foil consists of composite material and opens once at sea like the
upper part of a clam shell. Using solar technology the CargoXpress can handle up to 200
containers. Designed for Mediterranean Sea shallow ports the ship includes a cantilevered
crane capable of unloading containers onshore without the need for port equipment. Other
sources of power could be Thermo-solar systems for short-distance marine transportation and
rig-less sailing ships designed primarily to work using the wind. These could use masts that fully
rotate with sails that operate electronically to achieve best wind angles.
9.0 Effect on shipping as a whole:
9.1 The oil crisis of the seventies had a great impact on the development of shipping as the
freight and chartering market slowed. It became necessary to reduce and control operating
costs. Fuel costs in operations had increased tremendously due to high bunker prices. Modern
fuel saving measures was put in place, fuel-efficient engines and ships with special hull form
were built. The bunker purchases were made on spot basis as against the earlier system of
contract. This resulted in the entry of bunker brokers, quality inspectors etc. this era also saw
the concept of ship management companies taking shape.
9.2 The arrival of ship management companies changed the system of ship operations to
some extent. The seafarers were no more the employees of the ship-owner but were on
contract with the ship manager. Their stay on the ship was of shorter duration and they started
changing jobs frequently. The larger ship management companies were also able to consolidate
larger shipping operations and were able to get better deals in various aspects of operations.
The re-flagging of vessels with Flags of Convenience state allowed the owner/manager with not
only an operational freedom but also possibilities of reducing the costs. Seafarers from non-
traditional seafaring countries started sailing on the ships. Whereas earlier European vessels
used to have European seafarers, today mostly these vessels are manned with Asian officers
and ratings and some other developing countries. The dissolution of the U.S.S.R. has also
provided large trained seafaring manpower to the market.
9.3 Over the years, now these measures have stabilized and it is quite usual to see
seafarers of various nationalities sailing onboard a particular ship. Also the traditional system of
compartmentalizing, the job on board as deck and engine crew has evolved into development of
general purpose crew and therefore to polyvalent seafarers. This has further reduced manning
costs. The increased use of automation along with high manning costs resulted in reducing the
total number of seafarers on board a ship. The technological development in the repair and
maintenance area also has been quite substantial. The use of self polishing point on the ship’s
hull can extend the period between two dry-dockings to more than 4 years. Under water surveys
and bottom cleaning of the hull also, along with fewer dry-dockings, reduces the technical costs.
9.4 Information technology has helped in the communications and the navigation of the ship.
The presence of satellite has also helped in these fields. The Global Maritime Distress Safety
System has not only reduced the presence of radio officer onboard ships but also assisted in
search and rescue operations (SAR) after a maritime casualty. The operating data can now be
accessed by the shore office instantaneously and therefore the ship’s performance can be
monitored on ‘on line’ basis and corrective measures taken.
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9.5 The developments referred above have definitely improved the efficiency of ship
operations. However; even with all the hi-tech equipment onboard, streamlined paper work and
with lesser number of crew onboard, the seafarer also faces difficult and demanding
environment. Studies have confirmed that the main cause of marine casualties is human error –
either by way of stress or mistakes. The STCW95 now has addressed the question of minimum
rest period for watch keeping personnel onboard.
9.6 The technological development is a natural process and is likely to induce changes in
the ships and methods of ship operations in future too. The business of moving the cargo from
one port to another port has changed substantially in last few decades and will change further in
future.
10.0 New and Expanded Shipping Lanes:
10.1 Global warming is changing where merchant ships can operate. Probably the most
significant change is the Arctic where the Northeast Passage above Russia, and the Northwest
Passage, through Canada's northern islands, represents short cuts from Asia to Europe and
North America. A summer, ice- free Arctic Ocean is a climate change problem that benefits
marine shippers looking for safe passage through the Arctic. Shorter routes mean lower fuel
consumption and less environmental pollution.
10.2 It also means avoiding waters south of the Suez Canal where piracy near the Horn of
Africa has become endemic. Climatologists are predicting passable sea routes through the
Canadian Arctic by 2020 as summer sea ice continues to shrink. Russia is already operating ice
breakers as a service to marine ships attempting the Northeast Passage.
10.3 Do we look forward to newer ports coming up in these areas which had never been a
trade route? As more super container ships get delivered to major marine shipping companies
the Arctic routes may become the preferred method of navigating between Asia, North America
and Europe.
11.0 Northern Sea Route:
11.1 Due to global warming the ice from Northern and Southern part of the earth is slowly
melting and thereby making it possible to navigate without use of ice breaker from higher
latitudes in Northern hemisphere. It means from Europe to far East Asia and vice versa ships
can use this route known as “Northern sea route”. Earlier they had to use Southern Shipping
route through Suez canal and Mallacca straight route.
11.2 A Russian tanker has travelled through the northern sea route in record speed and
without an icebreaker escort for the first time on 24 August 2017, highlighting how climate
change is opening up the high Arctic The $300m Christophe de Margerie carried a cargo of
liquefied natural gas (LNG) from Hammerfest in Norway to Boryeong in South Korea in 19 days,
about 30% quicker than the conventional southern shipping route through the Suez Canal.
11.3 IMO has published Polar code which will be applicable for ships transiting though the
“Northern sea route”.
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1. What are the most important areas where development of sea transport has
impacted?
2. Can you explain the economy of scale and mention its limitations.
3. Describe main technological developments in container ship design and building.
4. How does ship development influence ports?
5. Mention few issues that act as controlling factor in creating bulk vessels.
6. What type of equipment is required for larger bulk vessels?
7. Which political event had a major effect on shipping?
8. What are current problems being faced by the industry?
9. How ship management companies do impact the shipping business?

10. Describe the new shipping route.
11. Describe the Northern sea route and its advantages.

1. Sea Transport: by Patrick M. Alderton
2. Shipping: A Techno-economic Approach by C. N Hughes
3. Technological Development in Ocean Transport – Dr. K. V. Hariharan
4. Port Management – a 360 degree view by Mihir Das ( 2014)
**********
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LESSON 13
MARITIME PIRACY, FRAUDS AND CONTAINER CRIMES
A. MARITIME PIRACY
1.0 There are historical evidences that piracy in one form or another was inexistence at sea
or in coastal waters since ancient times. In recent years, with the growth of technology and sea
trade, piracy has become sophisticated, purposeful and ruthless.
2.0 DEFINITION:
2.1 Piracy and robbery both aim at committing theft by use of force. Robbery usually is
committed on land, while piracy is associated with sea voyages.
2.2 Well known definition of piracy is “robbery, murder or forceful depredation on the high
seas without lawful authority, with the spirit and intentions of universal hostility (i.e. hostility
shown in general like terrorist attacks and not towards a particular person of ship). They are
done without authority of a sovereign state which makes it unfair to hold ay state responsible for
their commission.”
2.3 As piratical attacks take place at port terminate or harbours also, besides high seas. The
International Maritime Bureau modified the definition thus:
2.4 “Piracy is an act of boarding of any vessel with the intent to commit theft or any other
crime and with the intent or capability to use force in the furtherance of that act”.
3.0 DEVELOPMENT:
3.1 A study has revealed that the culture of piracy in recent times has been developed due
to three factors: economic, political and law-cum-regulation.
3.2 The economic factor is the most significant. In many parts of the world piracy was
thought to be an acceptable part of the local culture and in some part of South East Asia it was
considered a normal but illegal means of making money. 3.3 Majority of piracy attacks
involve theft of ship’s equipment or the crew’s belongings. The property lost might include cash,
radios, ropes, life rafts or even tins of paint. The perpetrators of these types of attacks do not
necessarily seek to use violence. Their method is to slip aboard a ship under cover of darkness
in the hope of not being discovered. Once on board they then scour the ship, taking anything of
value that is saleable. Such attacks may happen while the ship is in port or at sea – more so
because the number of crew in modern ships have been drastically reduced with technical
advancement. Violence is usually only threatened or used when the attacker’s means of escape
is blocked.
3.4 When the ship is hijacked, the financial gains derived thereby are very high. With
increased finances, the pirate gangs purchase more weapons and bigger attack craft.
3.5 The rapid political changes that have been taken place around the world since the end of
the Second World War also had an unfortunate negative effect of piracy.
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3.6 Moreover, the reasons for piracy are many and complex and tackling the causes in one
country may not necessarily be an appropriate solution for another country. Solutions must
therefore be found which are global as well as regional.
3.7 Jurisdiction and prosecution of pirates have always been major obstacles I combating
piracy. Many piracy attacks and particularly those involving hijackings involve several countries.
Therefore in the first place the law enforcement where the offenders are found needs to
establish jurisdiction. If this obstacle is overcome, then there are problems of investigation and
prosecution.
4.0 PIRACY – STATISTICS:
4.1 Attached in the annexure to this chapter is a 5-year statistics of piracy & Armed Robbery
– documented by IMB showing actual and attempted attacks and the pie chart shows the
relative vulnerability of the regions. . While the number of crew killed declined, the trend to
violence is giving a cause for concern. Pirates carried guns on 53 occasions and knives were
used twice as often as in1998. The majority of piracy attacks in 1999 took place in South East
Asia. The number of attacks in and around Indonesian waters in 1999 took place in South East
Asia. The number of attacks in and around Indonesian waters almost doubled as compared to
1998.
5.0 REGIONAL VARIATIONS IN PIRATE ATTACKS:
5.1 In recent years, four specific types of piracy, varying very much according to the region
in which the practice was found.
5.2 Firstly, there has always been what is called “Asian” Piracy, where ships are boarded
and cash and valuables are stolen from the ship’s safe and the crew with the minimum of force.
These attacks are not on the high seas as all the waters in the area are within the territory of the
various countries, which border them. A well-known target area was the Phillip Channel
between Indonesia and Singapore but the emphasis has now shifted to Indonesian waters.
5.3 From the pie chart provided it will be seen that now more than 50% attacks are in the
Indonesian range. The attacks take the form of intruders coming alongside a ship underway,
usually during the night, boarding it and then taking possession of whatever cash and
negotiable valuables come easily to hand. The notable feature of this type of attack is the
degree of skill that is used to board the ship; coupled with the fact that violence is not normally
used unless resistance is offered.
6.0 PIRACY REPORTING CENTRE:
6.1 In October 1992, the IMB set up the Piracy Reporting Center in Kuala Lumpur. This is a
24-hour information center to warn and assist vessels against piratical attacks. At the same
time, some countries in the Region had a “clean up” operation against pirates. The net result
was that the problem became manageable in the following years. .
6.2 Secondly, there is “South American” or what used to be “West African” type piracy,
where ships berthed or at anchor are attacked by armed gangs that are more disposed to be
violent than their Asian counterparts. Here the targets are cash, cargo, personal effects, ship’s
equipment, in fact anything which can be moved.
 The total value of goods stolen per attack tends to be higher than in the “Asian
piratical attack and there is degree of pre-planning.
 There is a demonstrated lack of competence or willingness to respond on the part of
law enforcement. Law enforcement takes long time to arrive at the scene and gives
little assistance to the victims.
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6.3 The only similarly between “Asian” piracy and the above attacks is that the pirates come
alongside in small craft and mount high-sided ships with remarkable agility.
6.4 Thirdly, there are maritime attacks with a military or political feature. Notable amongst
these was the attack by terrorists on the cruise ship Achille Lauro on 7th October 1985, in the
Eastern Mediterranean. This attack was instrumental in the creation of the convention for the
Suppression of Unlawful Acts against the Safety of Maritime Navigation (1988 SUA Convention)
by the International Maritime Organization (IMO). In contrast to the attacks for purely monetary
gain, the response to terrorist attacks, both on the part of potential targets and by the forces of
law and order have been the highest degree.
6.5 Fourthly, another violent form of piracy has emerged in South East Asia involving the
hijacking of a ship underway, overpowering the crew and stealing the entire cargo and
sometimes the vessel. At times, if the existing crew were found to be “surplus to requirements”
they were set adrift in boats or thrown overboard or shot dead.
7.0 AN UNIQUE EXAMPLE OF HIJACKING:
7.1 The hijacking of Alondra Rainbow in late 1999 was a classic example of the involvement
of organized crime in hijacking of ships. It is also a demonstration of the Industry and law
enforcement acting together in the fight against piracy.
7.2 On 22 October 1999, the Alondra Rainbow registered in Panama, loaded a cargo of
7000 metric tons of aluminum ingots and sailed from Kuala Tanjung in Indonesia for Milke in
Japan. Shortly after her departure a gang of pirates armed with swords and guns hijacked her.
The 17-crew members were threatened with death and transferred to another ship, which came
alongside at sea. They were held captive for a week and eventually set adrift in a life raft on 29
October 1999, off the North East Coast of Sumatra.
7.3 On 28 October 1999, the IMB Piracy Reporting Center commenced broadcasting a
message to ships at sea via Safety NET service of IMMARSAT- C with a request to report any
ship, which matched the description of the Alondra Rainbow. This was followed by a special
alert to relevant agencies, ports, authorities and law enforcement in the Region requesting them
to look out for a ship or cargo of a similar description.
7.4 The excellent response received from various Maters at sea helped locate the missing
ship. On 14 November 1999, the Master of a tanker reported sighting a ship matching the profile
of the Alondra Rainbow heading in to the Arabian Sea. The IMB Piracy Reporting Center
passed this information along with a photograph of the alondra Rainbow to the Indian Coast
Guard ad requested their assistance in locating and detaining the suspect ship.
7.5 The response of the Indian authorities was swift. The Coast Guard immediately
dispatched a patrol aircraft to search the area. Upon sighting the suspect ship, the Coast Guard
advised that her profile matched the photograph of Alodra rainbow. However, the suspect ship
had a name Mega Rama and was flying the Belize flag. Quick checks by the IMB Piracy
Reporting Center revealed that no ship was registered in Belize. This was relayed to the Indian
Coast Guard. The patrol aircraft the attempted radio contact with the ship but she maintained
radio silence. Thereafter, a coast guard Patrol vessel was sent to intercept the ship 70 miles
west of Ponnai. Despite warning shots filed across her bow, the ship increased speed ad
continued her path. It was only when a missile carrying INS Prahar, was called into action that
the high seas chase was brought to an end. The naval ship deployed a graduated use of force
to bring the suspect ship’s capture on the 16 November 1999, approximately 300 miles west of
Mumbai. The 15 Indonesians found on board allegedly attempted to destroy the evidence by
setting fire to and scutting the ship. The naval boarding party out the fire brought the flooding
under control and towed the ship to Mumbai.
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7.6 Just under half the cargo, 3000 metric worth US$4.25 Million had been illegally offloaded
at an unknown destination. Discovery of a large amount of cash ad the fact that at least one of
the 15 Indonesians found on board had featured in the hijacking of Tenyu in September 1998,
suggest that they are part of an organized syndicate.
8.0 ABSENCE OF EFFECTIVE LAW:
8.1 The Indian Law enforcement placed the 15 Indonesians in custody and declared its
intention to prosecute them. However, although India is a signatory to the United Nations
Convention on the Law of the Sea (UNCLOS) 1982 this has not been incorporated into the
national legislation. The Indian Penal Code does not address offence of piracy or highjacking of
ships. India became a signatory to the 1988 SUA Convention on 15 October 1999. However,
the accession to this Convention came into effect on 15 January 2000, whilst the alleged
offenders were arrested on 21 November 1999.
8.2 Certain countries are not taking a hard line in the prosecution of pirates. In December
1999, China prosecuted the highjackers of Cheung Son and the Marine Master and passed
death sentences on a total of 14 pirates had imprisonment for other involved in these
highjackings. Indonesia has recently successfully prosecuted pirate gang leader. Such firm
actions will act as major deterrents to the highjackers.
9.0 IMO GUIDELIES TO SHIPOWNERS AND SEAFARERS ON PREVENTING AND

SUPPRESSING PIRACY AND ARMED ROBBERY AGAINT SHIPS
9.1 IMO’s efforts to provide guidance.
9.2 In 1983, the Maritime Safety Committee (MSC), IMO’s most senior technical body,
addressed the issue for the first time, as the piratical attacks had grown to such an extent that
the situation had become “alarming”.
9.3 After discussing the matter, the MSC prepared and the IMO Assembly adopted in
November 1983 resolution A.545 (13) - Measures to prevent acts of piracy ad armed robbery
against ships, which notes with great concern the increasing number of incidents involving
piracy ad armed robbery and recognizes the grave danger to life and the grave navigational and
environmental risks to which such incidents can give rise. It urged Governments concerned to
take, as a matter of highest priority, all measures necessary to prevent and suppress acts of
piracy and armed robbery from ships in or adjacent to their waters, including strengthening o of
security measures; invites Governments concerned and interested organizations to advise ship
owners, ship operators, shipmasters and crews on measures to be taken to prevent acts of
piracy and armed robbery and minimize the effects of such acts; invites Governments and
organizations concerned to inform IMO of action taken to implement the aims of the resolution;
and recommends Governments concerned to inform IMO of any act of piracy or armed robbery
committed against a ship flying the flag of their country, indicating the location and
circumstances of the incident. This has been updated by the IMO circular MSC.1/Circ.1334 (23 June
2009)
10.0 STUDY BY MARITIME SAFETY COMMITTEE:
10.1 The MSC discussed piracy and armed robbery at its seventy-first session in May 1999,
including the outcome of the two missions to South America and South East Asia. It noted that
the main problems in dealing with pirates and armed robbers were:
 The economic situation prevailing in the regions concerned

 Resource constrains on law enforcement agencies
 Lack of communication and co-operation between the agencies involved
 The time taken to respond after an incident has been reported
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 General problems in reporting incidents, such as alerting the nearest coastal State
as well as other ships in the area of a ship under attack or threat of attack
 Timely and proper investigation of incidents
 Prosecution of pirates and armed robbers when apprehended
 Lack of regional co-operation
10.2 The Committee’s main conclusions were incorporated into the revised MSC Circulars
622 and 623 (below). One conclusion reached as a result of the two missions was the need for
more effective action in apprehending and prosecuting pirates. The Committee agreed to
develop a draft Code for the investigation of cases involving violence against crews,
passengers, ships or cargoes, to be considered at the MSC’s seventy-second session in May
2000. The aim of the Code will be to promote a common approach to the investigation of cases
involving violence against ships and those on board and to promote co-operation between
States in the course of these investigations.
10.3 What Shipboard Personnel should do to tackle piratical attacks?
10.4 IMO recommendations
A) Recommendations to Governments for preventing and suppressing piracy and

armed robbery against ships (MSC/Cir.622/Rev.1)
B) Guidance to ship owners and ship operators, shipmasters and crews on preventing
and suppressing acts of piracy and armed robbery against ships
(MSC/Cir.623/Rev.1).
C) Although the piracy risk off Somalia has reduced from its peak of several years ago,
the possibility of piracy, armed robbery and terrorist attack in this region and
elsewhere are very much still evident. In light of new developments, the Best
Management Practices to Deter Piracy and Enhance Maritime Security in the Red
Sea, Gulf of Aden, Indian Ocean and Arabian Sea has been updated, with the
participation of the International Group of P&I Clubs, and a new version (BMP5) has
been published in June 2018.
10.5 These recommendations adopted in 1993, outline steps that should be taken to reduce
the risk of piratical attacks, possible responses to them and the vital need to report attacks,
whether successful or unsuccessful, to the authorities of the relevant coastal state and to the
ship’s own Maritime Administration. It suggests a phased approach to the problem, related to
voyages in piracy and armed robbery threat areas, in 15 different phases, which can be broadly
summarized in 4 categories:
 Approaching, entering and inside a piracy/armed robbery threat area, but no suspect
piracy/armed robbery vessel detected.
 Inside a piracy/armed robbery threat area; suspect piracy/armed robbery vessel
detected, certainty that piracy/armed robbery will be attempted: pirate/armed robbery
vessel in proximity to, or in contact with, own ship.
 Pirates/armed robbers start attempts to enter ship; have succeeded in entering ship;
have one or more of the ship’s personnel in their control/custody; have gained
access to the bridge or the master’s office; have stolen property/money etc.; start to
disembark; have disembarked; are no longer in contact with the ship.
 Own ship leaves the piracy/armed robbery threat area.
10.6 One of the most important things a ship’s crew can do is to be observant when they are
on their way into a risky area. Accordingly, masters should question any occurrence that seems
out of the ordinary, particularly as the methods used by would be attackers to attack the ship
vary widely. Practical measures, such as night illumination ad posting guards, should be taken
as well.
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10.7 Should an attack – occur, masters must be assured that they will not suffer any
repercussions from the ship owner’s side for reporting the incident. It is equally important that
port authorities do not delay or otherwise penalize ships, reporting such incidents. Of course, it
is in a ship owner’s best interest to be aware of any attacks and to forward the details to flag
State, IMO, BIMCO, or the IMB. In the long run, this information will allow these administrations
and organizations to provide warnings that are more precise and reliable.
10.8 Additionally, it is important that port States are made aware of the crime. Coastal States
often argue – “if they have not been notified of an event, they cannot respond”. The exchange of
information, in this respect is clearly essential.
11.0 PRECAUTIONS AND ACTIONS TO BE TAKEN BY SHIP’S PERSONNEL:
11.1 Following precautionary measures can significantly reduce the risk of attack. Above all,
potential raiders will be discouraged by visible of good ship security and vigilance.
11.2 All ships expected to operate in waters where attacks occur should have a ship security
plan, which should cover such matters as:
 The need for enhanced surveillance and the use of lighting, surveillance and
detection equipment;
 Crew responses, if a potential attack is detected or an attack is underway;
 The radio alarm procedures to be followed; and
 The reports to be made after a attack or an attempted attack
11.3 The ship security plan should be implemented with the primary goals of:
 Identifying suspicious persons or craft at the earliest possible moment, and making
their detection apparent by means of sounding the ship’s alarm and illuminating the
suspects using lights, flares, etc.
 Preventing all doors and lockers so that if thieves do manage to come aboard they
cannot gain access to valuable stores, equipment or the ship’s accommodation.
 Ensuring the safety of the ship’s crew and passengers.
11.4 Once developed, the crew should practice ad perfect the procedure set out in the ship
security plan. If instructions are to be given over the vessel PA system, they must be phrased
clearly to ensure that they are understood by those on board who may not have fully mastered
the language used.
11.5 Bearing these goals in mind, the following practical steps should be implemented:
 Be aware of the geographical areas in which problems with piracy and armed
robbery are to be expected and have been reported. It may be necessary to reroute
ships to avoid dangerous areas.
 Vessels trading along coasts known for piratical attacks are recommended to stay
well clear from shore (i.e. about 50 nautical miles), to avoid sailing between the
mainland and islands, to sail at top speed, and to keep as may lookouts as can be
spared.
 All information concerning sailing routes, schedules and the nature of the cargo
carried should be treated as confidential.
 When visiting a port where pirates are known to attack anchored ships, try to time
the ship’s arrival during daylight hours. If a long waiting time before berthing is
anticipated, consider establishing berth priority on arrival and the retreating into safer
deep waters. Charterers should be aware of these problems and be willing to co-
operate.
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 Where a ship is on liner service, arrivals and departures should be scheduled so as
to minimize the risk of an attack. Liner companies often dispatch a ship with orders
to make best speed to the next port. It may be better to sail at low speed or stop
during the passage and arrive when a berth is available.
12.0 Additionally: Following has been suggested to the masters for enhancing security:
 Be aware of the sea areas / and ports affected by piracy and armed robbery (the
PRC broadcasts regularly to ships in the IOR and AOR regions).
 Brief crew: Inform them to be vigilant and inform bridge / duty officer of anything
suspicious not normal.
 The attitude “this will not happen to me” should be strongly discouraged.
 Conduct a drill prior to entering a high risk area. This will ensure emergency
communication procedures are tested and contact information is readily available.
 Ensure all crew are fully aware of alarm procedures and muster stations.
 Keeping in mind multinational crews - all internal communications should be carried
out in the working language of the ship.
 Master to adjust ship routines prior to entering high risk area to ensure well rested
and additional crew on watch at all times.
 Ensure blind spots and dark areas are lit up (ensure lighting does not hamper safe
navigation and lookout duties).
 Ensure the deck watch work in pairs at all times.
 Ensure rounds on deck are taken at irregular intervals.
 Reporting from deck to bridge at regular intervals (if reporting not done it is the first
indication that there is something wrong).
 Be especially vigilant during watch change over times.
 Keeping in mind watch-keepers on deck - access into the accommodation, bridge,
steering gear room and engine room to be secured.
 Rig and pressurize fire hoses prior to entry into high risk areas.
 Depending on ship type - engine room to be manned.
 Keep security / urgency messages ready to transmit while transiting high-risk areas.
 Keep important telephone numbers ready at hand especially those of CSO, Flag
State and PRC.
 Have a designated communications officer (this will ensure the master is able to
concentrate and deal with the situation rather than being distracted by
communication procedures).
 If applicable keep emergency checklist ready at hand.
 Test the SSAS as required by manufacturer.
13.0 In Port:
13.1 When at anchor or in port, the following precautions should be taken:
 Do not leave ropes or wires hanging over the side. Have the hawse pipe covered
and secured
 Control the number of people allowed access on board ad record the names of those
who are admitted. Do not allow local traders on board to sell their goods to crew
members. Some owners may consider making use of CCTV cameras to record
movements in and around the main access of a ship. This is particularly important on
passenger vessels.
 Do not rely solely on local gangway watchmen. Assign crew members to
complement such posts to ensure that access to the ship is restricted to authorized
person.
 Arrange proper illumination of all decks and quayside areas during the night.
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 Gangways, ladders and ramps should be raised or closed when not in use and at
night.
 Decks should be controlled regularly and in areas of particular danger, additional
watches should ensure a good lookout at all times. Deck watchmen should make
their rounds at irregular intervals to avoid thieves timing a boarding in between
rounds. Crewmen on watch should be in radio contact with the bridge, checking in at
regular intervals.
 Seal off all access to the accommodation, storage lockers and hatches to the
greatest extent possible, keeping I mind the need to escape in case of fire or
emergency. Keep cabin doors and windows closed and locked.
 Keep water hoses under pressure and readily available for use.
14.0 At Sea:
14.1 When under way the following precautions should be taken in addition to some of those
listed above:
 The crews of slower ships with a low freeboard should be particularly vigilant and all
masters are advised to have double watches and to have the radar ad radio
continually manned during navigation in dangerous sea areas.
 The ship’s main deck should be blacked out apart from the mandatory navigation
lights. The water surface in the immediate vicinity of the vessel should however be
illuminated.
 Wide beam floodlights ad signal projectors should be kept ready to probe for
suspected craft.
 Keep water hoses under pressure and readily available for use, keep the deck wash
pump in operation at all times and sprays water over the deck in positions where
pirates may be likely to board.
15.0 If thieves are detected:
 The bridge should be notified immediately and the general alarm should be should
be sounded. Alert shore stations and other ships in the vicinity.
 Broadcast a piracy/armed robbery attack message in the prescribed format.
 At night, direct the vessels searchlights at the thieves, thereby essentially blinding
them whilst enabling the vessel’s crew to monitor their activities.
 Using the fire hoses to direct a water jet at suspicious approaching motorboats or
thieves approaching can be considered. However, the use of such action in cases
where the raiders are known to be armed with handguns and/or other firearms is not
recommended. If used, the recommended pressure is at least 8.1 pounds per square
inch.
 Vessels’ speed should be increased and course altered seaward if possible.
 If thieves are attempting to board using grapping hooks, cut the lines attached to the
hooks.
16.0 Attackers on board:
16.1 If attackers manage to come on board:
 Alarm signals to be sounded and the crew should seek refuge in previously
designated secure areas. Such secure areas should give ready access to the key
areas on the ship such as bridge, radio office and engine room.
 Attacks should be reported immediately to the local port authorities and/or police and
distress signals fired.
 Unless the pirates have ordered the ship to maintain radio silence, broadcast a
piracy/armed robbery attack message in prescribed format.
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 Turning the fire hoses on approaching intruders is of course an option. However, it
must be remembered that the use of aggressive physical action may escalate
violence. When the thieves are in possession of firearms, compliance with their
orders is recommended.
 Comply with the attacker’s demands in calm manner.
17.0 After the attack:
17.1 The following guidelines should be followed after the intruders have left the ship.
 Crew members should remain I the designated secure areas until a prearranged all
clear signal has been given, confirming that the pirates have left the vessel.
 If not already done, alert shore stations and other ships in the vicinity.
 Medical treatment should be provided to ay injured persons.
 All evidence of attack should be collected and all witnesses should make written
statements of the events, including detailed descriptions of the perpetrators.
Characteristics such as tattoos, scars and distinguishing marks should be noted.
 Initial reports must be made to the ship owners, local law enforcement agencies, and
the relevant Rescue Co-ordination Centre (RCC). The owners or managers should
then forward the reports to IMO, the IMB Piracy Reporting Centre and BIMCO.
 Complete co-operation should be given to all investigation law enforcement officials.
17.2 The submission of these reports is essential to ensure that proper action is taken by the
relevant authorities who may otherwise not be aware of the existing problem or try to play down
the scale of the attacks. The reports also allow for advice to be issued to masters, as to how
such attacks can be deterred.
18.0 Following are some instruments / processes that might deter / reduce the intensity of
attacks:
18.1 SECURE SHIP: This is an effective innovation in the fight against piracy. It is a non-
lethal, electrifying fence surrounding the whole ship, which has been specially adapted for
maritime use. The fence uses 9,000-volt pulse to deter boarding attempts. An intruder coming in
contact with the fence will receive an unpleasant non-lethal shock that will result in the intruder
abandoning the attempted boarding. At the same time an alarm will go off, activating floodlights
and a very loud siren. The owner has the option of a message being relayed directly to the IMB
– PRC. The IMB strongly recommends ship owners to install this device on board their ships.
18.2 SHIPLOC: There are a number of reliable ship tracking devices available on the market
today based upon INMARSAT and other satellite systems. The IMB endorses ShipLoc, an
inexpensive satellite tracking system, which allows shipping companies, armed only with a
personal computer with Internet access, to monitor the exact location of their vessels. In
addition to anti-hijacking role, ShipLoc facilitates independent and precise location of ships at
regular intervals. ShipLoc is fully compliant with the IMO Regulation SOLAS XI-2/6 adopted
during the diplomatic conference in December 2002, concerning a Ship Security Alert System.
The ship security alert system regulation requires ships of over 500 GT to be equipped with an
alarm system in order to reinforce ship security. The system allows the crew, in case of danger,
to activate an alarm button that automatically sends a message to the ship owner and to
competent authorities. The message is sent without being able to be detected by someone on-
board or by other ships in the vicinity. ShipLoc is contained in a small, discrete waterproof unit,
which includes: an Argos transmitter, a GPS receiver, a battery pack in case of main power
failure, and a flat antenna.
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19.0 Conclusion:
Some recent initiatives by IMO:
19.1 In 2009, the IMO-convened Djibouti meeting adopted the Code of Conduct concerning
the Repression of Piracy and Armed Robbery against Ships in the Western Indian Ocean and
the Gulf of Aden (The Djibouti Code of Conduct), to address the then-growing problem of piracy
off the coast of Somalia.
19.1.1 Since then, the IMO Djibouti Code Trust Fund has funded numerous projects,
coordinated by the Secretariat’s Project Implementation Unit, to improve regional capacity to
counter-piracy by developing enhanced regional cooperation and coordination, based on the
four pillars of Legislation, Training, Capacity Building, and Information Sharing.
19.2 A Code of Conduct (Guinea) concerning the repression of piracy, armed robbery against
ships, and illicit maritime activity in west and central Africa was adopted formally in Yaoundé in
June 2013 by Heads of State or their representatives from 25 West and Central African
countries. IMO’s strategy and initiatives for enhancing maritime security and supporting
development of a sustainable maritime sector in West and Central Africa; aims to ensure
successful implementation of the Code of Conduct. IMO assists Member Countries in revising
national legislation to criminalize piracy, attacks against ships, and other illicit maritime
activities; coordinating structures and procedures; and having in place well-trained operational,
technical and logistical personnel.
19.3 What is certain is that piracy is now a global problem. It can only be tackled effectively if
there is co-operation at the international level, by local coastal States, trading countries,
shipping companies and law enforcement agencies. It is apparent that the action taken needs to
be vigorous, effective and quick – before piracy grows from being a local and/or a regional
problem to an international menace.
20. International Ship & Port Facility Code:
20.1 International Ship & Port Security (ISPS) :
20.1.1 Following on from the terrorism events on 11 September 2001, the International
Maritime Organization (IMO) agreed to develop security measures applicable to ships and port
facilities. These security measures have been included as amendments to the Safety of Life at
Sea Convention, 1974 (SOLAS Convention) to which Australia is a party (Chapter XI–2). The
ISPS code is associated with this new chapter. Part A of the Code is mandatory and Part B
recommendatory.
20.1.2 Contracting governments to the SOLAS Convention finalised the text of the preventative
maritime security regime at a Diplomatic Conference held at the IMO's Headquarters in London
from 9 to 13 December 2002. The Conference adopted the tacit acceptance procedures
established in SOLAS to ensure that the maritime security measures would be accepted
internationally by 1 January 2004, and in force six months later (by 1 July 2004).
20.1.3 Contracting governments to the SOLAS Convention finalised the text of the preventative
maritime security regime at a Diplomatic Conference held at the IMO's Headquarters in London
from 9 to 13 December 2002. The Conference adopted the tacit acceptance procedures
established in SOLAS to ensure that the maritime security measures would be accepted
internationally by 1 January 2004, and in force six months later (ie. by 1 July 2004).
20.1.4 The IMO security regime in Chapter XI-2 is essentially preventive in nature, and it
applies to ships and port facilities. In Australia, responses to maritime security incidents will be
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undertaken through its law enforcement agencies and under existing arrangements for
responding to terrorist incidents generally (e.g. through the National Counter-Terrorism Plan).
20.2 The objectives of the ISPS Code are to:
 establish an international framework involving co-operation between contracting

governments, government agencies, local administrations and the shipping and port
industries to detect/assess security threats and take preventive measures against
security incidents affecting ships or port facilities used in international trade.
 to establish the respective roles and responsibilities of all these parties concerned, at
the national and international level, for ensuring maritime security.
 to ensure the early and efficient collation and exchange of security-related

information.
 to provide a methodology for security assessments so as to have in place plans and

procedures to react to changing security levels.
 and to ensure confidence that adequate and proportionate maritime security

measures are in place.
The objectives are to be achieved by the designation of appropriate security

officers/personnel on each ship, in each port facility and in each shipping company to
prepare and to put into effect the security plans that will be approved for each ship and
port facility.
20.3 Key Elements of the ISPS Code :
20.3.1 Provides for considerable flexibility to allow for required security measures to be
adjusted to meet the assessed risks facing particular ships or port facilities.
It has two parts:
Part A containing mandatory provisions covering the appointment of security officers for
shipping companies, individual ships and port facilities. It also includes security matters
to be covered in security plans to be prepared in respect of ships and port facilities; and
Part B containing guidance and recommendations on preparing ship and port facility
security plans.
20.4 The ISPS Code contains three security levels.
The three levels are:
Security Level 1, normal; the level at which ships and port facilities normally operate.
In Australia this will mean that minimum protective security measures shall be
maintained at all times.
Security Level 2, heightened; the level applying for as long as there is a heightened risk
of a security incident.
Security Level 3, exceptional; the level applying for the period of time when there is a
probable or imminent risk of a security incident.
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But to create a security regime – there must be a Risk Assessment – Risk management
– Port facility Security assessment – Port facility Security Plan and similarly for the
Ships. The persons generally entrusted are port Facility Security Officer & Ship Security
Officer.
B. MARITIME FRAUDS & CONTAINER CRIMES

1.0 Introduction:
1.1 During the recent years, the shipping industry and maritime commerce has seen a sharp
increase in not only the number of fraud cases, but also the variety of fraud. Any maritime
professional needs to be well prepared to understand where the danger lies and which are the
organizations that can guide and assist in case of such incidents. Fraudsters are becoming
more and more ingenious in their design and execution of schemes, including the use of
modern technology, such as computer hacking, but sometimes tried & tested “old school”
methods, such as document fraud, work just as well. Fraud in commerce is as ancient as
commerce itself, with examples going back to the Roman world and before.
1.2 The International Maritime Bureau defined maritime fraud as:
“An international trade transaction involves several parties – buyer, seller,

ship-owner, charterer, ship’s master or crew, insurer, banker broker or
agent. Maritime fraud occurs when one of these parties succeeds, unjustly
or illegally, in obtaining money or goods from another party to whom, on the
face of it, he has undertaken specific trade, transport and financial
obligations.”
1.3 Maritime fraud is becoming more common due to a number of reasons:
 Criminals are increasingly turning to new methods such as computer hacking

 Ports are adopting new technologies that in the worst case can enable new types of
fraud (such as automatise container operations)
 Ship-owners are under pressure to win new business, many have disregarded due
diligence when dealing with new business partners.
1.4 As both the greater reliance on IT and electronic trading platforms and documents
increases, so does the need to stay ahead of the game played by the Fraudsters. There is a
“cost” of course, to greater security, both in terms of investing in better technology and
processes, but also in potential business opportunities. In order to achieve the right commercial
balance it requires experience, skill as well as knowledge of what scams and schemes are out
there.
1.5 Given that Shipping is a global business, with many players and jurisdictions involved in
any single shipment of cargo, even a simple one POL to other POD voyage, there are a myriad
of potential pitfalls where the unscrupulous seek to take advantage of the unprepared. As
parties are often based in multiple jurisdictions, and necessarily deal with each other at “arm’s
length” and / or through Brokers and Financial Institutions, there may be little or no opportunity
to make “physical checks”.
1.6 Everything comes down to reliance on documents, most importantly the Bill of Lading, as
a key facilitator to fast trade with a low transaction cost. That is also the inherent weakness, the
trust in a key document that can be adulterated and issued in multiple originals, which is the root
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of many of the frauds being perpetrated today. It may be “minor” cheating or a multi-million
dollar scam, but being prepared is the key to avoiding both. Surprisingly there is evidences are
piling to indicate that a significant proportion of commercial crimes and related offences are
perpetrated by organised crime group.
1.7 Fraud can come in many different ways, from many different angles. When we speak of
“fraud” in the Maritime Industry, we do use it as an umbrella term that goes beyond strict legal
definitions, but the meaning is clear: someone is seeking to take advantage of someone else in
a way that goes beyond commercial sharp practice. The following is an overview of the kinds of
fraud that may be experienced, but it is far from an exhaustive list.
2.0 Types of Frauds :
2.1 Documentary Frauds: Some or all of the documents specified by the buyer for
presentation by the seller to their back to receive payment are forged.
2.1.1 There are many cases where forged documents were submitted to the paying bank by
the exporter and received money, because of the vague wordings used in the Letter of Credit.
Banks, who follows the instructions of the importer who has opened the Letter of Credit, has no
means of checking the genuineness of the documents submitted. In recent times, it has been
proved that in many cases, the documents used in international trade should not be taken at
face value because they may not necessarily be authentic. The high-tech printing kits make it
possible to forge Bills of Lading as they have no security feature. There have been cases in
which shipping companies released cargoes against wrong Bills of Lading. In many cases
goods exported to destinations were cleared through forged Bills of Lading.
2.1.2 There is no standard international law, which fixed liability on bankers for not properly
checking trade documents. The verdict frequently depended on the country where the court is
situated. For example, a Swiss Court delivered judgment exonerating a bank for the liability
arising out of its failure to check the documents but had it been an Iraqi court, the judgment
would have been perhaps different.
2.1.3 Efforts at prevention of frauds can only minimize the rigors but there is no substitute to
taking adequate precautions at the stage of entering the contract.
2.1.4 Some years ago a P & I Club included an article on the dangers attached to "pre-dating
and clausing" of bills of lading and issued a circular on the same subject in 1996.
2.1.5 Why does a shipper ask for a bill of lading containing incorrect information?
2.1.6 In most cases he will be paid by means of a letter of credit, and unless the bill of lading
complies with its terms exactly, he will not be paid. The shipper, the carrier and the agent all
know, or would be assumed to know, that in the vast majority of cases the bill of lading will be
used to negotiate payment.
2.1.7 The most frequent requests from shippers are for the issuance of a bill of lading:
 Misdating takes place by confirming loading on a date prior to, or subsequent to, the
date on which the cargo was loaded. Pre-dating a bill of lading only two or three
days earlier than the cargo was actually loaded on the ship is fraudulent;
 Incorrect description of cargo is used by providing an incorrect description of the

quality, quantity or condition of the cargo. The most frequent misdescription of cargo
is "clean on board" in respect of cargo which is known to have been damaged in
some way;
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 The route of "shipped on board" when not shipped is taken when claused "shipped
on board" before the cargo is loaded. In some cases before the ship arrives at the
port or even in the knowledge that the cargo has been shut out from the voyage in
question.
 Managing “under deck bills of lading” for break-bulk cargo “shipped on deck” is a
practice by using claused "shipped under deck" (or bearing no reference to shipment
on deck) for cargo which is known to have been loaded on deck;
 A route to fraud is by providing / showing an incorrect port of shipment, in order to

defeat boycotts by concealing the port of origin. Bills of lading are often "switched" at
intermediate ports to disguise the origin of cargo to take advantage of the
intermediate country's import quotas into, for example, the EU.
 An agent may feel that he is not personally guilty of fraud because he is simply
following his principal's instructions. This has little effect on the legal position; if an
agent knowingly misrepresents the status of cargo he is equally guilty with his
principal of fraudulently inducing an innocent third party to pay for goods which are
not in accordance with the bill of lading.
 The consignor or his agent may feel that he has secured his position by obtaining a
letter of indemnity either from his principal or from the shipper. Such an indemnity is
a worthless document in that it has been issued to support a fraud; it is therefore
illegal and void and cannot be enforced in a court of law.
 The agent should also be aware of the fact that his principal is probably uninsured
for the consequences of the issuance of a fraudulent bill of lading by his agent, and
that the fraud will possibly have deprived his principal of the limitations incorporated
in the bill of lading.
2.1.8 Although fraud by employees is covered by some of the Clubs under certain rules, fraud
which is intended to confer benefit on the Member is excluded. A deliberate risk taken by the
agent as a favour to his principal, or to a regular shipper, would almost certainly be regarded as
being "for the benefit of the insurer". The Club has seen claims totalling millions of dollars
resulting from the issuance of fraudulent bills of lading. Agents come under considerable
pressure from principals and shippers, but must always realise that their duty does not include
an obligation to knowingly participate in a fraud.
2.2 Bunkering frauds:
2.2.1 Fuel can be the single greatest expense in the daily running cost of ships. Fuel prices
rose over the last 10 years and never really fell significantly. The issue will be best understood
by the case described. Such values may provide a strong incentive for criminal designs to
commit fraud, the incidence of which is said to be on the increase. Commonly, disputes and
alleged misdealing are in respect of:
 Quantity consumption by the vessel

 Quantity of deliveries
 Quality of deliveries
2.2.2 Case of supplier overstating quantity supplied: The P & I clubs are often involved in
matters where disputes arise over the quantity supplied; at times several days after a supply
has been made. These issues can be difficult to resolve, as the passage of time makes it more
difficult to conclusively determine where fault may be found.
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2.2.3 In particular it appears possible by the use of pumping air into bunkers as well as
heating them to increase their volume and create what has been called “the Cappuccino” effect.
Experienced Engineers will be able to closely monitor a fuel supply and check for visible and
physical signs of possible problems, including monitoring the temperature of the supply as well
as checking for signs of air supply.
2.2.4 Therefore it is important to properly prepare for and monitor the supply of fuel oil to the
vessel and not downgrade its operational significance. Experienced crew, assisted by a Bunker
Surveyor, can significantly assist in the mitigation of this risk scenario. A mass flow meter on
board the receiving vessel can also assist to determine exact quantities supplied, as mass
measurement may be more accurate than volume.
2.2.5 In many cases it has been found that bunkers are adulterated and off specification.
Disputes over bunker quality are not uncommon, and often related the precise specifications,
ignition quality, viscosity or other important factors. Beyond those quality issues which simply
make a Chief Engineer’s life more difficult than usual, are those which potentially can cause
significant if not catastrophic damage to a vessel’s engines.
2.2.6 Bunker fuel is a heavy fuel oil product, resulting from the refinery process of crude oil
and it contains a great many chemical and metal traces. Ship engines are designed to deal with
these, but unusual or excessive concentrations may cause problems. There had been cases
where bunker supplies were co-mingled with waste oils originating from a number of sources,
including waste car oils and vegetable oils from the restaurant industry.
2.2.7 Therefore wherever possible new bunkers should be pumped into empty tanks on board
the vessel and not co-mingled with existing stores. These bunkers should not be used until tests
are performed to determine the exact nature of the supply. For claim purposes, bunker manifold
samples on the receiving vessel can have the best evidential value if taken and stored properly.
2.2.8 Shipping Frauds may be scuttling, deviation, cargo theft, arson or so called accidental
fires in which vessel or cargo is disposed of with the connivance of her owners.
2.3 Charter Party Frauds:
2.3.1 Charter party fraud can be described as a fraudulent act on the part of the charterer of a
vessel, to the detriment of the ship-owners, the shipper, or both. It is the most difficult to prove.
Charter party fraud is usually in two forms: one that is committed by charterers against ship-
owners (e.g. non-payment of hire; and is often the case in a time charter party) and one that is
committed by ship-owners against charterers (e.g. levying of additional, and extortionate, freight
charges; and is usually the case with a voyage charter party).
2.3.2 In other instances, a sub-charterer may defraud the charterer, the ship-owner and cargo
interest. An example of fraud committed by a charterer would be a case where the charterer
receives full payment for the entire voyage from those who have placed the goods on board for
shipment and later disappears, leaving the ship-owner with the problem of delivering cargo for
which he has not been paid freight. The charterer was able to conduct fraud because he
collected full freight for shipment but paid only part of the hire to the ship-owner. He issued a
liner bill of lading (with freight prepaid), on behalf of the ship-owner, to the shipper of the cargo
without any reference to a charter party leaving, therefore, the ship-owner with the obligation to
deliver the cargo to its destination. By the time the second hire payment is due, the charterer
has disappeared leaving, on one side, the ship-owner with a cargo for which he is supposedly
paid to deliver under the bill of lading but without funds to continue the voyage and, on the other
side, the receiver of the cargo waiting for delivery of the cargo for which he has already paid.
2.3.3 Sometimes, in order to have more security, ship-owners would insist on having a clause
in the charter party which specifies that bills of lading will be issued on freight collect terms in
order to have the possibility of a lien on the cargo for unpaid freight. But then the fraudulent
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charterer would simply substitute the original bills of lading with a set of forged bills of lading
marked “freight prepaid”, collect the freight and disappear. The fraud is discovered only when
the ship reaches its port of destination.
2.3.4 Another example of a fraudulent charterer would be the case where companies charter
vessels and offer a low-price rate to carry cargo. They collect the cargo and shipment fees,
default on contract, then go into liquidation. The owner of the vessel would be left with unwanted
cargo (for which he has been paid only part of the shipping), and would ask the buyer to pay
again for delivery. A case of fraud committed by a ship-owner would be, for instance, where the
ship-owner has been paid for the freight of the entire voyage but fails to deliver. After the
release of the bills of lading and reception of freight, the ship-owner fails to continue the voyage,
interrupting the itinerary with the pretext of a serious technical problem (e.g. engine problem).
2.3.5 By such behavior, the ship-owner tries to extort additional freight from the cargo owner in
order to be able to continue his voyage and to deliver the goods. In some cases, the ship-owner
may abandon the fully laden vessel to the local courts and creditors and, after auction, the new
ship-owner may not even have the obligation to honor the contract of carriage entered into by
the previous ship-owner.
2.3.6 Therefore, the owner of the cargo will have to bear the consequences and, if prompt and
positive action is taken, the cargo owner can still claim against default of the ship-owner. It
should be noted that in any case, whether the charterer or the ship-owner defaults, it is almost
always the cargo owner who suffers the losses.
3.0 Theft of cargo by crew:
3.1 To a large extent, containerization has led to considerable improvements in cargo

security during transportation. Certainly pilferage and opportunist thefts have been much
reduced as a result of the ‘box’.
4.0 Trading Fraud:
4.1 Like most credit systems, the letter of credit system is designed for the use of the honest
businessman. It is not designed to protect him from the fraudsters. The buyer must therefore
make checks into the track record of the seller before entering into any transaction and opening
a letter of credit. In today’s world of sophisticated printer and color copiers, a fully operable letter
of credit in the hands of a fraudulent seller is not dissimilar to a blank cheque.
4.2 A typical recent fraud was planned basing the information available on the internet. In
this case the assistance of International Maritime Bureau (IMB) was sought & the fraud was
detected and prevented in time. The fraud was entirely based on false documents. It unraveled
just in time to stop the cash moving into the fraudster’s bank account.
4.3 International businesses, banks and trading companies must be alert to the thread of
fraud; however, they are also involved in a market place and if they hesitate for too long, the
deal will go to competitor. The IMB helps businesses by quickly verifying documents and
searching its own database for people and companies suspected or previously involved in crime
and for known criminal methods.
5.0 Marine Insurance Frauds:
5.1 Marine insurance fraud can take various forms, covering both hull/ship and cargo
insurance. It basically implies a fraudulent misrepresentation or non-disclosure of a material fact
to the insurer concerning not only the value of the cargo but also the existence and ownership of
the cargo. Cargo insurance fraud can be defined as a fraudulent claim on an insurance
company.
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5.2 The fraud may be defined as the insurance of a cargo in excess of its true value in order
to take advantage from the insurance proceeds of a loss. Such fraud is usually limited to
countries with foreign exchange control and restrictions, which use over-valued invoices in order
to exchange local currencies into hard currencies.
5.3 However, marine insurance frauds do not only concern the value of the cargo but also
the existence and ownership of the cargo. For instance, marine insurance fraud may take the
form of scuttling (intentional sinking) of an over-insured vessel, which will allow the ship-owner
to benefit from hull insurance for more than what the vessel is worth. Scuttling of an over-
insured or non-existent cargo, in addition to the hull claim of the vessel owner, enables the
cargo owner to similarly benefit from the cargo insurance of over-insured or non-existing cargo.
The insurance company has not only to prove that the ship was deliberately sunk but also that
the party insured was involved in the fraud. Finding and gathering of evidence is a major
problem, sometimes aggravated by legal difficulties caused by the laws of the country or
countries involved.
5.4 Various forms of the above scenarios can take place. For instance, a ship-owner may
claim that a cargo has sunk, then sell it secretly, therefore acquiring a double benefit from the
cargo and the hull insurance. It is usually difficult for the insurance company to prove fraud and
stop payment in these circumstances. The practice of arson is closely related to scuttling with
the ship-owner setting a fire to destroy the vessel and claim against the insurer since fire is an
insured peril; it is generally extremely difficult to prove that a fire was started deliberately.
5.5 As with other cases of maritime frauds, insurers can avoid problems and reduce frauds
by checking the accuracy and validity of the documents in case of any uncertainty. Gathering
internationally available information on ships, ownerships, charterers and corporate history, help
insurers in assessing risks and paying claims on lost ships. Marine insurers of developing
countries often suffer losses from maritime crime and fraud due to inexperience and/or lack of
information, especially about the manner in which trade is conducted in their country.
5.6 If the company is small, the underwriter might not thoroughly check the shipping
documents, the antecedents of the trading parties, and thus the status of the vessels. It is also
possible that the requirement of immediate notification of the loss or damage is not enforced.
The underwriter may not have access to or may not make full use of the internationally available
information about ships, their owner, charters, corporate history, etc. The insurer may also not
be well organized or fully familiar with the intricacies of international trade. It has also been
realized that the international criminal often has much experience and, in any case, the
advantage of pre-planning.
5.7 For example, in order to face fraud insurance problems in India, the insurance sector
has introduced a system of verification through which different elements are checked before
approving any insurance coverage:
 First, operational aspects, such as who has issued the bill of lading and on whose
behalf it has been executed and the operator, charterer or owner of the vessel, are
verified;
 Secondly, financial aspects, such as the financial standing and bank report on the
parties involved, are examined;
 Thirdly, the details of the ship, such as the year built, classification status, and
whether any mandatory survey is pending, are investigated.
6.0 Vigilance is a key element to reduce fraud. Traps are more likely to be avoided if the
people involved in trade are fully advised about the counterpart they are dealing with, and are
dealing only with companies (banks, insurer, charterer, broker, etc.) that have a sound
reputation. If fraud is suspected or has been discovered then it should be directly reported and
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the relevant authorities must be contacted immediately. Early discovery of fraud greatly
increases the chance of protecting or successfully recovering the goods.
7.0 Means of avoiding frauds:
7.1 Fraud lives in dark corners, it cannot be eliminated but it can be avoided if anticipated
and if simple procedures are followed to conduct transactions (simple documentation and few
parties involved). It is the commercial / trade system that opens the way for fraud and errors.
Risk of fraud can be reduced if prudence is observed and if few or no intermediaries are
involved in a transaction.
7.2 Large trading companies, which have been in the business for a long time, have adapted
to the situation and devised their own strategies to deal with documentary credit. Banks
generally undertake their own inquiries when they receive a letter of credit. Moreover, they
generally have a credit risk committee that sets general country limits and client limits. They
have people who monitor the business in the countries they deal with (they know the demand
and production level of the country, their clients and to whom they are selling, as well as the
people involved in shipping the goods). Large trading companies have their own network. They
are very well informed and sometimes they can act as adviser to banks who are subject to open
letters of credit from fraudulent sources.
7.3 A fraudulent trader will use a terminology that can be identified by professionals. For
example, sugar amounts and requirements for a specific country are usually known and a
professional trader will have no difficulty in identifying a fraudulent trader who is proposing an
attractive deal with a lower price or different characteristics that do not meet the usual
specifications. When it comes to credit, traders are not willing to take the risks. Before signing
any contract, they need to know the risks and costs involved in the transaction. Generally
speaking, they take the gamble on the price but make sure they get the money. Therefore, they
consider documentary credit as a secured means of receiving payment and know how to deal
with it to their satisfaction.
7.4 Because international trade involves contracting parties from different backgrounds and
countries, a trader should be able to identify the risk related to the bank, the goods, and the
counterpart he is dealing with. The best protection for buyers and sellers against fraud is to
make adequate inquiries to be able to satisfy themselves as to the reliability of the parties they
deal with before entering into any binding engagement; a trader shall be fully aware of the
integrity of his partner, i.e. a partner who is in a legitimate business, with a legitimate product.
Fraud can never be eliminated, nevertheless, it can be avoided if one can have a clear
knowledge of how international trade operates and what are the due diligence measures that
can be undertaken to avoid fraud.
7.5 All parties dealing in international trade can be victims of fraud basically because of lack
of information. In commodity trading information is the key. Furthermore, once a deal is agreed
to, partners involved in a commodity trade transaction have to make strong and adequate
investigations on the contracting parties (carriers, charterers, shipping agents, etc,) in order to
make sure that they will do what they promised, i.e. to deliver the merchandise on time, in the
right condition and at the right place. One of the key elements in fraud prevention is accurate
and timely information. There are specialist data bases which provide due diligence information
in this respect including BIMCO, Lloyds Intelligence and Lloyd’s list, and the ICC International
Maritime Bureau (IMB).
7.6 Some of the blame for the continuous increase of frauds lies with the fact that many new
and inexperienced traders who know little about the market are seeking to set up deals that will
make them gain a lot of money without much commitment on their own part. If they knew
anything about the market and the business, it would help in a way to instantly identify the signs
of fraudulent behavior. Traders who are tempted by an attractive deal should have the due
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diligence to check the soundness of the transaction. In many cases, traders are not willing to
face reality because they are quite thrilled by the appeal of a big and quick profit.
7.7 On the other side, banks, if they have any doubts, should make inquiries to check the
legitimacy of the transaction. As a mechanism to reduce risks, big trading companies try to
control all the elements in the trade transaction (i.e. the goods, the vessel and documents) so
that, at the time the goods are loaded on the vessel, they already know all about the
conditioning of the goods, the vessel and the documents.
8.0 INTERNATIONAL MARITIME BUREAU (IMB):
8.1 The ICC International Maritime Bureau (IMB) is a specialized division of the International
Chamber Of Commerce (ICC). The IMB is a non-profit making organization, established in 1981
to act as a focal point in the fight against all types of maritime crime and malpractice. The
International Maritime Organization (IMO) in its resolution A 504 (XII) (5) and (9) adopted on 20
November 1981, has inter alia, urged governments, all interests and organizations to cooperate
and exchange information with each other and the IMB with a view to maintaining and
developing a coordinated action in combating maritime fraud. The IMB has a MOU with the
World Customs Organization (WCO) and has observer status with Interpol (ICPO).
8.2 IMB’s main task is to protect the integrity of international trade by seeking out fraud and
malpractice. For over 25 years, it has used industry knowledge, experience and access to a
large number of well-placed contacts around the world to do this: identifying and investigating
frauds, spotting new criminal methods and trends, and highlighting other threats to trade. The
information gathered from sources and during investigations is provided to members in the form
of timely advice via a number of different communication routes. It lists the threats and explains
how members can reduce their vulnerability to them. Over the years, this approach has
thwarted many attempted frauds and saved the shipping and trading industry many millions of
dollars.
8.3 The IMB provides an authentication service for trade finance documentation. It also
investigates and reports on a number of other topics, notably documentary credit fraud, charter
party fraud, cargo theft, ship deviation and ship finance fraud. As well as helping to prevent
crime, the IMB also has a duty to educate both the shipping community and a wider audience
that comprises just about every entity engaged in trade. To this end, the IMB runs a regular
series of courses and training programmes that have a wide-ranging syllabus and many proven
benefits. It also offers bespoke consultancy services in areas such as ship and port security.
8.4 One of the IMB’s principal areas of expertise is in the suppression of piracy. Concerned
at the alarming growth in the phenomenon, this led to the creation of the IMB Piracy Reporting
Centre in 1992. The Centre is based in Kuala Lumpur, Malaysia. It maintains a round-the-clock
watch on the world’s shipping lanes, reporting pirate attacks to local law enforcement and
issuing warnings about piracy hotspots to shipping. A separate chapter on Piracy gives intricate
details.
8.5 In an increasingly competitive global market it is not always possible to deal only with
blue chip companies. Timely and meaningful information regarding the background and the
track record of a trading partner/client is a vital due diligence measure. Charter party failure,
phantom ship frauds, theft of cargoes and deviation of vessels can have serious consequences
for ship-owner, charterer or cargo owners. These frauds can be avoided by making the right
enquiries before a vessel is fixed.
8.6 With its multi-lingual and multi-disciplined staff, experience, unique structure, industry
support and well-placed contacts, the IMB can rightly claim to be the world’s premier
independent crime-fighting watchdog for international trade.
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8.7 IMB’s objectives:
 To prevent and contain fraud and other suspect practices in international trade and
maritime transport;
 To receive information provided by commercial and other interests, including
governmental and international agencies, relating to fraudulent or other suspect
practices in international trade and maritime transport, and to collate this information
as a basis on which to provide due diligence advice to members and the industry
generally; the IMB’s data base includes information on companies and individuals
who have been reported as a result of fraud, malpractice and falling to meet their
obligations under shipping and trading contracts.
 To suggest avenues of procedure to those involved in a transaction which they
believe may be fraudulent or otherwise suspect;
 To advise organizations establishing or improving operational and commercial
systems to reduce their vulnerability to fraud or malpractice;
 To investigate cases of fraud and malpractice with a view to recovering the losses
suffered;
 To design and provide educational services to prevent malpractice, and assist
injured parties who have suffered loss in effecting financial recoveries.
9.0 ICC Commercial Crime Services (CCS)
9.1 ICC Commercial Crime Services (CCS) is the anti-crime arm of the International
Chamber of Commerce. Based in the UK, CCS is a membership organization tasked with
combating all forms of commercial crime. CCS comprises three specialised Bureaux, which
operate as an autonomous membership association offering its members a full range of
resources. Companies and individuals can become members of an individual Bureau according
to their business type and requirements, or in more complex situations they may benefit from
association with more than one Bureau. A breakdown of the membership fee structure can be
found in the Membership section.
10.0 Financial Investigation Bureau (FIB):
10.1 Formerly known as the Commercial Crime Bureau, FIB provides commercial banks, the
financial services sector and investors with a range of ‘Know Your Customer' (KYC), financial
fraud and anti-money laundering services that help members balance risk against reward and
avoid becoming the victims of financial scams.
11.0 Counterfeiting Intelligence Bureau (CIB):
11.1 CIB is one of the world's leading organizations dedicated to combating the counterfeiting
of products and documents, protecting the integrity of intellectual property and brands, and
preventing copyright abuse. CIB has a dedicated team of internet investigators to combat this
trade. CIB also hosts the International Hologram Image Register.
12.0 Fraud Net :
12.1 CCS also operates FraudNet, a unique global network of law firms who specialize in
tackling business crime. Members of CCS comprise companies engaged in international
business, the legal profession and law enforcement, dealing with shipping, transport and trade,
banking, insurance, intellectual property and information technology.
12.2 Over two decades, CCS has saved its members literally billions of dollars by alerting
them to the threats and highlighting the preventative measures they can take to protect
themselves. It has also succeeded in getting fraudsters brought to justice and has helped
members recover many millions of dollars thought lost.
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12.3 For full details about each Bureau and its services please go to the relevant section of
this website.
12.4 The IMB’S services for members include due diligence advice, investigations,
negotiations, authentication of documents, ship monitoring, special reports, seminars, cargo
surveys, and advice on claims and recoveries. The membership of the IMB includes banks,
insurance companies, ship owning/operating companies, charterers and traders. Members are
updated every fortnight with a Confidential Bulletin giving details of companies and individuals
reported for frauds, commercial failures and the non-payment of debts.
13.0 Access to IMB Database:
13.1 The IMB has a comprehensive database of companies and individuals involved in
international trading and shipping, which can be accessed free of cost at all times by members.
14.0 Recovery of Debts :
14.1 IMB’s legal department will advise on bill of lading/charter-party disputes and the most
effective way to recover debts. Along with IMB’s ability to investigate cases worldwide and
collect the evidence to be used in litigation or settlement negotiations, the IMB offers services
from instructions to settlement negotiations.
15.0 Authentication of a Trade transaction:
15.1 The IMB will advise on the authenticity of trade transactions. At times one may find that
a number of bogus offers of commodities such as sugar, urea, cement and rice are circulating in
the market. The purpose of these offers is usually to extract an advance fee or to build up
documentation lending credibility to the fraudsters to help commit other frauds. This service is
free of cost to members, except where the IMB may be forced to appoint sub-agents to obtain
information.
16.0 IMB - Services for Banks:
16.1 Authentication of documents:
16.1.1 The authentication of shipping documents including bills of lading, survey certificates,
certificates of origin presented for payment under a documentary credit is a service widely used
by banking members of the IMB. A major Asian bank, after its first year of membership with the
IMB reported that IMB checks into bills of lading presented under letters of credit had helped
them to detect false documents valued at over USD 60million.
16.1.2 The IMB aims to respond within two working days of receipt of the query so that banks
can act within the time constraints set in. This service is free of cost to members.
16.2 Investigations into Documentary Frauds :
16.2.1 Cover Court cases relating frauds involving documentary credits, including the tracing of
funds, location and identification of the beneficiaries of the fraud, co-ordinating civil litigation and
liaising with law enforcement agencies with respect to criminal actions, negotiating and drafting
contracts of settlement.
16.3 Investigating different types of Frauds:
16.3.1 Include Hull and Cargo frauds, charter-party failures, phantom-ship frauds, piracy etc.
IMB can investigate circumstances of the failure/fraud, can collect the evidence, negotiate with
ship-owners/charterers/cargo owners towards a resolution of the failure and the completion of
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the voyage, drafting contracts, holding funds in escrow and monitoring the voyage to completion
and discharge of the cargo. In case of phantom-ship frauds, it can assist in locating these
vessels which have disappeared with cargoes and recovering these cargoes from difficult
jurisdictions.
16.4 Loss Prevention Advice :
16.4.1 The IMB often advises on loss minimization measures in transit sectors where losses
have occurred.
16.5 Background information on carriers:
16.5.1 Frauds can be avoided by making the right enquiries before a vessel is fixed. The IMB’s
comprehensive database of companies and individuals involved in international trading and
shipping provides adequate and updated background information of vessels, ship owners and
charterers.
16.6 Recovery of Claims in subrogation:
16.6.1 The IMB’s legal department will advise on the most effective way to recover claims.
Along with IMB’s ability to investigate cases worldwide and collect the evidence to be used in
litigation or settlement negotiations, the IMB offers a turnkey service from instructions to
settlement.
17.0 CONTAINER CRIMES & PRECAUTIONS:
Current estimates put the annual cost of cargo crime worldwide at between US$30-50 billion, so
how safe is container cargo whilst in transit?
17.1 Pilferage :
17.1.1 The most common form of cargo theft is pilferage, which is most often perpetrated by
employees. The practice of hauliers pilfering cargo has long been in vogue in the shipping
industry. Shippers/Consignors have been known to over-ship cargo to allow for the “Shrinkage”
that occurs due to pilferage. In the case of containerized cargo, access is achieved through the
following methods:
 After off loading from the ship while the container is idle awaiting pickup/ delivery in
the terminal yard.
 While the cargo is undergoing consolidation or deconsolidation either at the terminal
or an off-site freight forwarder.
 Instances occur in which high-value, high-technology equipment is deliberately “side-
tracked” inside a carrier’s terminal by employees. When it fails to arrive at the
consignee’s premises it is treated as a loss. After a period of time it legally belongs
to the carrier; and, after appropriate arrangements are made between the
perpetrators and associated liquidators, the shipment is sold at a fraction of its value.
17.1.2 The value of computer hardware and components makes such shipments and attractive
target of theft. Exchange now take place where cocaine shipments bound for the United States
are traded for computer chips stolen from cargo shipments. In this scenario, both commodities
have the capacity for significant increase in value as they are passed along.
17.1.3 Further, as an alternate method to remitting drug profits (that are in the form of cash) out
of the United States, these profits are invested in stolen cargo purchased at a fraction of its
value (computer hardware, memory chips, etc.) and shipped overseas as legitimate cargo, thus
maximizing the capital generation of illicit activity.
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17.1.4 One frequent method of pilfering cargo is by removing all or part of the contents from the
container and placing them into an adjacent container (for example, one that is empty or
carrying low value cargo) which will not be monitored. In addition, employees of shipping
companies with access to EDI applications have been able to trace shipments from point of
origin to place of delivery at the terminal in order to arrange theft of the cargo. In some cases,
current employees, using access codes that were either fabricated or belonged to other co-
workers, conducted the thefts. In other cases former employees, using their old access numbers
accessed shipment information via the internet. We can refer to this case: The “MSC
Amsterdam” (Trafigura Beheer BV & anr v Mediterranean Shipping Company, the “MSC
Amsterdam”, [2007] EWHC 944. In this case the employees of the company created an EDI-
IGM for fraudulent delivery to another person of the consignee’s country and made it faster so
that the rightful owner is defrauded.
17.1.5 Deliberate misdirection of high-value cargo, to an outside, non-secured, general storage

area on the tarmac or in the container yard is yet another method of committing a shipment
theft. Once, it is misplaced, the cargo is easily transferred into other containers for delivery out
of the terminal.
17.1.6 The favorite locations for this type of crime are at ports, terminals or during road or rail
transport. Whilst onboard a vessel container cargo poses less of a risk and yet all too often the
vessel operators find that they are the focal point of a claim. The reason for this is due to the
fact that the operators generally:
 As a matter of fact accepts a container onboard without actually checking the seal.
 The contractual terms of their bill of lading provides coverage from door-to-door.
Their assets are often more easily accessible than that of other parties.
17.1.7 Thus a reasonable question can arise - “What control does the issuer of a bill of lading
have as to the safety of a laden container whilst in transit and storage?” or “How reliable are
their agents in complying with the release terms of a container’s cargo?” Whatever type of
container is used, its safety relies on its own security safeguards and those in place throughout
its journey. The introduction of containers was a technological advancement in the safe
movement of cargo that has had a major impact on the reduction of cargo pilferage. However,
this type of transport has become the notable asset to the organized criminal, primarily due to
the cargo involved, which offers substantial profits with minimal chance of detection.
17.2 Some precautions:
17.2.1 Cargo in transit has and always will be the subject of crime. The distance involved in this
type of movement, combined with the various handling procedures in place during its journey,
presents a major obstacle. Without an investigation it is extremely difficult to identify where a
loss occurred and who carried it out. This is obviously very important when a bill of lading
provides a door-to-door service. If a container is correctly stuffed and its doors secured, there
are only three ways that an unlawful entry can be gained by the removal of a section of the
container’s body or interference to the seal or seals on the outer Interference to the container
doors.
17.2.2 The weakest links tend to be the pivot rivet connecting the door handle to the handle
hub, the rivet to the swivel seal bracket and the rivets on the door hinges. The presence of a
seal on a container provides evidence that its cargo has remained secure throughout its
journey. It is not an anti-theft device. Fortunately, there have been significant advancements in
the design of seals which act as an additional deterrent against the loss of cargo from
containers whilst in transit.
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17.2.3 These improvements alone will not prevent an attack on a container, because if given
the time, situation and the tools, the criminal can remove virtually any seal or section of a
container’s door. As with a container, the extent to which a seal offers protection is only as good
as the system into which it is introduced. For this reason it is imperative that issuers of bills of
lading are satisfied that the procedures in place throughout a container’s movement meet their
requirements. If it does not, take heed, for resourceful criminals know what containers to attack
and the weaknesses in the operational system to enable them to carry out the crime. In many
instances, where improved security procedures have reduced the opportunity of a loss occurring
at a port or terminal, they have not prevented the criminal from identifying a suitable cargo to
steal once it has left that location. There is therefore a need to constantly review procedures in
the manner as below:
 Is the sender satisfied that a container was correctly secured before departure from
the shipper’s premises?
 Is the sender satisfied with the haulier contracted to move a laden container on your
behalf?
 Do they use sub-contractors? If so, are they suitable to undertake this work?
 Are transport instructions issued to the haulier? How efficient is the checking
procedure of a container on its arrival at a port?
 Is there a physical check prior to a container being loaded onto a vessel? Accepting
the operational and financial aspects that are involved when discharge and loading
takes place, it is this weakness in the system which is constantly exploited by
criminals, who remove cargo prior to loading.
 Is the seal physically checked when the container is offloaded at the destination port
- checked when the container leaves the port - is there a procedure in place should
there be an alleged irregularity on delivery?
 It is important whenever there is a potential loss that:

o The seal sections are retained.
o Special attention is given to the container’s doors, in particular as to whether
there are any different shaped rivet heads or signs of repainting.
17.2.4 Any irregularity should be noted, with consideration being given to a surveyor’s
examination.
17.2.5 It is imperative that a carrier’s agent complies with the cargo release terms, which
generally requires the presentation of the original bill of lading. The case of Motis Exports v
Dampskibsselkabet AF 1912 and another emphasized this point. On occasions agents show a
lack of judgment in not complying with the release terms, but take an alternative approach
without first obtaining the required authority.
Such action usually relates to:
17.3 Empty container fraud:
17.3.1 The IMB recently investigated a case where five containers were shipped from the
United States to Europe and the seller and buyer combined to commit fraud. In this case each
container was allegedly loaded with designer clothing and was valued at over $2 million. The
seller insured the cargo in the US for over $10 million. The buyer in Europe financed the
purchase of the cargo with $10 million borrowed from a European bank.
17.3.2 In the normal manner of international trade, the buyer’s bank paid the seller $10 million
against the shipping documents. Usually however, the containers were left on the quayside in
the European port for two months before the buyer presented himself at the port to collect his
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containers. During the time interval when the containers were left in the port the seller
disappeared from the United States with the $ 10 million he had obtained from the buyer’s bank
and the buyer surreptitiously managed to remove the seal from the five containers stored in the
port. At the end of the two months period the buyer went to the European port to claim his
containers. As the seals were missing and the five containers were empty, the buyer claimed
$10 million from the insurers in the United States.
17.3.3 The fraud was discovered because, by chance, the shipping company weighed the five
containers before they were loaded in the United States. Each container was proved to be
empty before shipment. The insurance company did not pay because the cargo had never
existed; however the European bank lost the $ 10 million that had been used to finance the
deal.
17.3.4 There was another case in which empty reefer containers were stolen. This happened in
Hong Kong in 1998 and the fraudsters would call up forwarding agents and other shipping
companies requesting for empty reefer containers to ship export cargo; they would do this on
the eve of weekends or holidays.
17.3.5 The empty reefer containers would be transported to China, never to return back and be
there as portable air-conditioned offices!
17.4 Insurance fraud:
17.4.1 A similar attempted insurance fraud involved six containers shipped to England from the
Fast East. This time the seals on the containers were cut after delivery to the load port, Hong
Kong. The containers were shipped to Europe and the cut seals were detected only when truck
drivers examined the containers before they were collected from the English port. The six
containers were opened and found to be completely and cully loaded with cartons of electrical
goods; there was no space left even for one extra carton. The shipper latter claimed that fifty
cartons had been stolen from each container. He had supplied the electrical goods at cost and
intended making his profit from the insurance claim.
17.5 Blackmail:
17.5.1 In a typical case of blackmail a West African living in Europe shipped; what he purported
to be a loaded container from Europe to an African Port? On arrival at the port, the container
was found to be empty. The West African was a well known and experienced fraudster who
claimed for loss of the cargo and supported his claim with forged invoices.
17.5.2 Because of his notoriety the claim was quickly investigated and rejected but
unfortunately the rejection resulted in a serious financial threat to the shipping company that
carried the container. The West African was a good and close friend to the judiciary in his own
country. He persuaded the judges to arrest the ship in order to satisfy his claim and delay in the
sailing of the ship would have cost the shipping company thousands of dollars per day. In effect
the crime he was committing was not fraud against the insurance company but blackmail of the
shipping company.
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17.6 Whole container theft:
17.6.1 Something the problem with the container crime is not trying to identify where the theft of
the cargo took place but the theft and disappearance of the whole container, usually as a result
of fraudulent documents.
17.6.2 In one case more than eight hundred containers were to be delivered by road transport
from the same vessel in a British port. The normal procedure was for the agent to write to the
container terminal instructing the release of the container to a specified trucking company. This
container release was partly hand-written onto original headed notepaper.
17.6.3 To save time, after the details common to each shipment were written onto the
notepaper, it was photocopied, more details were added and the paper was photocopied again.
Eventually a mixture of the photocopied document and original manuscript was produced to
provide a final release document ready for each individual truck driver to collect their specified
container.
17.6.4 The container release document provided criminals with a simple opportunity to steal a
container loaded with $200,000 of hi-fi equipment. They first obtained a release document for
one of the other eight hundred containers, photocopied it and then used correction fluid to
remove the original details entered by the agent. Next, they photocopied the document again
and entered the details of the container loaded with hi-fi equipment, a fictitious trucking
company and a false vehicle registration number.
17.6.5 The forged document was now indistinguishable from any of the other photocopied
container release documents. However, the thieves had made one error, the container number
on the forged document was wrong by one digit. When the criminals presented the document at
the container terminal, instead of being refused the hi-fi container, the terminal’s computer came
to their assistance. Since container numbers are often wrongly transcribed, the computer
searches for similar combinations of letters and numbers with the help of a specially written
piece of software.
17.6.6 The computer found the container of hi-fi equipment and the terminal staff corrected the
forged container release document. Thus the container terminal assisted the theft of the
container.
17.7 Stowaways in container:
17.7.1 Stowaways are fast becoming a problem either opportunist individual seeking a better
life elsewhere or the product of elaborate collective crime system. The purpose of stowaways
had changed rapidly over recent years. When once they were largely a product of third world
persecution and poverty stricken in their quest for greener pastures aided by lax security
and inadequate precautions, today’s stowaways originate from prominent West European
ports and are moved in control groups by crime syndicates fro whom they represent a lucrative
new source of income.
17.7.2 Ships are modified to accommodate the ‘human cargo’ and containers are specially
tailored for human habitation. One such container said to contain Beer cases and delivered to
Antwerp from Rotterdam for loading was found to contain six Romanians! The available
evidence pointed that stowaways receive outside & very professional help in an organized
manner.
ooooooo
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1. What is Piracy? How it is affecting the merchant navy?
2. How India is affected by Piracy.
3. What is ISPS code and its necessity.
4. Define maritime fraud.
5. What is BMP document? How it is helping mariner to safe guard against Piracy.
What precautions are required to be taken by ship’s personnel against Piracy.
6. What is CITADEL and Arms guards.
7. What is SSAS and how the system works?
8. Why maritime frauds are increasing?
9. What are the types of documentary frauds? Give one example. Mention the way it
could have been avoided.
10. Explain “bunkering fraud”. Elaborate how these can be controlled.
11. How charter party frauds take place. Can you suggest some remedies?
12. Is it a fact that theft of cargo by crew has been reduced? How has it taken place?
13. How do the fraudsters commit marine insurance frauds?
14. Describe some general guidelines as to how the frauds can be reduced?
15. Elaborate the functions of IMB and assess its effectiveness in counteracting frauds in
maritime industry.
16. Write short notes on

a. CCS
b. FIB
c. CIB
d. Fraud Net
e. ICC
f. PRC
17. Describe different types of container related crimes. Provide some suggestions as to
how these can be avoided.
18. Why has the “stowaway” issue become an important aspect of maritime frauds?
19. Explain why IMB can assist the banks in containment of frauds?
Recommended for further reading:
 Best Management Practices Version 5 (BMP 5).
***********************
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LESSON – 14
OFFSHORE SHIPPING
1.0 INTRODUCTION:
1.1 Early history of oil usage:
1.1.1 More than four thousand years ago, asphalt was employed in the construction of the walls
and towers of Babylon (now in Iraq). Oil was exploited in the Roman province of Dacia, now in
Romania, where it was called picula. The earliest known oil wells were drilled in China in 347 AD
or earlier. They had depths of up to about 800 feet and were drilled using bits attached to bamboo
poles. The oil was burned to evaporate brine and produce salt. By the 10th century, extensive
bamboo pipelines connected oil wells with salt springs. The ancient records of China and Japan
are said to contain many allusions to the use of natural gas for lighting and heating. Petroleum
was known as burning water in Japan in the 7th century. Song Dynasty coined the word 石油
(Shíyóu, literally "rock oil") for petroleum, which remains the term used in contemporary Chinese
and Japanese (Sekiyū). The first streets of Baghdad were paved with tar, derived from petroleum
that became accessible from natural fields in the region. In the 9th century, oil fields were exploited
in the area around modern Baku, Azerbaijan. In the 13th century, Kerocin was produced by
distillation of Petroleum and was available in Spain, Romania. 1595 Petrolium mention is found
in America and 1753 map is available showing the oil springs of Pennsylvania. In 1710 asphaltum
was discovered and established refinery at Val-de-Travers, (Neuchâtel) that operated until 1986.
In 1745 refinery were built in Ukhta for refining rock oil and producing Kerosene which was used
in oil lamps by Russian churches and monasteries.
1.1.2 Oil sands were mined from 1745 in Merkwiller-Pechelbronn, Alsace, which was active until
1970, and was the birthplace of companies like Antar and Schlumberger. The first modern refinery
was built there in 1857.
1.2 Onshore vs Offshore:
The words onshore and offshore have traditionally been used in the context of oil exploration and
drilling. Of late however, the terms have become associated with many other businesses that
seem to have confused many regarding the differences between these two words. Let us
understand the terms in the context of oil drilling.
1.3 On shore and Offshore drilling:
Oil & Gas are found below the surface of earth, the location may be on the land or under water.
Though trying to extract oil & gas from below the surface of the ocean is much more difficult than
making wells on land and drilling holes, it is nonetheless profitable and this is why oil & gas
exploration is done through floating or fixed platforms on the ocean. The activity of extracting oil
from under the sea bed is called offshore drilling whereas onshore drilling is the practice of
extracting oil from under the surface of earth away from the ocean. It is not just oil that requires
onshore and offshore drilling but sometimes this is undertaken for extraction of natural gas also.
Initially near coast exploration started in shallow waters. But as the demand for energy kept on
increasing, the search of oil started into deeper waters into the sea. Deep water exploration is a
complex environment where projects require long-term investment and commitment. The
technical and logistical challenges of operating in deep water are testing the limits of industry
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resources. Innovative technologies required to withstand hostile and deepwater environments.
Greater water depths create unique production challenges. It requires more sophisticated
breakthrough technologies in order to achieve economically sustainable production. Significant
increase in drilling capacity is required for deepwater production to have an impact on the Nation’s
energy requirement. Viability of investments in deepsea drilling projects in relation to returns is
required to be studied. Deep water projects require long-term investment and commitment.
2.0 VARIOUS STAGES OF OFFSHORE OIL EXPLORATION:
2.1 The seismic survey:
2.1.1 The seismic survey is one form of geophysical survey that aims at measuring the earth’s
(geo-) properties by means of physical (-physics) principles such as magnetic, electric,
gravitational, thermal, and elastic theories. It is based on the theory of elasticity and therefore
tries to deduce elastic properties of materials by measuring their response to elastic disturbances
called seismic (or elastic) waves. Seismic survey, method of investigating subterranean
structure, particularly as related to exploration or petroleum, natural gas and mineral deposits.
2.1.2 Seismic vessels are ships that are solely used for the purpose of seismic survey in the high
seas and oceans for the purpose of pinpointing and locating the best possible area for oil
drilling. Such vessels are built only in selected locations across the world. Seismic vessels are
more in demand in today’s time considering the amount of subsea drilling that is being carried
out. They are also known as research vessels because in a completely different way, they do help
research the oceans and seas.
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A Seismic Survey vessel carrying out Seismic survey at sea with streamed seismic cables.
2.1.3 Considering the type of jobs these ships perform at sea, an extremely competent crew is
required. In addition to the normal marine crew, seismic vessels also have an additional group of
professionals called the seismic crew, who play a major part in the seismic operation. The seismic
team/crew consisting more than 40 nos, headed by the Party chief, consists of the professionals
such as Processors (geophysicists), Observers, Navigators, Gun technicians. As a vessel is
restricted in its ability to maneuver (RAM) as it has more than 6 to 8 nos. each 6 Km long trailing
seismic survey cables. These operations may be carried out close proximity to shore and in area
of dense traffic, hence extreme caution is required. With high tech equipment, maintaining vessel
on track lines becomes easier, but proper look out is also required to keep a watch on fishing
activity, which can damage the seismic equipment, resulting in delay in acquisition. With number
of high-tech machineries fitted on board and operations close to shore. A high standard of
pollution prevention policy is therefore maintained by the companies to avoid spill and other
damage to maritime environment. The Seismic data is transmitted ashore for further analysis and
study and preserved as confidential Data which is National property. Subsequently, this data is
provided to E&P operators who are awarded such blocks for exploration.
2.2 GAS and OIL Reserves:
2.2.1 Crude is a mixture of oil, gas and water. Once the formation has been evaluated and all
the logs compiled, the geological risk is to be determined. The probability of Oil existing and being
producible under current economic conditions using current technology, categorizes the reserves
such as Proven Reserve (90 % certainty being produced.), Probable reserve (50% certainty being
produced) and possible reserve (10% certainty being produced).
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2.3 Award of blocks by Govt. to Exploration and Production (E&P) operators:
2.3.1 Govt. awards the blocks, based on seismic survey to E&P operators. The terms and
conditions of the award are finalized by the Govt. In India such blocks are awarded by Ministry
of Petroleum and Natural Gas (MOPNG) by adopting various transparent methods as per Govt.
policies. ONGC was the sole Govt. agency for oil & gas exploration till private operators came in.
2.4 Geotechnical Surveys:
2.4.1 Geotechnical investigations have become an essential component of every construction

to protect Health, Safety & Environment (HSE). It includes a detailed investigation of the soil to
determine the soil strength, composition, water content, and other important soil characteristics.
Geotechnical investigations are executed by geotechnical engineers and geologists who acquire
information regarding the physical characteristics of soil and rocks. The purpose of geotechnical
investigations is to design earthworks and foundations for structures, and to execute earthwork
repairs necessitated due to changes in the subsurface environment.
2.4.2 A geotechnical examination includes surface and subsurface exploration, soil sampling,
and laboratory analysis. Geotechnical investigations are also known as foundation analysis, soil
analysis, soil testing, soil mechanics, and subsurface investigation. Geotechnical investigations
have acquired substantial importance in preventing loss of life and material damage due to the
earthquakes, foundation cracks, and other catastrophes. The investigations can be as simple as
conducting only a visual assessment of the site or as detailed as a computer-aided study of the
soil. The investigation must therefore be planned with a knowledge of the intended offshore
project work and anticipated column loads, utilization and a broad knowledge of the geological
history of the area. Geotechnical survey vessels pick up samples from seabed at various depths,
and samples are tested on board and sent to shore laboratory for further testing. Geotechnical
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vessels are also constructed at selected yards in the world, has Marine as well as Geotech crew
total of more than 50 crew. Such surveys are carried out by E&P operator.
2.5 Drilling:
2.5.1 Drilling is a cutting process that uses a drill bit to cut or enlarge a hole of circular cross
section in solid materials on the seabed. The drill bit is a rotary cutting tool, often multipoint. The
bit is pressed against the work piece and rotated at rates from hundreds to thousands of
revolutions per minutes. This forces the cutting edge against the work piece, cutting off Chips
from the hole as it is drilled. Exceptionally, specially-shaped bits can cut holes of non-circular
cross-section; a square cross-section is possible.
2.5.2 Offshore drilling is a mechanical process where a wellbore is drilled below the seabed.
It is typically carried out in order to explore and subsequently extract petroleum which lies in rock
formations beneath the seabed. Most commonly, the term is used to describe drilling activities on
the continental shelf, though the term can also be applied to drilling in lakes, inshore waters and
inland seas. Offshore drilling presents environmental challenges, both from the produced
hydrocarbons and the materials used during the drilling operation.
There are many different types of facilities from which offshore drilling operations take place.
These include bottom founded drilling rigs (Jack up barges and swamp barges), combined drilling
and production facilities either bottom founded or floating platforms, and deepwater mobile
offshore drilling units (MODU) including semi-submersibles and drillships. These are capable of
operating in water depths up to 3,000 metres (9,800 ft). In shallower waters the mobile units are
either anchored to the seabed or jacked up, however in deeper water (more than 1,500 metres
(4,900 ft.) the semi submersible or drill ships are maintained at the required drilling location using
dynamic positioning. https://en.wikipedia.org/wiki/Grand_Lake_St._Marys The wells were developed
by small local companies such as Bryson, Riley Oil, German-American and Banker's Oil.
2.6 Developing Offshore oil Field:
2.6.1 An offshore platform, often referred to as an oil platform or an oil rig, is a large structure
used in offshore drilling to house workers and machinery needed to drill wells in the ocean bed,
extract oil or natural gas, or both, process the produced fluids, or to temporarily store product until
it can be brought to shore by ship or pipe for refining and marketing. Depending on the
circumstances, the platform may be built on concrete or steel legs, or both, anchored directly onto
the seabed, supporting a deck with space, fixed to the ocean floor. It may consist of an artificial
island, or may be floating. Such platforms are, by virtue of their immobility, designed for very long
term use. Various types of structure are used are steel jacket, concrete caisson, floating steel,
and even floating concrete. Steel jackets are vertical sections made of tubular steel members,
and are usually piled into the seabed.
2.6.2 Jack-up Mobile Drilling Units (or jack-ups), as the name suggests, are rigs that can be
jacked up above the sea using legs that can be lowered, much like jacks. These MODUs (Mobile
Offshore Drilling Units) are typically used in water depths up to 120 metres (390 ft.), although
some designs can go to 170 m (560 ft.) depth. They are designed to move from place to place,
and then anchor themselves by deploying the legs to the ocean bottom using a rack and pinion
gear system on each leg.
2.6.3 Various types of platforms are like Fixed Platform (FP), Compliant Tower (CT - typically
used in water depths ranging from 370 to 910 metres (1,210 to 2,990 ft)), Semisubs can be used
in water depths from 60 to 3,000 metres (200 to 10,000 ft), Tension Leg Platform (TLP), Mini-
Tension Leg Platform (Mini-TLP), SPAR Platform (SPAR), Floating Production System (FPS),
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Subsea System (SS), Floating Production, Storage & Offloading System (FPSO) etc. Remote
subsea wells may also be connected to a platform by flow lines and by umbilical connections.
These subsea solutions may consist of one or more subsea wells, or of one or more manifold
centers for multiple wells.
2.6.4 When offshore drilling moved into deeper waters of up to 30 metres (98 ft), fixed platform
rigs were built, when the demands for drilling equipment was needed in the 100 feet (30 m) to
120 metres (390 ft) depth of the Gulf of Mexico, the first Jack Up Rigs were used.
2.6.5 One of the world's deepest hubs is currently the Perdido in the Gulf of Mexico, floating in
2,438 meters of water. It is operated by Royal Dutch Shell and was built at a cost of $3 billion.
The deepest operational platform is the Petrobras America Cascade FPSO in the Walker Ridge
249 field in 2,600 meters of water.
3.0 Drillships:
A drillship is a maritime vessel that has been fitted with drilling apparatus. It is most often used
for exploratory drilling of new oil or gas wells in deep water but can also be used for scientific
drilling. Early versions were built on a modified tanker hull, but purpose-built designs are used
today. Most drillships are outfitted with a dynamic positioning system to maintain position over the
well. They can drill in water depths up to 3,700 m (12,100 ft).
In 2013 the worldwide fleet of drillships tops 80 ships, more than double its size in 2009
In 2011 the Transocean drillship the Dhirubhai Deepwater KG2 set the world water-depth record
at 10,194 feet of water (3,107 meters) while working for Reliance - LWD and Directional drilling
done by Sperry Drilling in India
3.1 Floating production systems:
The main types of floating production systems are FPSO (floating production, storage, and
offloading system). FPSOs consist of large monohull structures, generally (but not always)
shipshaped, equipped with processing facilities. These platforms are moored to a location for
extended periods, and do not actually drill for oil or gas. Some variants of these applications,
called FSO (floating storage and offloading system) or FSU (floating storage unit), are used
exclusively for storage purposes, and host very little process equipment. This is one of the best
sources for having floating production.
The world's first floating liquefied natural gas (FLNG) facility is currently under development.
Total 226 nos. FPSO’s are in operation all over the world out of which 4 FPSO’s are in INDIA.
Following picture is of FPSO.
3.2 Normally unmanned installations (NUI):

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These installations, sometimes called toadstools, are small platforms, consisting of little more
than a well bay, helipad and emergency shelter. They are designed to be operated remotely under
normal conditions, only to be visited occasionally for routine maintenance or well work.
The Petronius Platform is a compliant tower in the Gulf of Mexico modeled after the Hess Baldpate
platform, which stands 2,000 feet (610 m) above the ocean floor. It is one of the world's tallest
structures.
The Hibernia platform in Canada is the world's largest (in terms of weight) offshore platform,
located on the Jeann D'Arc Basin, in the Atlantic Ocean off the coast of Newfoundland. This
gravity base structure (GBS), which sits on the ocean floor, is 111 metres (364 ft) high and has
storage capacity for 1.3 million barrels (210,000 m3) of crude oil in its 85-metre (279 ft) high
caisson. The platform acts as a small concrete island with serrated outer edges designed to
withstand the impact of an iceberg. The GBS contains production storage tanks and the remainder
of the void space is filled with ballast with the entire structure weighing in at 1.2 million tons.
Royal Dutch Shell is currently developing the first Floating Liquefied Natural Gas (FLNG) facility,
which will be situated approximately 200 km off the coast of Western Australia and is due for
completion around 2017. When finished, it will be the largest floating offshore facility. It is
expected to be approximately 488m long and 74m wide with displacement of around 600,000t
when fully ballasted.
3.3 Essential personnel on Platform:
Not all of the following personnel are present on every platform. On smaller platforms, one worker
can perform a number of different jobs. The following also are not names officially recognized in
the industry:
 OIM (offshore installation manager) who is the ultimate authority during his/her shift and
makes the essential decisions regarding the operation of the platform, operations team
leader (OTL), offshore operations engineer (OOE) who is the senior technical authority on
the platform, PSTL or operations coordinator for managing crew changes, dynamic
positioning operator, navigation, ship or vessel maneuvering (MODU), station keeping, fire
and gas systems operations in the event of incident, automation systems specialist, to
configure, maintain and troubleshoot the process control systems (PCS), process safety
systems, emergency support systems and vessel management systems, second mate to
meet manning requirements of flag state, operates fast rescue craft, cargo operations, fire
team leader; third mate to meet manning requirements of flag state, operate fast rescue
craft, cargo operations, fire team leader; ballast control operator to operate fire and gas
systems, crane operators to operate the cranes for lifting cargo around the platform and
between boats;
 scaffolders to rig up scaffolding for when it is required for workers to work at height,
coxswains to maintain the lifeboats and manning them if necessary, control room
operators, especially on FPSO or production platforms, catering crew, including people
tasked with performing husbandry functions such as cooking, laundry and cleaning the
accommodation and production techs to run the production plant;
 helicopter pilot(s) living on some platforms that have a helicopter based offshore and
transporting workers to other platforms or to shore on crew changes, maintenance
technicians (instrument, electrical or mechanical). Fully qualified medic, Radio operator to
operate all radio communications.
3.4 Incidental personnel:
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Drill crew will be on board if the installation is performing drilling operations. A drill crew will
normally comprise:
Toolpusher, Driller, Roughnecks, Roustabouts, Company man, Mud engineer, Motorman,

Derrickhand, Geologist, Welders and Welder Helpers, Well services crew will be on board for
well work. The crew will normally comprise of Well services supervisor, Wireline or coiled tubing
operators, Pump operator, Pump hanger and ranger.
3.5 Various types of Offshore platforms and drilling rigs:
Larger lake- and sea-based offshore platforms and drilling rig for oil.
1, 2) conventional fixed platforms; 3) compliant tower; 4, 5) vertically moored tension leg and mini-
tension leg platform; 6) spar; 7,8) semi-submersibles; 9) floating production, storage, and
offloading facility; 10) sub-sea completion and tie-back to host facility.
3.6 Storage Tankers:
These are normal crude oil tankers having suitable capacity (from 60000 T to 150000 T) for
storage, oil water segregation and discharge of extracted crude oil. The storage tankers are
moored in oil fields on Single Buoy / Point Moorings (SBM/SPM) for a long time. One pull back
tug is kept at the stern of the tanker for tanker and SBM safety. Capacity of a storage tanker is
decided as per rate of extraction of crude oil. The storage tanker discharges crude oil into a
daughter vessel by double banking operation in oil field itself. The storage tanker leaves its station
only after another tanker replaces her for periodical dry docking maintenance.
4.0 Some of the Notable offshore fields:
 the North Sea

 the Gulf of Mexico (offshore Texas, Louisiana, Mississippi, and Alabama)
 California (in the Los Angeles Basin and Santa Barbara Channel, part of the Ventura
Basin)
 the Caspian Sea (notably some major fields offshore Azerbaijan)
 the Campos and Santos Basins off the coasts of Brazil
 Newfoundland and Nova Scotia (Atlantic Canada)
 several fields off West Africa most notably west of Nigeria and Angola
 offshore fields in South East Asia and Sakhalin, Russia
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 major offshore oil fields are located in the Persian Gulf such as Safaniya, Manifa and
Marjan which belong to Saudi Arabia and are developed by Saudi Aramco.
 fields in India (Mumbai High, K G Basin-East Coast Of India, Tapti Field Gujrat, India)
4.1 Major Drilling contractors:
Major Drilling Contractors are Baker Hughes, ENSCO International, Halliburton, Seadrill,
Transocean, Wheatherford, Atwood Oceanics, COSL, Diamond Offshore, Fred Olsen
Energy, Gyro Data, KCA Deutag, Mearsk drilling, Nabors, Nobel, Rowan Companies,
Scientific Drilling, Superior Energy services INC etc.
5.0 Brief History of Offshore Drilling:
5.1 Modern history:

5.1.1 The modern history of petroleum began in the 19th century with the refining of paraffin
from crude oil. In 1847 in Derbyshire a light thin oil suitable for use as lamp oil, and a thicker oil
suitable for lubricating machinery was distilled. In 1846, Baku, the first ever well drilled with
percussion tools to a depth of 21 meters for oil exploration.
5.1.2 The production of refined oils and solid paraffin wax from coal formed the subject of
Young’s patent dated 17 October 1850 at Glasgow. The first rock oil mine was built in central
European Galicia (Poland) in 1853. These discoveries rapidly spread around the world, and the
first modern Russian refinery was built at Baku in 1861. At that time Baku produced about 90%
of the world's oil.
5.1.3 However, 1859 well near Titusville, Pennsylvania, is popularly considered the first modern
well as Drake's well is probably singled out because it was drilled, not dug; because it used a
steam engine; because there was a company associated with it; and because it touched off a
major boom. The industry grew through the 1800s, driven by the demand for kerosene and oil
lamps. It became a major national concern in the early part of the 20th century; the introduction
of the internal combustion engine provided a demand that has largely sustained the industry to
this day.
5.1.4 US production of crude oil in 1859 was 2000 barrels, in 1879 was 20 million barrels, in
1909 was 126 m barrels.
5.1.5 By 1910, significant oil fields had been discovered in the Dutch East Indies (1885, in
Sumatra), Persia (1908, in Masjed Soleiman), Peru (1863 Venezuela) 1914, in Maracaibo Basin,
and Mexico. Significant oil fields were exploited in Alberta (Canada) from 1947. First offshore oil
drilling at Oil Rocks (Neft Dashlari) in the Caspian Sea off Azerbaijan eventually resulted in a city
built on pylons in 1949. Until the mid-1950s coal was still the world's foremost fuel, but after this
time oil quickly took over.
5.1.6 The earliest oil wells in modern times were drilled percussively, by repeatedly raising and
dropping a cable tool into the earth. In the 20th Century cable tools were largely replaced with
rotary drilling, which could drill boreholes to much greater depths and in less time. The record-
depth Kola Borehole used non-rotary mud motor drilling to achieve a depth of over 12,000 metres
(39,000 ft).
5.1.7 Until the 1970s, most oil wells were vertical, although lithological and mechanical
imperfections cause most wells to deviate at least slightly from true vertical. However, modern
directional drilling technologies allow for strongly deviated wells which can, given sufficient depth
and with the proper tools, actually become horizontal. This is of great value as the reservoir rocks
which contain hydrocarbons are usually horizontal, or sub-horizontal; a horizontal wellbore placed
in a production zone has more surface area in the production zone than a vertical well, resulting
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in a higher production rate. The use of deviated and horizontal drilling has also made it possible
to reach reservoirs several kilometers or miles away from the drilling location (extended reach
drilling), allowing for the production of hydrocarbons located below locations that are either difficult
to place a drilling rig on, environmentally sensitive, or populated.
5.2 Life of a well :
5.2.1 The creation and life of a well can be divided up into five segments:
 Planning
 Drilling
 Completion
 Production
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6.0 Maintenance, supply and Logistic Support:
A typical oil production platform is self-sufficient in energy and water needs, housing electrical
generation, water de-salinators and all of the equipment necessary to process oil and gas such
that it can be either delivered directly onshore by pipeline or to a floating platform or tanker loading
facility, or both. Elements in the oil/gas production process include wellhead, production manifold,
production separator, glycol process to dry gas, gas compressors, water injection pumps, oil/gas
export metering and main oil line pumps.
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Larger platforms assisted by smaller ESVs (emergency support vessels). During normal
operations, PSVs (platform supply vessels) keep the platforms provisioned and supplied, and
Anchor Handling Towing support/supply (AHTS) vessels can also supply them, as well as tow
them to location and serve as standby rescue and firefighting vessels. Some other types of
vessels are Diving Support Vessels (DSV), Well Stimulation Vessels (WSV), Interception vessels
(IV’s), Accommodation barges, pipe lay barges, etc. Various cargo carried on to and from offshore
oilfields is Pipes, steel, chemicals, cement, byrite, drill water, fresh water, HSD, brine, passengers,
etc. Each above vessels are specialized vessels providing specific services to off shore oil fields.
These are highly sophisticated vessels. DSVs supports subsea maintenance where as WSV does
well stimulation. Such vessels can be positioned accurately in Offshore Oil fields by Dynamically
Positioning capability such as DP1 / DP 2 / DP 3 vessels. The Offshore crafts are categorized as
High End Segment ( Seismic Survey Vessels (SSV), Diving Support Vessels (DSV), Multi Support
Vessels (MSV), Geo Technical Vessels (GTV), Well Stimulation Vessels (WSV), Self Propelled
Drill Ships, Semi Submersible Rigs, Non Propelled Drill Barges, Jackup Rigs, Pipe / Cable or pipe
Laying Vessels, Floating Production Storage and Offloading (FPSO), Floating Storage and
Offloading (FSO), remote Operated Vehicles ( ROVs ) and Low End Segment Offshore Supply
Vessels, Platform Supply Vessels, Anchor Handling and Towing Supply Vessels (AHTSV), Tugs,
Crew boats, Supply Boats, Crane barges, Accommodation barges. Below picture shows rig move
operation in the oil field. (Rig is being towed by towing tugs.)
6.1 Up Stream logistic Support:
6.1.1 In order to ensure continuous production, the offshore installations need to be supplied
regularly. However, the oil companies decide the use of the vessels. In practice, this means that
activities such as scheduling and routing are the responsibility of the oil company and are planned
by using optimization techniques or simulation.
6.1.2 In the oil and gas industry ‘downstream logistics’ is defined as bringing oil and gas to
onshore customers while ‘upstream logistics’ is defined as supplying the offshore drilling and
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production units with the necessary supplies. Important issues in upstream logistics are to support
offshore activities so that these can be carried out as planned and in a cost-efficient way. To be
able to operate from remote locations, offshore drilling and production units need different types
of support services that are provided by specialized vessels. Examples of such vessels are
Anchor Handling Vessels, Offshore Supply Vessels (OSVs), Crew Boats and Standby/Rescue
vessels, Platform Supply Vessels. The end customers for the supply vessels are the offshore
drilling and production units. The high value of the production, and the high cost of delaying
offshore operations dictate the design of the upstream chain. There are many types of offshore
drilling and production units representing different logistical needs.
6.1.3 It is common to distinguish between two types of units. One which are mainly producing
(but might also be drilling) and stay at the same position for a longer period, such as (production)
platforms or production ships. Second, are those moving around on commission, solely for
exploration, called exploration (or wildcat) rigs/ships. The size of offshore drilling and production
units can vary from small, unmanned units to large constructions, in which several hundred
workers are needed onboard. Consequently, the need for supplies to support daily operations
(like food, clothes and so on), and the amount and type of equipment needed, for instance to
carry out drilling operations (drill pipes and casing), will vary significantly. For convenience all
kinds of offshore drilling and production units are referred as ‘offshore installations. In general,
installations that are drilling have more fluctuating and uncertain demand patterns for supplies
than producing installations, due to the complex nature of offshore drilling operations. Producing
installations usually have a smoother and more predictable demand. Naturally, these
uncertainties transmit to the whole supply chain and make the planning and execution of the
logistics quite challenging.
6.1.4 Installations do not only need to receive supplies. There is also a need for return transport
and the directional balance is good. Most of the returned cargos are empty load carriers, waste,
rented equipment and excess back-up equipment. In general, offshore installations have a rather
limited storage capacity, and thus it is important to have rather frequent visits to avoid a shortage
of supplies or a buildup of return cargo. Much of the equipment, especially specialized equipment
used in well and drilling operations, is rented with high daily rates; hence it is also financially
important to return such equipment quickly.
6.1.5 Often installations are located in clusters. The main reasons for this are that discoveries
of oil and gas are usually naturally limited geographically and that economies of scale related to
both the upstream and downstream part of the chain make it more beneficial for the oil companies
to cluster offshore production facilities. However, this leads to a clustering of heterogeneous
installations with regard to their demands and storage capacities. When supplying such a cluster
by the same upstream chain, the challenge is to design an upstream chain that is both lean and
agile. Although the main focus of lean supply is on reducing costs.
6.1.6 Supply vessels rarely break down. However, this could vary somewhat between different
vessels. Data regarding reliability are regarded by most shipowners as sensitive information. The
supply vessels work round the clock. Periodically OSVs are given paid lay off at average of one
day per month dedicated to maintenance. In practice it is usually not a problem to plan for this.
Approximately every second year, a supply vessel is docked to carry out more comprehensive
maintenance. When the vessel is not operational, charter hire is not received.
6.1.7 All supply vessels have what is called an ‘economical speed’, which is the transit speed
that is regarded as most economical under normal operational circumstances. Most modern
vessels have an economical speed of around 11–13 knots and aximal speed is around 17–18
knots.
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6.1.8 If the weather is good, all deck cargo and bulk cargo can be loaded/unloaded
simultaneously. Deck cargo is lifted from the deck of the supply vessel to the deck of the
installation by the use of cranes mounted on the installations and bulk is pumped from the tanks
on the supply vessel to tanks onboard the installations by the use of hoses. Usually the
installations have demands for both categories of supplies. However, if the weather is bad,
offshore loading/unloading can be stopped. So, just as for sailing capability, also the
loading/unloading capability is uncertain. It is the responsibility of the captain of the supply vessel
to ensure that loading/unloading is done safely, however, the crane operator and the platform
chief also have the authority to stop this operation. In addition, there are regulations with regard
to working conditions, which must be met. These relate to factors such as wave height, visibility,
wind and currents.
6.1.9 The capability to cope with the weather elements and keep its position with a high degree
of accuracy varies between vessels and is related to the particular vessel’s hull, design,
propulsion arrangement and machinery power. Many safety standards require that a vessel must
not use more than 50 per cent of its machinery power to keep its position alongside the installation.
This is to ensure that the vessel has excess power to handle unforeseen problems. During recent
years vessels station keeping ability in disturbed weather condition are better due to improved
designs. Especially the developments in dynamic positioning systems (DP Systems ) have been
very important.
6.1.10 In general, the geographical location where the offshore activity takes place is an
important indicator of the choice of supply vessel. Factors like weather conditions, the amount of
equipment needed and the distance from the shore are important for what properties the vessel
should have. Most oil companies charter supply vessels on the supply vessel market. The rate
they pay depends upon many factors such as the features of the vessel, the length of the charter,
the supply/demand balance at the time the charter is signed and the location of the vessel. In
addition to paying rent, it is common that the oil company pays for fuel, bunkers oil and harbour
dues. All other costs are covered by the shipowner. Both short-term (spot) and long-term charters
are thus available on the market. It is important for the shipowners that the vessels are chartered
out at all time to ensure a steady cash flow. Consequently, to build a tailor-made vessel, a
shipowner needs to be certain that there is a long-term charter. Vessels built for trading the spot-
market (built on speculation) are usually designed to be amenable to a wide range of potential
clients, often worldwide.
6.2 Various categories of supply vessels are as under:
6.2.1 Offshore Supply vessels (OSV) :
The need for this type of vessel arose with the start of the oil exploration activity in the
Gulf of Mexico in the mid 1950s. Since then, the use of supply vessels has been spread
worldwide. The gradual exploration of more demanding areas has contributed to an
evolution of the supply vessels. Today the worldwide supply vessel fleet consists of more
than 1000 vessels operating. These vessels carry wide variety of cargo such as Deck
cargo (pipes, cases, spares, containers, refrigerated containers, palettes cargo, etc.), bulk
cargo such as methanol, pre-blended drill fluids, brine, water and oil are transported in
segregated tanks. All tanks have individual pumps and hoses for discharging. Dry bulk
cargo such as cement, barite and bentonite are loaded and discharged by using
compressed air. OSVs also carry passengers. OSVs call Supply base port every 3rd / 4th
week for replenishment. They also carry out stand by duties as well as capable of
extinguishing external fires by pumping large quantity of water, if classed as FIFI. Below
picture is of OSV .
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6.2.2 Platform supply vessels (PSV) :
These are basically similar to OSVs but faster vessels to carry out faster supply activities
and return to base within a week. Below picture is of PSV – DP II FIFI -1 vessel.
6.2.3 Anchor Handling Towing supply vessel (AHTSV OR AHT):
In addition to OSVs duties they carry out ocean/field towage of rigs, barges, and other
floating objects. They drop and pick up anchors of other units to keep these units in
position firmly. AHTSV /AHT vessels are also capable of storing rig/barges anchor chain
in the specially designed chain lockers. Below picture is of AHTSV 120 T bollard pull – DP
I and FIFI 1 vessel.
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7.0 Dynamically Positioned Vessels:
7.1 Dynamic positioning started in the 1960s for offshore drilling.

7.2. Dynamic positioning (DP) is a computer-controlled system to automatically maintain
a vessel's position and heading by using its own propellers and thrusters. Position reference
sensors, combined with wind sensors, motion sensors and gyrocompasses, provide information
to the computer pertaining to the vessel's position and the magnitude and direction of
environmental forces affecting its position. Examples of vessel types that employ DP include, but
are not limited to, ships and semi-submersible mobile offshore drilling units (MODU),
oceanographic research vessels and cruise ships.
7.3 The computer program contains a mathematical model of the vessel that includes information
pertaining to the wind and current drag of the vessel and the location of the thrusters. This
knowledge, combined with the sensor information, allows the computer to calculate the required
steering angle and thruster output for each thruster. This allows operations at sea where mooring
or anchoring is not feasible due to deep water, congestion on the sea bottom (pipelines,
templates) or other problems.
7.4 Dynamic positioning may either be absolute in that the position is locked to a fixed point
over the bottom, or relative to a moving object like another ship or an underwater vehicle. One
may also position the ship at a favorable angle towards wind, waves and current, called
weathervaning.
7.5 Dynamic positioning is used by much of the offshore oil industry, for example in the North
Sea, Persian Gulf, Gulf of Mexico,West Africa, and off the coast of Brazil. There are currently
more than 1800 DP ships.
7.6 Many of the Offshore crafts are DP vessels. There are three categories of DP i.e. DP 1
(basic), DP 2 (100% redundancy of DP equipments) and DP 3 has 100% redundancy of all the
DP equipments as well as all the machinery and machinery spaces. Special trained personal are
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required to operate such vessels. DP Operator (DPO) certificates are issued by Nautical Institute
(NI). IMCA has guidelines to operate such vessels. DP Equipments/system manufacturers are
Kongsberg, Althom etc. Accurate position is provided by service providers like FUGRO with help
of Satellite signals. DP Vessels have very high automation therefore are expensive. DP-2 Diving
Support vessel is shown in picture below.
7.7 FI-FI Class vessels:
Offshore vessels are specialized to fight external fires and provided with special Fire Fighting
equipments as per the Class notation of the vessel either FI-FI – 1 or FI-FI – 2.
All Off shore operations, safety, safe working practices are as per IMCA guidelines/ regulations.
8.0 IMCA :-
The International Marine Contractors Association (IMCA) is the international trade association
representing companies and organisations engaged in delivering offshore, marine and
underwater solutions. IMCA’s core purpose is improving performance in the marine contracting
industry by championing better regulation and enhancing operational integrity. In 2014 IMCA has
released Vision & Strategy 2014-2019 that gives an overview of what we do and how we plan to
achieve it. Head office is in London.
IMCA operates with a global focus via a structure of technical committees made up of experts
elected from member companies, supported by a small, focused secretariat in London. IMCA has
a respected voice around the world promoting good practice, particularly in the areas of health,
safety and environment, quality and efficiency, as well as providing technical guidance.
Good communication with 1000+ company members via a variety of documents, website and
meetings encourages the sharing of experience, ideas and aspirations.
There is a host of member benefits to joining IMCA and aligning with world-wide membership
community. All companies who join IMCA benefit from our good practice guidance, based on
members' cumulative global experience.
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IMCA’s online library holds over 200 guidance documents, codes of practice, industry guidelines
and audit templates.
IMCA organises a regular programme of meetings and events all over the world and also support
conferences run by other organisations which may interest our members. These include our IMCA
annual seminar, safety seminars, briefing sessions as well as many social and networking events.
On a day-to-day basis, our work is organised by the London-based secretariat, led by the Chief
Executive and Technical Director. The secretariat supports the committees, represents the
association with external organisations, produces and distributes a wide range of
IMCA was founded in 1995 through the merger of the Association of Offshore Diving Contractors
(AODC) 1972 and the Dynamically Positioned Vessel Owners Association (DPVOA) 1990. 1995
- AODC and DPVOA merged to form IMCA - membership around 100.
All the rig moves / positioning / towages are carried after approval and under supervision of NDA
surveyors.
9.0 NDA surveyors
Noble Denton & Associates Ltd
The Noble Denton rules and technical guidelines are developed through extensive research and
development, the know-how and experience of engineers and the close feedback of their
worldwide network of technical experts. The rules and guidelines represent the current state of
scientific development and industry practice. Guidelines for Offshore wind farms, moorings, float-
over installation or removal of structures, Cargoes on ships or towed barges. Towage of self-
floating marine and oilfield equipment, pipeline installation by laying, pulling or towing, design and
approval of the transportation and installation of steel offshore jacket structures. Guidelines are
intended to lead to an approval by Noble Denton for entry into the Towing Vessel Approvability
Scheme. Seabed and Sub-seabed Data for Approvals of Mobile Offshore Units, Concrete
Offshore Gravity Structure Construction and Installation, Guidelines for Load-Outs, Guidelines for
Elevated Operations of Jack-Ups and General Guidelines for Marine Projects.
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10.0 Divers / Helicopters:
Deep sea divers work underwater, performing operations such as undersea welding, equipment
installation and removal, photography or even salvage and hazardous materials cleanup. While
recreational divers may explore shipwrecks or caves, commercial divers are paid to work on
construction projects, infrastructure inspection and other jobs where they can put their aquatic
and trade skills to work. Wages of Deep sea divers are very high. But they can work only equal
on / equal off cycle.
Logistic support mainly passenger transportation is also provided by Helicopters. Hence most of
the offshore crafts and platforms are fitted with HELIPAD for chopper landing. Each person
working at Offshore oil field must have undergone Helicopter Under water escape training.
(HUET).
11.0 Main E&P operators:
Main Exploration and production operators called as OIL Majors or Super Majors. Super Majors
are BP, Chevron, ConocoPhillips, ExxonMobil, Royal Dutch Shell and Total. National oil companies are
ADNOC (UAE), CNOOC (China),CNPC (China), Ecopetrol (Colombia), Gazprom (Russia), Iraq National Oil
Company, Indian Oil Corporation ,Kuwait Petroleum Corporation, Lotos (Poland), Nigerian National
Petroleum Corporation, NIOC (Iran), NISOC (Iran), OGDCL (Pakistan), ONGC (India), PDVSA (Venezuela),
PKN Orlen (Poland), Pemex (Mexico), Pertamina (Indonesia), Petrobras (Brazil), PetroChina , Petronas
(Malaysia), Petrovietnam, PTT (Thailand), Qatar Petroleum, Rosneft (Russia), Saudi Aramco (Saudi
Arabia),Sinopec (China), SOCAR (Azerbaijan), Sonangol (Angola), Sonatrach (Algeria), Statoil (Norway)
YPF (Argentina).
11.1 Following table shows Top 10 oil producing, oil exporting and Oil consuming countries.
Sr. Top 10 oil producing Top 10 oil exporting Top 10 oil consuming
No countries countries countries
1 Russia Saudi Arab USA
2 Saudi Arab Russia China
3 USA Iran Japan
4 China Iraq India
5 Canada Nigeria Russia
6 Iraq UAE Saudi Arab
7 Iran Angola Brazil
8 UAE Venezuela Germany
9 Kuwait Norway South Korea
10 Mexico Canada Canada
11.2 Major Offshore contractors / service providers:
Main Offshore Contractors are AMEC, Baker Hughes, Cameron, CGG, CH2M HILL, Chicago Bridge & Iron
Company, China Oilfield Services, Enbridge, Ensco, GE Oil & Gas, Halliburton, Naftiran Intertrade, National
Oilwell Varco, Petrofac, Saipem, Schlumberger, Snam, Technip, TransCanada, Transocean, Weatherford
and Wood Group.
11.3 OPEC countries:
11.3.1 Organization of the Petroleum Exporting Countries is an intergovernmental organization

was founded in Baghdad, Iraq, with the signing of an agreement in September 1960 by five
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countries namely Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. They were
to become the Founder Members of the Organization. OPEC has headquartered since 1965 in
Vienna, Austria. These countries were later joined by Qatar (1961), Indonesia (1962), Libya
(1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon
(1975) and Angola (2007). Gabon suspended its membership from 1995. Hence now the
Organization has a total of 13 Member Countries. These 13 countries account for 40% of global
oil production and 73% of the world's "proven" oil reserves, making OPEC a major influence on
global oil prices.
11.3.2 OPEC's objective is to co-ordinate and unify petroleum policies among Member Countries,
in order to secure fair and stable prices for petroleum producers; an efficient, economic and
regular supply of petroleum to consuming nations; and a fair return on cap ital to those investing
in the industry.
11.3.3 The Statute stipulates that “any country with a substantial net export of crude petroleum,
which has fundamentally similar interests to those of Member Countries, may become a Full
Member of the Organization, if accepted by a majority of three-fourths of Full Members, including
the concurring votes of all Founder Members.”
11.3.4 Now one more organization is formed called as OPEC Fund for International development
(OFID).
12.0 ISGOTT: International Oil Tanker and Terminal Safety Guide:
ISGOTT is the definitive Guide to the safe carriage and handling of crude oil and petroleum
products on tankers and at terminals. It was first published in 1978 and combined the contents of
the 'Tanker Safety Guide (Petroleum)', published by the International Chamber of Shipping (ICS),
and the 'International Oil Tanker and Terminal Safety Guide', by the Oil Companies International
Marine Forum (OCIMF). In producing this Fifth Edition, the content has again been reviewed by
these ICS and OCIMF, together with the International Association of Ports and Harbors (IAPH),
to ensure that it continues to reflect current best practice and legislation. This edition also takes
into account of the recent changes in recommended operating procedures, particularly those
prompted by the introduction of the International Safety Management (ISM) Code, which became
mandatory for tankers on 1st July 1998. The Guide provides operational advice to directly assist
personnel involved in tanker and terminal operations, including guidance on, and examples of,
certain aspects of tanker and terminal operations and how they may be managed. It is NOT a
definitive description of how tanker and terminal operations are conducted. It is a general industry
recommendation that a copy of ISGOTT is kept and used onboard every tanker and in every
terminal so that there is a consistent approach to operational procedures and shared
responsibilities for operations at the ship/shore interface.
13.0 OCIMF:
The Oil Companies International Marine Forum (OCIMF) is a voluntary association of oil
companies having an interest in the shipment and terminalling of crude oil and oil products.
OCIMF's mission is to be the foremost authority on the safe and environmentally responsible
operation of oil tankers and terminals, promoting continuous improvement in standards of design
and operation. OCIMF was formed at a meeting in London on 8 April 1970 and was incorporated
in Bermuda in 1977 and has a branch office in London primarily to maintain contact with the IMO.
It was initially the oil industry's response to increasing public awareness of marine pollution,
particularly by oil, after the Torrey Canyon incident.
Governments had reacted to this incident by debating the development of international

conventions and national legislation and the oil industry sought to play its part by making its
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professional expertise available and its views known to governmental and inter-governmental
bodies. The role of OCIMF has broadened over the intervening period. Most recently the
organisation has contributed to the EU discussion on tanker safety and the draft EU Directive on
Environmental Liability, and has provided support to the European Union (EU) and
the International Maritime Organization (IMO) debate on the accelerated phasing out of single-
hull tankers and on the carriage of heavy grades of oil. The current membership [Feb 2016 ] of
OCIMF comprises 94 companies worldwide. The Executive Committee is the senior policymaking
Committee of OCIMF. A full-time Director is in charge of a small permanent Secretariat located
in London. This Secretariat comprises full-time employees and technical staff seconded from
member companies. The work of OCIMF is carried out through four main Committees (General
Purposes Committee (GPC), Ports and Terminals Committee, Offshore Marine Committee and
the Legal Committee. Sub-Committees, Forums, work groups and task forces composed of
members' representatives and assisted by the Secretariat.
13.1 Other agencies:
 International Association of Oil & Gas Producers

 International Energy Agency
 International Petroleum Exchange
 Society of Petroleum Engineers
 World Petroleum Council
14.0 Offshore Contracts:
There are various standard contracts for use in offshore like BIMCO Supplytime 2008, BIMCO
Tow hire, BIMCO Towcon, BIMCO Barecon. E&P operators own contracts with T&C suitable to
individual operator are most commonly used contracts in Off shore. There is Sub Contractor
concept in Offshore and very commonly such sub contractors are appointed.
15.0 Drawbacks:
15.1 Risks :
The nature of their operation — extraction of volatile substances sometimes under extreme
pressure in a hostile environment — means risk; accidents and tragedies occur regularly.
Platforms are believed to be an easy potential terrorist targets.
Accidents, pollutions, Fire Hazards and Insurance :
All off shore operations are required to be carried out with precision, perfection and utmost care.
Two main hazards which are faced are FIRE and POLLUTION. The preparedness is required to
combat and safe guard against each risks. Safe working practices are strictly adhered to. Pollution
control equipment are required to be kept in readiness. OSVs working in the fields are also
designed to control pollution as well as fight the fire. E&P operators covered under offshore
package insurance policy. All the assets are insured together under one policy from insurance
companies.
15.2 2005 Mumbai High accident : Samudra Suraksha and BHN:
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On 27 July 2005, MSV Samudra Suraksha while transferring a patient (a cook whose fingers
were cut) by crane lift to Mumbai High North ( MHN ) platform, in Mumbai High off shore oil field
about 100 miles off from Mumbai, got pushed into the MHN due to high swells, South West
Monsoon rough weather. The MSV’s helideck came in contact and damaged one or more gas
export risers on the MHN jacket. The resultant gas leak ignited within a short time. The close
proximity of other risers and lack of fire protection caused further riser failure. The subsequent
fire engulfed the platforms MHN and MHF, causing the complete destruction of the MHN. The fire
also engulfed the MSV Samudra Suraksha, with heat radiation causing severe damage to the NA
platform and the Noble Charlie Yester jack-up rig. Emergency shut-down valves (ESDVs) were
in place at each end of the risers, but some risers were up to 12 km long and riser failure caused
large amounts of gas to be uncontrollably released. The MSV suffered extensive fire damage and
was towed away from scene but later sank on 01 Aug 2005, about 18km off Mumbai coast. The
seven-storey high MHN collapsed after around two hours, leaving only the stump of its jacket
above sea level. A total of 384 personnel were on board the MHN complex and NCY jack-up at
the time of the accident. All installations were abandoned with 362 crew rescued and 22 reported
dead (11 fatalities with 11 missing). A clean-up operation was also undertaken after a 10 nautical
mile oil spill resulted from the fire. The platform, constructed in 1976, was ONGC's oldest oil and
gas process platform. Bombay High North platform was insured for $195 million and MSV was
insured for $ 60 million under ONGC's offshore package insurance policy. This is considered as
a largest ever loss and claim in India in a single accident. Production of 100,000 barrels per day
was lost due to this accident at MHN for some time.
On April 21, 2010, the Deepwater Horizon platform, 52 miles off-shore of Venice, Louisiana,
(property of Transocean and leased to BP) exploded, killing 11 people, and sank two days later.
The resulting undersea gusher, conservatively estimated to exceed 20 million US gallons
(76,000 m3) as of early June, 2010, became the worst oil spill in US history, eclipsing the Exxon
Valdez oil spill.
15.3 Ecological effects
National Oceanographic and Atmospheric Administration (NOAA) map of the 3,858 oil and gas
platforms extant in the Gulf of Mexico in 2006. In British waters, the cost of removing all platform
rig structures entirely was estimated in 2013 at £30 billion.
Aquatic organisms invariably attach themselves to the undersea portions of oil platforms, turning
them into artificial reefs. In the Gulf of Mexico and offshore California, the waters around oil
platforms are popular destinations for sports and commercial fishermen, because of the greater
numbers of fish near the platforms. The United States and Brunei have active Rigs-to-Reefs
programs, in which former oil platforms are left in the sea, either in place or towed to new
locations, as permanent artificial reefs. In the US Gulf of Mexico, as of September 2012, 420
former oil platforms, about 10 percent of decommissioned platforms, have been converted to
permanent reefs.
16.0 INDIAN OFFSHORE SCENARIO:
16.1 Chronology OF Exploration and Production Activities in India
India began its journey into Oil Exploration and Production just seven years after the famous
‘Drake Well’. Chronological events are as under:-
Year Activity
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W.L.Lake of Assam Railway and Trading Co. (AR & T Co) commenced Digboi Well No-
1. The name “Digboi” was arrived since Lake used to urge his men “Dig boy, dig” and
1889
hence the name was coined. This discovery in Upper Assam was a milestone in the
history of oil.
A new company Assam Oil Company (AOC) was set up by AR&T and a small refinery
1899 at Margharita (Upper Assam) with a capacity of 500 bbl/d (79 m3/d) was started to refine
the Digboi-oil.
1901 Digboi refinery was commissioned.
1911 Burmah Oil Company (BOC) enters into the Indian market.
1921 Burmah Oil Company (BOC) takes over Assam Oil Company (AOC).
1925 India’s first attempt to use geophysics with a Torsion balance survey in its search for oil.
Seismic surveys were initiated in and a major ‘High’ was located at Nahorkatiya in
1937- Assam The successful outcome of NHK-1 was a triumphant vindication of the
39 geophysical methods of exploration. Nahorkatiya triggered a new wave of enthusiasm in
the search for oil in the country and became the forerunner of discoveries not only in
Assam basin but also in other basins
1948 Geological Survey of India (GSI) started geophysical surveys in Cambay area.
1956 AOC discovers the Moran oil field. Oil & Natural Gas Commission (ONGC) was
established.
1959 Under an act of parliament, ONGC becomes autonomous body. Oil India Private Ltd
(OIL) incorporated and registered as a Rupee Company
1960 Oil struck at Ankleswar in Gujarat and Rudrasagar in Assam.
1961 GOI and BOC become equal partners in OIL.
1962 The first public sector refinery comes up at Guwahati.
World’s first crude oil conditioning plant commissioned at Nahorkatiya. India’s first
1963 deviated well NHK122 drilled by OIL and ONGC started offshore seismic surveys in Gulf
of Cambay.
Oil discovered in Geleki by ONGC. OIL commissioned the 1158 km oil pipeline to
1968
Guwahati and Barauni refineries
1970 India’s first offshore well spudded in the Gulf of Cambay.
1974 Drillship strikes oil in Bombay High. BH discovered.
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1981 First well spudded in Godavari offshore. OIL becomes a Government of India enterprise.
1983-
Gas struck at Razole, Andhra Pradesh and Gotaru, Rajasthan.
84
First Early Production system (EPS) commences in Gujarat. Gas struck at Gotaru in
1984-
Rajasthan by ONGC. Oil struck in Kutch offshore, Godavari offshore and Changmaigam
85
in Assam.
1986-
Oil struck in the Tapti offshore area and Namti structure (Assam) by ONGC.
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1988-
Commercial gas finds in Rajasthan by OIL, Nada field in Gujarat discovered.
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1989-
South Heera field discovered in Mumbai offshore.
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16.2 NELP –History:
New Exploration Licensing Policy (NELP) was formulated by the Government of India, during
1997-98 to provide level playing field for all the investors and providing several concessions and
incentives to both Public and Private sector companies in exploration and production of
hydrocarbons with Directorate General of Hydrocarbon (DGH) acting as a nodal agency for its
implementation. NELP was conceptualised by Mr. Amit B Singh (co-founder of Standard Oil) after
request by the Government of India. India has an estimated sedimentary area of 3.14 million km2.
consisting of 26 sedimentary basins, of which, 57% (1.79 million km2.) area is in deepwater and
remaining 43% (1.35 million km2.) area is in onland and shallow offshore. At present 1.06 million
km2 area is held under Petroleum Exploration Licenses in 18 basins by national oil companies
viz. Oil and Natural Gas Corporation Limited (ONGC), OIL India Limited (OIL) and Private/Joint
Venture companies. Before implementation of the New Exploration Licensing Policy (NELP) in
1999, a mere 11% of Indian sedimentary basins were under exploration, which has now increased
extensively over the years.
New Exploration Licensing Policy (NELP) launched and 48 Exploration blocks offered under
round-I.
Second round of New Exploration Licensing Policy launched and 25 Exploration blocks
2000
offered.
Third round of New Exploration Licensing Policy launched and 27 Exploration blocks
2002
offered.
Fourth round of New Exploration Licensing Policy launched and 24 Exploration blocks
2003
offered.
Fifth round of New Exploration Licensing Policy launched and 20 Exploration blocks
2005
offered.
Sixth round of New Exploration Licensing Policy launched and 55 Exploration blocks
2006
offered.
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Seventh round of New Exploration Licensing Policy launched and 57 Exploration blocks
2007
offered
Eighth round of New Exploration Licensing Policy offered and 31 blocks offered.
9th round a total of 33 exploration blocks were offered. ONGC and OIL got 10 each whereas
RIL got two deep-sea blocks in the Andaman Basin in the Bay of Bengal and four onshore
blocks in Rajasthan and Gujarat. 10th round was last in its series offering more than 42
blocks and sugar-coated with a uniform licensing model — which means under a single
2010 contract, drilling of all forms of hydrocarbons, from oil and gas to shale could be done —
and also usher in the revenue-share model. It is with a revenue-sharing model, wherein a
bidder will be asked to quote the amount of oil or gas output it is willing to offer to the
government from the first day of production; whereas in the existing PSC, the contractors
are allowed to recover the entire cost of exploration and production before sharing the profit
with the government. However, many explorers have opposed the revenue-sharing model,
citing higher risk, particularly for deep and ultra-deep water blocks. However, many
explorers have opposed the revenue-sharing model, citing higher risk, particularly for deep
and ultra-deep water blocks.
400 PSC’s have been signed, out of which 168 are in operation. The private / JV companies
contribute about 46% of gas and 16% oil to the national Oil & Gas production. The Mangala fields
in Rajasthan and Krishna-Godavari Basins have been the major source for oil and gas fields.
The government now started Open Acreage Licensing Policy (OALP). The OALP will enable
upstream companies to bid for any oil and gas block throughout the year without government
having to hold an auction. OALP is with uniform licensing policy, open acreage and revenue-
sharing model. The data for these blocks would be made available to the bidders through the
NDR. Pakistan has such a system in place. “Uniform licensing policy would reduce monitoring
and approval delays but it will increase risk for companies in absence of assured cost recovery,”
ICRA, an associate of Moody’s Investors Service, said in a recent report.
16.3 Main features of Indian Offshore:-
 More than 300 offshore vessels are working in Indian offshore oil fields.
 Indian Offshore oilfields are also addressed as Offshore Development Area (ODA)
 Less than 30% of Oil consumed by India is produced in India and remaining is
imported.
 India’s oil Consumption is about 200 million tons per annum and increasing every
day. India is 4th largest Oil Consuming Country in the world.
 Major E & P Operators are ONGC, Cairn Energy, Reliance, GSPC, HOEC, Hardy
Oil, BG, Adani, Jindal etc.
 Main Offshore Logistics support and service providers are SCI, Great Offshore,
Greatship, Garware Offshore (Global ), Varun Shipping, Samson , Tag Offshore,
HAL Offshore, Vision Technologies, Ocean Sparkle etc.
 Main Off shore contractors are FUGRO, Baker Hughes, Schumburger, HAL,
Dolphin, Jindal, Transocean, Shelf Drilling, Punj Lloyd, NPCC etc.
 Indian Offshore Main Field are Bombay High, Neelam, Tapti, Heera Panna, Ratna,
Krishna Godavari Basin, Bassein and Aliabet island etc.,
 ODAG (Offshore Defense Advisory Group), a wing of Indian Navy and Indian
Coast Guard, protects ODA.
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17.0 Wind Energy:
As an alternative source of energy which environmental friendly is a wind energy, which now
being tapped to generate electricity, to sail the ships with sails. Offshore wind farms are set up for
such purpose.
TAPPING OFFSHORE WIND

 Renewable source of energy
 Clean energy
 Climate change concerns kept out
 Almost no environmental objection
 Opportunities for large industry scale
development
USE OF WIND ENERGY IN OSVS
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18.0 Oil Price History and Analysis :
The recent downturn in crude oil prices will as usual have the greatest immediate impact on the
exploration segment of the industry. Coincident with that will be a decline in sales and manufacture of oil
and gas equipment. The next segment of the industry to feel the pressure of the price decline will be the
oil and gas services.
18.1 The Long Term View - From 1867 to 1998:
18.1 Oil Prices behave much as any other commodity with wide price swings in times of shortage or
oversupply. The domestic industry's price has been heavily regulated through production or price controls
throughout much of the twentieth century.
18.2 The long term view is much the same. Since 1869 US crude oil prices adjusted for inflation have
averaged $18.63 per barrel. Fifty percent of the time prices were below $14.91.
18.2 Post World War II Pre Embargo Period (1947 to 1973) :
18.2.1 Crude Oil prices ranged between $2.50 and $3.00 from 1948 through the end of the 1960s. The
price oil rose from $2.50 in 1948 to about $3.00 in 1957. In 1996 dollars crude oil prices fluctuated
between $14 - $16 during the same period. The apparent price increases were just keeping up with
inflation. From 1958 to 1970 prices were stable at about $3.00 per barrel, but in real terms the price of
crude oil declined from above $15 to below $12 per barrel. The decline in the price of crude when
adjusted for inflation was further exacerbated in 1971 and 1972 by the weakness of the US dollar.
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18.2.2 Throughout the post war period exporting countries found increasing demand for their crude oil
and a 40% decline in the purchasing power of a barrel of crude. In March 1971, the balance of power
shifted. More importantly, it meant that the power to control crude oil prices shifted from the United
States (Texas, Oklahoma and Louisiana) to OPEC.
18.3 Middle East Supply Interruptions Yom Kippur War - Arab Oil Embargo :
18.3.1 In 1972 the price of crude oil was about $3.00 and by the end of 1974 the price of oil had
quadrupled to $12.00. The Yom Kippur War started with an attack on Israel by Syria and Egypt on October
5, 1973. The United States and many countries in the western world showed strong support for Israel. As
a result of this support Arab exporting nations imposed an embargo on the nations supporting Israel. From
1974 to 1978 crude oil prices increased at a moderate pace from $12 per barrel to $14 per barrel.
18.4 Crises in Iran and Iraq :
18.4.1 Events in Iran and Iraq led to another round of crude oil price increases in 1979 and 1980. This
resulted in crude oil prices more than doubling from $14 in 1978 to $35 per barrel in 1981.
18.4.2 OPEC has seldom been effective as a cartel. The rapid price increases caused several reactions
among consumers: better insulation in new homes, increased insulation in many older homes, more
energy efficiency in industrial processes, and automobiles with higher mileage.
18.4.3 From 1982 to 1985 OPEC attempted to set production quotas low enough to stabilize prices. These
attempts met with repeated failure as various members of OPEC would produce beyond their quotas.
18.4.4 A December 1986 OPEC price accord set to target $18 per barrel was already breaking down by
January of 1987. Prices remained weak. The price of crude oil spiked in 1990 with the uncertainty
associated Iraqi invasion of Kuwait and the ensuing Gulf War, but following the war crude oil prices
entered a steady decline until in 1994 inflation adjusted prices attained their lowest level since 1973.
18.4.5 Prices have boomeranged from more than $120 to less than $30 in early 2016. The U.S. shale oil
boom, sanctions against Russia, and the rise of alternate sources of energy has undercut OPEC's influence
on oil prices. These developments are a setback for the oil cartel that has controlled oil prices for the last
four decades.
18.4.6 In general, oil prices were volatile and high during the early years because economies of scale
during extraction and refining (which mark the current extraction and drilling processes) were not present.
18.4.7 For example, in the early 1860s, the price per barrel of oil reached a peak of US $120 in today's
terms, partly due to rising demand resulting from the U.S. civil war. The supply and demand for oil rose
additionally with the discovery of oil in Persia (present-day Iran) in 1908 and Saudi Arabia during the 1930s
and World War I, respectively.
18.4.8 The oil market was earlier controlled by the Seven Sisters or seven Western oil companies that
operated a majority of the oil fields The 1973 oil shock swung the pendulum in OPEC's favor. Post 1973,
however, the balance of power, however, shifted towards the 12 countries that comprise OPEC.
18.4.8 The cartel derives its pricing power from two trends: absence of sources of energy and a lack of
viable economic alternatives in the energy industry. It holds three-quarters of the world's conventional
oil reserves and has the world's lowest barrel production costs. This enables it to have a wide-ranging
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influence over oil prices. Thus, when there is a glut of oil in the world, OPEC cuts back on its production
quotas. When there is less oil, it increases oil prices to maintain stable levels of production.
18.4.9 The discovery of shale in America has helped the country achieve near-record volumes of
production. According to the Energy Information Administration, U.S. oil production is estimated to peak
at 9.7 million barrels this year. The last time that production was this high was in 1972, when U.S. oil
production peaked at 9.6 million barrels per day.
18.4.10 Shale is also gaining popularity beyond American shores. For example, China and Argentina have
drilled more than 475 shale wells between them in the last two years. Other countries, such as Poland,
Algeria, Australia, and Colombia, are also exploring the prospect of shale formations.
18.4.11 The Iran-U.S. nuclear deal is expected to further introduce more oil into the market. Iran, which
is not a member of OPEC, could reach 2.4 million barrels of oil by 2016. Geopolitical tensions within the
Middle East, such as the rise of ISIS, whose leader has already called for the bombing of Saudi Arabia
(OPEC's largest oil producer), and Yemen's disintegration could also destabilize oil supplies.
18.4.12 Demand from developing economies, such as China and India, has also skyrocketed, putting
additional pressure on prices in the face of constant production.
18.4.13 Theoretically, oil prices should be a function of supply and demand. When supply and demand
increase, prices should drop and vice versa. But the reality is different. Oil's status as the preferred source
of energy has complicated its pricing. Demand and supply are only part of the complex equation that has
generous elements of geopolitics and environmental concerns.
18.4.14 Regions that hold pricing power over oil control vital levers of the world's economy. The United
States controlled oil prices for a majority of the previous century, only to cede it to the OPEC countries in
the 1970s. Recent events, however, may end up with the pricing power swinging back towards the United
States and Western oil companies.
18.4.15 It wasn't until 1857 that the first commercial oil well was drilled in Romania. The U.S. petroleum
industry was born two years later with an intentional drilling in Titusville, Pa.
18.5 The two primary factors that impact the price of oil are:
18.5.1 supply and demand
18.5.2 market sentiment
18.6 The following are two types of futures traders:
(a) Hedgers.
(b) Speculators.
18.7 Price Cycle:
18.8.1 Additionally, from a historical perspective, there appears to be a possible 29-year (plus or minus
one or two years) cycle that governs the behavior of commodity prices in general. Since the beginning of
oil's rise as a high-demand commodity in the early 1900s, major peaks in the commodities index have
occurred in 1920, 1951 and 1980. Oil peaked with the commodities index in both 1920 and 1980. (Note:
there was no real peak in oil in 1951 because it had been moving in a sideways trend since 1948 and
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continued to do so through 1968.) It is important to note that supply, demand and sentiment take
precedence over cycles because cycles are just guidelines, not rules.
18.8 Conclusion:
18.8.1 Unlike most products, oil prices are not determined entirely by supply, demand and market
sentiment toward the physical product. Rather, supply, demand and sentiment toward oil futures
contracts, which are traded heavily by speculators, play a dominant role in price determination. Cyclical
trends in the commodities market may also play a role. Regardless of how the price is ultimately
determined, based on its use in fuels and countless consumer goods, it appears that oil will continue to
be in high demand for the foreseeable future.
18.9 Factors Determining Oil Prices:
18.9.1 There are different types of Crude oil - Brent, Dubai crude, West Texas Intermediate, etc. Each of
these oils differ on their sulfur content and how hard is it to refine them. To simplify things, Brent is usually
used as the standard and other oil prices are decided relative to it. Majority of world's trading happen on
Brent Crude (mostly produced in the North Sea).
18.9.2 The different types of crude oils are traded in a special type of market called the - Futures
Exchange. In the US, this primarily happens in New York (NYMEX). Here, the producers and purchasers
would come with their orders for delivery at a future date. For instance, Exxon could be selling a big chunk
of their recent oil finding that could be bought by a major refiner (such as Indian Oil).
18.9.3 The end buyers and sellers both have a price in mind and depending on their urgency and needs
will be willing to take a particular price. Depending on the supply & demand situations of that time, the
price would vary. Think about sports tickets for a game. If a po+pular star is sick, the price will drop or if
the team had won a previous game, the price will rise at the spot market.
18.9.4 The traders in the futures market do a collective guessing on the total supply and demand for oil
in the future. Just like the blackmarket stadium ticket sellers, they have to be quick on the feet in their
estimations
18.10 Factors affecting the guess:
18.10.1 News on new supply. US started tapping huge reserves of oil recently and this is sending waves
through the market. The news like the one below could come and immediately the traders would start
running around to reduce their oil inventories. Price would then fall substantially, until some buyers on
the fence (eg. airlines) come out and find their bargains.
18.10.2 Changes in consumer habits. For instance, if the news comes that Americans are driving a lot this
year, then the ripple would be felt across the market. US consumes 20% of world's oil and almost half of
the oil consumption goes to gasoline. A small change in driving habits could cause either a scarcity or a
surplus.
18.10.2 Terrorist attacks and disturbance. If there is any war, terrorism or any act involving an oil
producers, buyers would panic. That would mean more demand and prices would rocket. Some of these
include Nigeria attacks, Iran war threats, Venezuela crazy guy threat (RIP), etc.
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18.10.3 Alternative energy sources. If solar, fuel cell or other disruptive energy source could come, then
oil traders would panic, dumping all their oil. That would trigger a downward spiral. For now, this is not a
major trend impacting the market but in the future it potentially could.
18.10.4 Economic growth. If India, China and elsewhere suddenly show a change in economic growth
(upward or downward), oil market would react as traders would have to revise their consumption
projections.
18.11 Impact of Prices on Industry Segments:
Drilling and Exploration
Boom and Bust:
The Rotary Rig Count is the average number of drilling rigs actively exploring for oil and gas. Drilling an oil
or gas well is a capital investment in the expectation of returns from the production of crude oil or natural
gas. Rig count is one of the primary measures of the health of the exploration segment of the oil and gas
industry. In a very real sense it is a measure of the oil and gas industry's confidence in its own future.
At the end of the Arab Oil Embargo in 1974 rig count was below 1500. It rose steadily with regulated crude
oil prices to over 2000 in 1979. From 1978 to the beginning of 1981 domestic crude oil prices exploded
from a combination of the rapid growth in world energy prices and deregulation of domestic prices.
Forecasts of crude oil prices in excess of $100 per barrel fueled a drilling frenzy. By 1982 the number of
rotary rigs running had more than doubled.
After the Collapse:
Several trends were established in the wake of the collapse in crude prices. The lag of over a year for
drilling to respond to crude prices is now reduced to a matter of months. Like any other industry that goes
through hard times the oil business emerged smarter and much leaner. Industry participants, bankers and
investors were far more aware of the risk of price movements. Companies long familiar with accessing
geologic risk added price risk to their decision criteria.
Technological improvements were incorporated:
 Increased use of 3-D seismic data reduced drilling risk.

 Directional and horizontal drilling led to improved production in many reservoirs.
 Financial instruments were used to limit exposure to price movements.
 Increased use of CO2 floods to improve production in existing wells.
Well Completions – Can be a measure of success.
Rig count is certainly a good measure of activity, but it is not a measure of success. After a well is drilled
it is either classified as an oil well, natural gas well or dry hole. The percentage of wells completed as oil
or gas wells is frequently used as a measure of success. In fact, this percentage is often referred to as the
success rate. Immediately after World War II 65 percent of the wells drilled were completed as oil or gas
wells. This percentage declined to about 57 percent by the end of the 1960s. It rose steadily during the
1970s to reach 70 percent at the end of the decade. This was followed by a plateau or modest decline
through most of the 1980s. Beginning in 1990 shortly after the harsh lessons of the price collapse
completion rates increased dramatically to 77 percent. The percentage completion rates are much lower
for the more risky exploratory wells.
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The determining factor is economics. If the well can produce enough oil or gas to cover the cost of
completion and the ongoing production costs it will be put into production. Otherwise, its a dry hole even
if crude oil or natural gas is found.
Oil exploration is an expensive, high-risk operation. Offshore and remote area exploration is generally
only undertaken by very large corporations or national governments. Typical shallow shelf oil wells (e.g.
North Sea) cost US$10 – 30 million, while deep water wells can cost up to US$100 million plus. Hundreds
of smaller companies search for onshore hydrocarbon deposits worldwide, with some wells costing as
little as US$100,000.
Licensing:
Petroleum resources are typically owned by the government of the host country. In most nations the
government issues licenses to explore, develop and produce its oil and gas resources, which are typically
administered by the oil ministry. There are several different types of license. Oil companies often operate
in joint ventures to spread the risk; one of the companies in the partnership is designated the operator
who actually supervises the work.
Tax and Royalty - Companies would pay a royalty on any oil produced, together with a profits tax. In some
cases there are also various bonuses and ground rents (license fees) payable to the government.
Production Sharing contract (PSA) - A PSA is more complex than a Tax/Royalty system - The companies
bid on the percentage of the production that the host government receives (this may be variable with the
oil price), There is often also participation by the Government owned National Oil Company (NOC).
Service contract - This is when an oil company acts as a contractor for the host government, being paid to
produce the hydrocarbons.
oooooo
1. What is difference between On shore and Off shore drilling?

2. Explain Deep water and Ultra deep water drilling.
3. Write short note on Seismic Survey and Seismic Survey vessel.
4. Write short note on Geotechnical survey and GTV.
5. Write short note on Dynamically Positioned vessel.
6. Write short note on a) IMCA b) OPEC c) NDA surveyors d) ISGOTT e) OCIMF f) NELP
g) Indian Offshore Industry. h) NDA surveyors.
7. Write short note on Indian Offshore History.
8. Explain crude oil Pricing Mechanism.
9. What is Up Stream Logistics? Explain role of OSV.
10. Write short note on impact of falling oil / gas prices on E&P activities.
Reference for further reading:
1. International Oil tankers and terminal Guide.

2. United Kingdom Offshore Operators Association Guidelines.
3. IMCA M 191, M 103, SEL 007 and other IMCA publications.
4. Various OCIMF guidelines.
5. "Guidelines for the Evaluation of Petroleum Reserves and Resources". SOCIETY OF PETROLEUM
ENGINEERS :
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LESSON 15
LOGISTICS MANAGEMENT
1.0 BASIC PRINCIPLES OF LOGISTICS:
1.1 Based on the definition most widely accepted today, Prezenszki in his article, suggested that:
‘The task of logistics is to plan, organise, control, and inspect the flow of materials and information within
and between/among systems, and to ensure the hardware required for the execution of these tasks is
available.’
1.2 The purpose of logistics is that the relevant needs e.g.:
 the right product (always the product / service required at the time must be made available);
 in the right amount (smaller amounts result in the halting of production, while larger amounts
result in building up stocks);
 in the right quality (the product/service quality must be made available that the client
requires);
 at the right time (the product/service must be made available at the time required by the
client);
 to the right place (the product/service must be made available at the place where the client
needs it);
 at the right cost (the product/service must be made available at the cost accepted by the
client);
which require to be accommodated, should be ready for delivery.
1.3 These are the so-called logistics principles or the 6R-principle (R: right), with further ‘R’-s added
later on. The addition of the right manner and with the right equipment brought about the 7R principle,
and later, depending on how important the information, the people or the energy were – apart from
material – further additions followed the original 6R-principle. Technical literature already uses the
extension of the ‘right’ principle under the name of the 10R-rule, with special regard to use in military
logistics.
1.4 Logistic principles also express the logistic mindset as logistics aims not at minimising cost, but at
optimising processes, taking account of several factors.
2.0 CONCEPT, PURPOSE AND FUNCTION OF LOGISTICS:
2.1 Logistics has, today, become an important success factor in modern market economies. Logistics
has a long past which is significantly long. It is said that the origins of logistics go back to the military
profession. During those times of the past i.e. the birth of Logistics – the word “logistics” basically stood
for providing accommodation, carrying out catering, and the movement of fighting formations. With the
passage of time, the French revolution, the Napoleonic wars, and the World Wars (WW1 and WW2)
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contributed considerably to the improvement of logistics eventually reaching a standard where it was
capable of solving complex problems of supply. The recognition came after WW2 to economic
professionals that logistics methods lend themselves ideally to solving supply/provision problems in
economic life and also in times of peace, and this is how logistics began to gain ground in our daily
economic experience. Logistics undergoes constant improvement even today, the process motivated by
an increasingly fierce competition among economic actors, with victory to be won by the one that satisfies
client needs the fastest among all, ensuring the quality required by the client, at minimum costs.
Companies therefore see it as their top duty to continuously increase the standards of their logistic
services.
3.0 HISTORY OF LOGISTICS:
3.1 The word ‘logistics’ is of Greek origin, said to derive from ‘lego’ meaning ‘to think’. ‘Lego’ later
gave rise to the verb ’logizomai’ (count, consider, plan), and then to the noun ’logismos’ (counting,
consideration, plan), and to the adjective ‘logistikos’ meaning someone who can count, and think logically.
The earliest references to logistics come from the First Century B.C. A pedagogue named Marcus Terentius
Varro lived in the Roman Empire at the time educating, and looking after children of kindergarten age. In
his work titled “Logisticon”, Marcus Terentius Varro summed up his statements, and analytical views
concerning the comprehensive care for and nursing of children.
3.2 The next reference to logistics comes from the Roman army where ‘logistas’ were in charge of
providing for the legionaries. They arranged for the storage of food, and the grazing of the animals that
followed the army.
3.3 Around 900 A.D. Leo VI Emperor of Byzantium (886-912) compiled a collection titled ‘Warfare’. In
his work the emperor already distinguishes strategy from tactics, and refers to a third related discipline:
logistics that he describes as the collection of tasks related to provision for the troops.
3.4 The next milestone in the historical development of logistics came around the 17th – 18th century
when French logistics officer M. J. Puységur (1656-1743) lived. He was the first European theoretical
expert who investigated scientifically the complex problems of ensuring supplies to the army. Puységur’s
greatest merit was that he emphasised the priority of a methodical approach against experience-based
management methods.
3.5 Experience of the French Revolution and the Napoleonic Wars significantly contributed to the
development of military science. One of the most brilliant theoretical experts of the time was A. H. Jomini
(1779-1869) a French general of Swiss descent, who raised logistics to an independent branch of military
science. Jomini essentially saw logistics as being responsible for providing the necessary
supplies/reserves, the task including the planning and execution of troop movements as well as the
erection of military facilities.
3.6 When Jomini died, his writings were translated into English, and thereafter the entirety of tasks
relating to planning, organisation, and management of providing supplies to the fleet came to be referred
to in American literature as logistics. In World War 2 and in the Korean war Jomini’s principles were
gradually applied in practice. In contemporary terminology military logistics consists of all activities
relating to the placement/accommodation, and movement of, and catering for fighting formations, and
the material-technical support of their operations.
3.7 Military logistics took some major steps forward in World War 2 (1939-1945). Following 1945
Americans recognised for the first time that logistic methods applied in the war – enabling the solution of
complex tasks of ensuring supplies – are suitable also to solve supply problems in economic life. With that
recognition logistics took the first step toward becoming daily economic experience. The first country to
apply logistics in the economy was the US to be followed by Western Europe, East Asia, and, after the
regime change, East and Central European countries also began to use logistic methods.
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4.0 CHANGING GOALS OF LOGISTICS PERFORMANCE:
4.1 While in the 1950s cost-saving was the primary objective of logistics performance, the emphasis
shifted to sales from the 1970s. Then, from the middle of the 1980s customer service came to be the new
target given that economic professionals recognised at this period that those economic actors will win the
competition that can best meet their clients’ needs, and that is impossible without raising the standards
of logistic services.
Today logistics focuses on individual client needs, and supply networks.
The change of logistic goals over time
5.0 CONCEPTS OF LOGISTICS:
5.1 Logistics is an integrated science with several possible interpretations. When looking at a special
area, its practitioners place the emphasis on different areas of logistics.
5.2 In German technical literature logistics is understood to refer much more to the working floor
level, taking the technical-economic approach. In his book ‘Materialfluss und Logistik’ (Material flow and
logistics, 1989) Jünemann proposes the following definition for logistics. ‘Logistics is the science of
planning, organising, managing, and controlling the flow of materials/substances, persons, energies, and
information within systems.’ In English language technical literature, however, the dominant areas of the
interpretation of logistics are market and business processes.
6.0 DEFINITION OF LOGISTICS:
6.1 One of the most widely quoted definitions of logistics comes from the US Council of Logistics
Management:
‘... the process of planning, implementing, and controlling the efficient, effective flow and
storage of goods, services, and related information from point of origin to point of consumption
for the purpose of conforming to customer requirements’
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6.2 Activities of logistics expanded over the years resulting in new types of definition of logistics
whereby the interpretation of logistics became increasingly comprehensive. That is proved by the
definition created by another US organisation, the Society of Logistics Engineering (SOLE):
‘The art and science of management, engineering, and technical activities concerned with
requirements, design, and supplying and maintaining resources to support objectives, plans,
and operations.’
6.3 Today a new definition of logistics is emerging for supply chain management, claiming that Supply
Chain Management (SCM) is the entirety of interrelated, harmonised management and organisation
activities of suppliers, manufacturers, distribution providers, and consumers through the flow of
materials/substances and information. If the definition of supply chain management is matched with that
of logistics, a difference will be noticed whereby logistics focuses on relations and operations inside the
organisation, while supply chain management on those outside the organisation. As a result, the US
Council of Logistics Management re-phrased its definition for logistics: It is ‘...the process of planning,
implementing, and controlling the efficient, effective flow and storage of goods, services, and related
information from point of origin to point of consumption for the purpose of conforming to customer
requirements."
7.0 EVOLUTION OF INTEGRATED LOGISTICS:
7.1 Logistics is an integrated science using the results and methods of various scientific areas to
achieve its objectives. To solve problems of logistics, knowledge of technique and technology of material
flow, and technique and technology of transportation is instrumental. IT has a major role to play in
collecting, transmitting, storing, and processing logistics information. In operating the logistics system, a
major role is played by knowledge of electronics, automation, and communication technology.
7.2 The ideal operation of the logistics system assumes the maximum satisfaction of client needs,
which is why marketing is so important for logistics. Logistics continuously monitors and evaluates the
working of the system, logistics costs, and the performance of the logistics system, for which corporate
economics, and management knowledge is indispensable. When analysing, planning, controlling, and
inspecting the logistics system, maximum reliance is required on system technology, systems theory, and
mathematical methods.
7.3 Last but not least, production technique, technology, and service technique and technology
knowledge is likewise essentially needed because the structure, the layout, and operation of the logistics
system is fundamentally affected by the manufacturing or service provision process whose material flow
it contains.
8.0 UNDERSTANDING TRANSPORTATION OF GOODS
8.1 From the extraction of raw material to the point of reaching the consumer the process of value-
adding is composed of machining (shaping), movement, and storage sub-processes. The machining phase
sees the raw material turn into finished product, and movement enables the mobility of the base material,
semi finished, or finished product. That process of movement includes the delivery of the base material
from the supplier to the production company, and in-house material handling, and delivery from the
production company’s finished product warehouse to the customer. The relation between the individual
sub-processes of movement is created between operations of loading and storage. External transport
(goods transportation) usually involves forwarding large weights over great distances, which can only
occur with the help of various modalities of transport.
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9.0 The Role of Goods Transportation Systems:
9.1 The role of goods transportation systems is to move base, auxiliary materials, fuels, semi-finished
and finished products and waste from the location of generation, production, use, and recycling, i.e. to
realise so-called external transportation. Goods transport systems constitute companies’ external
material flow systems without which optimum material flow is not possible in a logistic chain.
9.2 Factors determining the main features of transportation tasks include:
 parameters of the goods to be transported,

 amount of goods to be transported in one load,
 relative geographical position of place of posting and destination (distance),
 frequency of deliveries,
 limitations and restrictions concerning the duration, and time of deliveries.
10.0 Grouping of goods transportation systems. Supply chains:
10.1 Goods transportation tasks may be grouped according to the relative geographical position of the
place of sending, and the destination making a distinction between domestic and international goods
transportation. A domestic task may be long-distance, in-zone (regional) or local, while international
transport may be either intercontinental or transcontinental.
10.2 Goods transportation tasks may be grouped according to the agent performing the transport task.
Production companies may have their transport jobs performed by:
 their own vehicles, if
o the task closely relates to the technological processes,

o the special features of the goods transported requires special vehicles,
o transport tasks of identical nature are repeated at high frequency,
o their own fleet can be operated economically;
 transporters who will carry for a haulage fee, and under a contractual relationship goods of
other parties from the place of posting to the destination;
 forwarding agents who purchase the haulage and other services required to get the product
to its destination on their own behalf and on their client’s account. Hiring forwarding agents
is particularly justified if the transport task
o covers a large distance, and involves the use of several modalities,

o crosses several countries,
o involves goods requiring special treatment.
10.3 Forwarding the goods from the place of posting to the destination may take place by
 direct transport, if the goods reaches the user with one transport vehicle without being re-
loaded
 indirect transport, if several transport vehicles and/or transport modalities are required to
get the goods from the sender to the user, in which case a so-called transport chain is built.
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10.4 With indirect transport the following distinction can be made:
 traditional transport when goods themselves are re-loaded from one vehicle to the other,
 combined transport, when the container with the goods inside or the vehicle itself is placed
on a transport vehicle.
11.0 Traditional goods transportation systems (railway, road, water and air):
11.1 The share of road transport has been on the increase since World War 2. The growth of road
transport brought with it the growth of the share of passenger vehicles in all of Europe, which lead to an
overload of the road infrastructure. To curb that overload a general objective arose of limiting road
transportation, a solution for which is the encouragement of combined transport.
11.2 Railway is an advantageous means of forwarding large quantities over a long distance on land.
11.3 The following are the advantages of rail transport:
 large amount of goods may be transported at a time on land,

 it is independent from environmental effects,
 requires relatively low amounts of energy,
 environmentally friendly,
 price is easy to calculate.
11.4 The following are the drawbacks of railway transport:
 the route is set (both sender and addressee must have a railway siding),
 network density is low,
 long time is spent for goods in transport,
 relatively high dynamic impact on the goods in transport,
 not very adaptable to changes of customer needs.
11.5 The unit of railway transport is the railway carriage (also referred to as wagon in India) and there
are different types of railway carriages usually mentioned by their code names eg BLC, BCN, BOXN etc. A
BCN wagon can take a payload of 54 tonnes and has a volumetric space of 103 cbm. A full rake of 45 such
wagons can carry about 2700 tonnes of bagged cargo like fertilizer, soya bean meal, sugar, rice, corn etc.
Transport on road is optimal for smaller amounts of goods for shorter distances.
11.6 The following are the advantages of transport on road:
 With road transportation door-to-door transport is possible,

 There is a dense network of roads available,
 It takes relatively short to reach the destination,
 Flexible adaptation to the customer’s needs,
 It supports almost all types of goods,
 Dynamic impact in transport is relatively low,
 Flexible contracting and rates.
11.7 Disadvantages of road transport:
 Significant dependency on environmental impacts,

 Energy need, and environmental pollution is relatively high compared to transport by railway,
 Only limited potential for transporting large amounts of goods,
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 Human labour intensive compared to other modalities, and has the highest potential for
accidents,
 Transport restrictions week-end transport bans hinder getting the goods to their destination.
Vehicles of goods transportation on roads:
 Trucks:
 General purpose truck: mostly open platform (with flip-down side and back wall) or closed
cargo box (for use with goods particularly sensitive to weather)
 Special purpose trucks:
 Self-unloading: designed to facilitate off-loading bulk products;
 Self-loaders: enable the loading and off-loading, and transport of large size, and large weight
goods;
 Tanker: equipped with a tank that can carry liquid or liquefiable goods, and a filling and
emptying device,
 Cooling trucks: they carry perishable goods, equipped with a device for ventilation or
refrigeration, and may be heat insulated,
 Other special types: For cars, bottled products, cylinders, etc
 Trailers: they usually come with two or 3 or 4 axles, and connect to the truck with a tow-bar:
 general purpose trailer: normal trailer, semi-trailer,
 Low-bed trailers
 semi-trucks: tows semi-trailers.
11.8 There are two types of road transportation: transportation, and piece goods transportation. For
transportation the customer orders a full vehicle, while for piece transportation the customer sends his
piece product of a size within set limits of weight and size on a piece vehicle. Further scenarios of road
transportation are rent with driver, and leasing. When a vehicle is rented with driver, the operator makes
available the number and type of vehicles with load-bearing capacity as required by the customer, and in
the event of vehicle leasing the selected vehicle is handed over for use to the lessee (without driver), and
the lessee bears all costs related to operation.
11.9 Water transport is normally used to forward bulk cargo over long distances, if duration of
transport is not a problem.
11.10 The advantage of water transport:
 specific energy need lower than that of other modalities,

 environment impact minimal,
 relatively cheap, price flexible,
 suitable for any type of product.
11.11 The disadvantages of water transport:
 it takes long to get the goods to their destination;

 several re-loading operations are required between sender and addressee, which may require
interim storage;
 dependence on the water level may cause difficulty in keeping the delivery deadline;
 this is the modality in which the mechanical impact on the goods is strongest among all.
11.12 Water transportation is carried out by:
 On Sea – By Sea-going ships i.e. tankers, bulk carriers, container ships, general cargo ships;
 On Sea – Specialized ships for different cargoes (LPG, LNG, Cement, Chemicals, Reefer etc);
 On River – barges, pusher-tug barges;
 Ro-RO ships;
 Ferries;
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 Ro-Ro ships;
 Barge-carrying vessels (BACAT, Seabee, LASH etc);
 River-and-sea vessels: their lower draught and low design makes them capable of
transporting load on both river and sea.
11.13 Water transport can be either inland or sea. Goods transport by sea plays an important role in
intercontinental trade. Goods sent by water transport may be forwarded as piece goods, barge load or
part load. Sea transport may be line, free, and chartered. Line shipping means that a vessel sails a fixed
route based on a timetable. In free water transport vessels have no set route, but sail to best paid
destinations. Chartering refers to a deal where a vessel is chartered for either a set period or a given route.
12.0 AIR TRANSPORT:
12.1 Air transport is used for urgent long-distance transport of small weights whose value per weight
unit is high.
12.2 The advantages of air transport are as follows:
 takes little time;

 physical impact is relatively low;
 delivery deadline may be at risk only at extreme weather conditions.
12.3 Disadvantages of air transport:
 not suitable for carrying any type of goods (e.g. flammable substances),
 goods require multiple re-loading, and/or temporary storage while on-route,
 specific energy needs are relatively high,
 freight is high,
 noise pollution is an unfavourable environmental impact.
12.4 Vehicles of air transport:
 air planes suitable both for passenger and cargo transport: passengers travel on board, while
the hold below the deck carries goods,
 traditional passenger planes converted to carry cargo: they carry special goods, goods on
special pallets as well as containers,
 cargo planes: they take standard size air containers on board,
 cargo helicopters: they carry cargo on locations with difficult access e.g. mountain peaks.
12.5 Air transport may use scheduled flights line flights or special cargo lines. In the event of scheduled
flights the cargo capacity of each plane is checked separately as it depends on the plane’s technical
parameters, and other cargo on board. With special cargo flights the freight forwarder charters an
airplane to solve his transport task. Equipment to form loading units in air transport differs from
traditional containers as their parameters must accommodate the sizes of the airplane’s cargo bay.
13.0 PIPELINE TRANSPORTATION:
13.1 A special feature about transport through pipelines is that the transport channel and the actual
equipment are the same. On short distances flow starts at the effect of gravitation. Over long distances
there are fixed pumps, and air compressor to ensure movement inside the pipe. Performance depends
on cross section and flow speed.
13.2 Advantages of using pipelines:
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 reliable;
 unaffected by weather and environmental factors;
 low specific operating costs;
 threat of environmental pollution is minimal.
13.3 Disadvantages of using pipelines:

 it forwards only a limited set of goods
 suitable only for identical type of goods,
 speed is low,
 cannot adapt to changing needs,
 requires major investment.
14.0 WAREHOUSING:
14.1 Storage is a logistic operation of great significance whose role is to buffer the difference of rhythm
between the various phases as goods flow through the supply chain. The buffer function appears between
the suppliers, and the production company, and the production company and the customer as well as
between sections of the plant within the company. It ensures continuous and smooth production so that
demand can be met from stocks held in line with the logistic procedures. The other very important
function of warehousing is the preservation of the quantity and quality of the goods.
15.0 The Concept of warehousing – its role in the logistics process:
15.1 Warehousing with all its facilities and equipment is responsible for preserving the overall state of
stocks, and for harmonising the flow of materials, and equalising disequilibrium if necessary. The concept
of warehousing dictates that warehouses should be able to preserve the quality and quantity without loss,
and their capacity, and material handling systems should enable entry and removal as necessary. Looking
at its role in the logistic process, one sees that storage enters the scene several times through its function
of collection and distribution, and enables the optimisation of the supply chain.
15.2 The model of the warehousing process appropriately illustrates some elements of the
warehousing process along with the link between the individual elements. The elements are as follows:
 The environment: affects the nature of incoming and outgoing relationships;

 The warehousing system: the full set of appliances and facilities contributing to the solution
of warehousing tasks;
 The input of the warehousing system: material coming from the environment;
 Output of the warehousing system: materials discharged into the environment.
Fig: The Warehousing system and its relationships.
15.3 The warehousing process requires a pool of equipment including devices moving goods in and
out, loading equipment, control instruments, internal moving devices, and storage appliances. The other
important element of the warehousing process is a set of facilities that includes traffic relations, loading
locations, takeover and releasing points, material handling routes, and storage spaces.
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15.4 The essential features of the warehousing system include the capacity of the warehouse, and the
capacity of the handling equipment. Warehouse capacity refers to the maximum amount of goods that
may be placed in the warehouse at any one time, while the capacity of the handling equipment refers to
the amount of goods it can move in a unit length of time.
16.0 Types of Warehouses:
16.1 Warehouses may be grouped on the basis of branches of the national economy: industrial,
agricultural, commercial, and transport warehouses. Based on its role in the production process the
warehouse may be for base material, auxiliary material, semi-finished product, and finished product
warehouse. According to their role in the distribution process, they can be warehouses supporting
commerce of consumption goods, production tools, mass buyers, waste collection-commerce,
forwarding, and central distribution.
16.2 Warehouses may be further classified as follows:
 form of the material stored:

o bulk,
o per-piece,
 feature of the storage location:

o open air,
o in-doors,
 storage hardware required:

o stacked,
o racks,
o requiring material handling equipment,
 method of storage:
o constant: the storage unit in the warehouse moves little or not at all,
o dynamic: the storage unit in the warehouse moves.
16.3 The goods stored in the warehouse fundamentally affect the storage method to be applied.
Fig: Relation between goods to be stored and place of storage.
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16.4 The most important sub-systems of the warehouse as a system are the material handling
equipment and appliances, the storage hardware, and IT equipment and tools.
17. Material Handling and Order-picking processes of warehouses:
17.1 What is material handling?
Definition – It is the efficient short distance movement in and between buildings and a
transportation agency. It has four dimensions – Movement, Time, Quantity and Space.
Objectives of material handling are – Increase effective capacity, minimize aisle space, reduce
product handling, develop effective working conditions, reduce heavy labour, reduce cost.
17.2 Material handling - is the movement, protection, storage and control of materials and products
throughout manufacturing, warehousing, distribution, consumption and disposal. As a process, material
handling incorporates a wide range of manual, semi-automated and automated equipment and systems
that support logistics and make the supply chain work. Their application helps with:
 Forecasting;
 Resource allocation;
 Production planning;
 Flow and process management;
 Inventory management and control;
 Customer delivery;
 After-sales support and service.
17.3 A company’s material handling system and processes are put in place to improve customer
service, reduce inventory, shorten delivery time, and lower overall handling costs in manufacturing,
distribution and transportation.
17.4 In warehouses suitable for handling piece-goods physical material handling consist of the
following elements:
 supply: unloading transport vehicle, entering goods in location of acceptance, acceptance of

goods, making storage unit if necessary, entering in warehouse,
 storage: goods undisturbed unless dynamic storage system is used,
 delivery: removal, order-picking, control of delivery units, loading delivery units on transport
vehicle.
17.5 Order picking is a highly important logistic process in warehousing. Order picking refers to the
sorting, and selection of goods to match individual orders. Order picking consists of the following steps:
 preparation of goods:
 constant: goods are collected direct from the storage place, i.e. the employee goes and picks
them up,
 dynamic: the storage unit that contains the required goods is carried to the order picking
location, where, after removing the necessary amount of goods, the remaining amount is
carried back to the storage place,
 removal: the removal of the required amount of goods from the storage unit, it may be
supported by machinery theoretically, still it is mostly done manually,
 movement during order picking:
 in the event of constant preparation the goods picked have to be carried to the location of
handover while the order picking process is in progress,
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 dynamic preparation: the storage unit involved in the order-picking process is carried in the
picking space, the necessary amount of goods taken out, and the storage unit carried back to
the storage location.
 Collection for delivery: may be centralised to one collection point or may be decentralised.
18.0 INVENTORY MANAGEMENT:
18.1 A component of supply chain management, inventory management supervises the flow of goods
from manufacturers to warehouses and from these facilities to point of sale. A key function of inventory
management is to keep a detailed record of each new or returned product as it enters or leaves a
warehouse or point of sale.
18.2 Inventory can best be described as any materials or goods that pass through or are held in your
business and are necessary in order to carry out your trade.
18.3 Inventory management is the activity involved in making sure your inventory works for your
business as cost-effectively as possible.
18.4 There are several parts to inventory management.
18.4.1 The first part is planning. You plan what inventory you are going to hold, where it will be held, and
how long you’ll hold it and you also plan for any special care you need to take for that inventory – for
example, if the inventory needs to be kept dry, warm, cold or whatever.
18.4.2 You may also need to plan on how to preserve your inventory.
18.4.3 For instance, you might need to turn or check certain items of inventory on a regular basis. The
next parts of inventory management are assessing and regulating your inventory.
Assessing it usually means counting it or checking it in some way. Regulating it means making sure that
you’re not holding too much or too little, and that you prevent the inventory you hold from being lost,
stolen or damaged.
19.0 How Can you Lose Inventory?
19.1 It’s all too easy when an item is in a warehouse, but you don’t know exactly where. The bigger the
warehouse, the more important it is to know exactly where the item is. Inventory management consists
of a set of processes for the treatment of those items so that you know exactly what you’ve got and where.
20.0 What Different Types of Inventory Exist?
20.1 We’ve already discussed the segregation of inventory into direct and indirect. However, inventory
management is easier if we also consider the discrete stages inventory goes through in the supply chain,
so we typically refer to business inventory in terms of “types”.
20.2 The main inventory types are:
 Raw materials: The ingredients or components from which your business manufactures or
produces the products it sells.
 Work in progress: Any inventory in the process of being transformed from one or more raw
materials into a finished product.
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 Finished goods: This is what we call the inventory that’s ready to be passed on to customers.
You may also hear two other types of inventory being talked about from time to time”.
 Service inventory: comprises spare parts and tools used after the sale or in service businesses.
 In-transit inventory: which is inventory being moved from one point to another by road, rail,
sea, or air (as opposed to riding a conveyor between adjoining warehouses for example—this
would not be classed as in-transit inventory).
21.0 Prioritisation and Preparedness in Inventory Management
21.1 The categories of inventory that you hold are determined by what you need to run your business.
That often means that you’ll assign different priorities to the different types.
21.2 E.g. If you run a bar or a pub that sells beer and sandwiches, your top inventory priority is likely
to be beer. Running out of sandwiches would be bad enough, but running out of beer would be
catastrophic.
21.3 You can classify your inventory to have categories which are “beer priority” (top priority) and
other categories. The first inventory management principle to be observed is then to not run out of the
essential items that sell well and keep your business going.
21.4 The next principle is to be prepared occasionally, to run out of items that don’t sell as well and
are non-critical to your business, if that helps you to do better inventory management overall. In other
words, you’re now differentiating among items in your inventory, treating the good (fast) sellers in one
way, and the slow movers in another way.
22.0 DIFFERENCE BETWEEN LOGISTICS, INVENTORY MANAGEMENT & SUPPLY CHAIN

MANAGEMENT:
22.1 Logistic Management: Logistics management plans, implements, and controls the efficient,
effective forward and reverse flow and storage of goods, services and related information between the
point of origin and the point of consumption in order to meet customer & legal requirements.
22.2 Inventory Management: The word “inventory” was first recorded in 1601. The French term
inventaire, or “detailed list of goods,” dates back to 1415. Inventory management is primarily about
specifying the quantity and placement of stocked goods.
22.3 In other words, logistics management answers the following questions:
 How can we deliver items to a customer as quickly as possible?

 How many items should we buy from vendor so that they are not spoilt in the
warehouse?
 Where should warehouse workers pick the goods? What is the optimal path to the item
in a warehouse?
 Where should warehouse workers pack the goods?
 What vehicle should load the goods?
22.4 As you can see, logistics management controls processes inside a company (warehouse logistics)
and outside a company (transport logistics).
22.5 Inventory management answers such questions as where an item is stored (aisle, row, shelf, etc.),
how many item units are stored in a warehouse and many other item related questions.
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22.6 For example, transfer an item from one company warehouse to another one, is this Logistics or
Inventory management? Answer is Logistics management.
22.7 One more term that also confuses a lot of people is Supply Chain Management (SCM). The thing
that may confuse is the difference between the supply chain management and logistics management.
23. Supply Chain Management:
23.1 Supply Chain Management is a system of organizations, people, technology, activities,

information, and resources involved in moving a product or service from supplier to a customer. Supply
chain activities transform natural resources, raw materials, and components into a finished product that
is delivered to the end customer. In sophisticated supply chain systems, used products may re-enter the
supply chain at any point where residual value is recyclable.
23.2 So, to extend Logistic management description, we can say that logistics management is the area
of a supply chain which plans, implements, and controls the efficient, effective forward and reverse flow
and storage of goods, services, and related information between the point of origin and the point of
consumption in order to meet customer & legal requirements.
23.3 Logistics is a channel of a supply chain which adds the value of time and place utility.
Actually Logistics is the physical execution part of Supply Chain Management. SCM deals with more
strategic aspects at macro level whereas logistics is nuts and bolts of its implementation.
24.0 Supply chain consists of the following areas:
 Transport;
 Finance;
 Health, safety & Environment;
 Information Technology;
 Education & Training;
 Human Relations;
 Warehousing.
24.1 Logistics is a logical extension of transportation & warehousing to achieve an efficient & effective
goods distribution system.
25.0 WHAT ARE “PLs”?
25.1 As we see, we’re laying down the law on the often confused – and sometimes debated – “PL”
terminology. What is a 1PL, 2PL, 3PL, 4PL, 5PL? How does 3PL differ from a 4PL? And which one is right
for a particular company?
25.2 It can be tough to decide whether you need a 3PL versus a 4PL logistics provider to optimize your
supply chain. Making the wrong choice can cost millions of dollars and negatively impact your customer
service levels — so you'll want to get it right.
25.3 In this article, let us look at some good definitions, compare the differences between 3PL and 4PL,
and explain how these solutions can support your unique supply chain strategy.
25.4 1PL - First-Party Logistics: An enterprise that sends goods or products from one location to
another is a 1PL. For example, a local farm that transports eggs directly to a grocery store for sale is a 1PL.
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25.5 2PL - Second-Party Logistics: An enterprise that owns assets such as vehicles or planes to
transport products from one location to another is a 2PL. That same local farm might hire a 2PL to
transport their eggs from the farm to the grocery store.
25.6 3PL - Third-Party Logistics: In a 3PL model, an enterprise maintains management oversight, but
outsources operations of transportation and logistics to a provider who may subcontract out some or all
of the execution. Additional services may be performed such as crating, boxing and packaging to add value
to the supply chain. In our farm-to-grocery store example, a 3PL may be responsible for packing the eggs
in cartons in addition to moving the eggs from the farm to the grocery store.
25.7 4PL - Fourth-Party Logistics: In a 4PL model, an enterprise outsources management of logistics
activities as well as the execution across the supply chain. The 4PL provider typically offers more strategic
insight and management over the enterprise's supply chain. A manufacturer will use a 4PL to essentially
outsource its entire logistics operations. In this case, the 4PL may manage the communication with the
farmer to produce more eggs as the grocery store's inventory decreases.
25.8 5PL - Fifth-Party Logistics: A 5PL provider supplies innovative logistics solutions and develops an
optimum supply chain network. 5PL providers seek to gain efficiencies and increased value from the
beginning of the supply chain to the end through the use of technology like blockchain, robotics,
automation, Bluetooth beacons and Radio Frequency Identification (RFID) devices.
25.9 As we progress through the spectrum of logistics models from 1PL to 5PL, it's clear that more and
more of the logistics function is in the hands of the provider rather than the enterprise itself. The most
common models now are 3PL and 4PL and we'll look at how each one can help solve supply chain
challenges.
26.0 What is Third Party Logistics Provider?
26.1 The term "third-party logistics provider," or 3PL, has been around since the 1970s. It simply means
that a third party is involved in a company's logistics operations, in addition to the shipper/receiver and
the carrier.
26.2 A 3PL does not take ownership of (or title to) the products being shipped. This third party comes
into play as an intermediary or manager between the other two parties.
26.3 The first 3PLs were intermodal marketing companies that accepted loads from shippers and
tendered them to railroads, becoming a third party in the contract between shippers and carriers,
according to the Council of Supply Chain Management Professionals (CSCMP) glossary. Today, any
company that offers some form of logistics services for hire is known as a 3PL. This includes facilitating
the movement of parts and materials from suppliers to manufacturers, as well as finished products from
manufacturers to distributors and retailers.
26.4 A 3PL may or may not have its own assets, such as trucks and warehouses. In some cases, the role
of 3PL and broker overlap, but typically a broker is used to engage trucking capacity for a specific
shipment. A 3PL may act as a broker or use brokers to move clients' freight.
26.5 Most 3PLs offer a bundle of integrated supply chain services, including:
 Transportation;
 Warehousing;
 Cross-docking;
 Inventory management;
 Packaging;
 Freight forwarding.
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26.6 A 3PL can scale and customize services to meet customers' needs based on their strategic
requirements to move, store, and fulfil products and materials. Companies turn to 3PLs when their supply
chain becomes too complex to manage internally. For example, a company may grow through mergers
and acquisitions, so a supply chain that was manageable at one time outgrows the in-house capability.
The 3PL offers experience gained from working for multiple clients across many different industries. They
also offer technology solutions — in some cases, proprietary tools — such as transportation and
warehouse management systems beyond what the shipper could afford to invest in independently. Long-
term relationships with carriers can result in better pricing and service during periods when capacity may
come at a premium. The economy of scale can lower prices on everything from packing tape to ocean
shipping rates.
26.7 Advantages of 3PL:
26.7.1 A 3PL will offer innovative strategies to transform your supply chain into a cost-effective,
responsive model. Consider what we're doing at Warehouse Anywhere as an example. In contrast to the
traditional single distribution centre (DC) model, we have pioneered and perfected forward-deployed
inventory management. The common hub-and-spoke DC model is not able to keep up with the pace of
business, with large inventories and infrequent truck service. We've developed the forward-deployed
model for warehousing and distribution that uses a larger number of smaller locations to move products
closer to the customer. This decentralized, hyper-connected model provides the responsiveness needed
to meet customers' expectations for timely delivery.
26.7.2 No matter if you're direct-to-consumer or in a service-level agreement situation, customers

expect overnight delivery, or as close to it as possible. The Warehouse Anywhere system can optimize
your inventory per location to ensure stock is on hand in areas of highest demand. You will save on
transportation and logistics expenses while improving customer service.
26.8 Disadvantages of 3PL:
26.8.1 While the 3PL model has been successful for decades, there are some things to consider. Perhaps
the most significant caveat is the lack of direct oversight and control. After all, a 3PL is an outsourced
service provider. That means some activities will take place outside of your direct supervision. Ensuring
quality control and customer service requires an extra level of diligence. If a 3PL fails to deliver on a
customer's expectation, the customer will blame your company, not the 3PL.
26.8.2 Another issue is the degree of dependency a 3PL can create. When you outsource a significant
segment of your business, it can be difficult to switch providers or take the operations in-house if pricing
or service levels no longer meet expectations.
27.0 What is 4PL?
27.1 A fourth-party logistics provider, or 4PL, represents a higher level of supply chain management
for the customer. The 4PL gives its clients a “control tower” view of their supply chains, overseeing the
mix of warehouses, shipping companies, freight forwarders and agents.
27.2 The goal is to have the 4PL act as the single interface between all aspects of the supply chain and
the client organization. Consulting firm Accenture originally copyrighted the term in the mid-1990s, but it
has since fallen into generic use.
28.3 In some cases, a 4PL may be established as a joint venture or long-term contract between a
primary client and multiple partners, often to manage logistics for specific locations or lines of business.
The structure of a 4PL can vary, as there may be a 4PL component within a larger 3PL relationship. A 4PL
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is a form of business process outsourcing, similar to contracting out human resources or financial
functions.
29.0 What is the difference between 3PL and 4PL?
29.1 A 3PL often owns warehousing or transportation assets. A 4PL is most often non-asset based.
A 3PL is focussed on day-to-day operations. A 4PL is focussed on optimizing the supply chain.
29.2 A 3PL is one of two points of contact in supply chain. A 4PL is a single point of contact in Supply
Chain.
29.3 So, typically, the 4PL does not own transportation or warehouse assets. Instead, it coordinates
those aspects of the supply chain with vendors. The 4PL may coordinate activities of other 3PLs that
handle various aspects of the supply chain. The 4PL functions at the integration and optimization level,
while a 3PL may be more focused on day-to-day operations. A 4PL also may be known as a Lead Logistics
Partner (LLP), according to the CSCMP.
29.4 The primary advantage of a 4PL relationship is that it is a strategic relationship focused on
providing the highest level of services for the best value, as opposed to a 3PL that may be more transaction
focused. A 4PL provides a single point of contact for your supply chain. With a 3PL, there may be some
aspects that you still have to manage. The 4PL should take over those processes for you, acting as the
intermediary for 3PLs, carriers, warehouse vendors and other participants in your supply chain.
29.5 The 4PL relationship simplifies and streamlines the logistics function using technology for greater
visibility and imposing operational discipline across many partners and suppliers. The enterprise can focus
on its core competencies and rely on the 4PL partner to manage the supply chain function for maximum
value. Basically, the 4PL acts as the enterprise would if the supply chain functions were managed in-house.
29.6 As companies transition their supply chain model to forward deployment or decentralized
distribution, a 4PL partner can step in and manage that complexity. Retailers, in particular, are shifting
toward a more nimble model to support e-commerce and omnichannel services. A 4PL can manage the
multiplying number of resources that it takes to compete at that level. The days of the million-square-foot
super regional DC may be over, as companies opt for shared warehouse space near major customer
centres to speed up responsiveness. The 4PL can manage those relationships, as well as optimize the
network to use parcel carriers or couriers to support e-commerce, rather than LTL or truckload services.
Fourth-Party Logistics Advantages
29.7 Choosing a 3PL vs. a 4PL can be a complicated decision that depends on the complexity of your
supply chain and your company's strategic goals.
29.8 A 3PL relationship works well when the organization has a solid, high-performance supply chain
strategy in place and requires support to execute the plan. Working with a 3PL will typically require a high
level of internal management commitment and oversight to ensure performance meets your standards.
However, many day-to-day decisions are out of your hands as you count on the providers selected by the
3PL to meet your service commitments. An asset-based 3PL may focus too much on ensuring that its own
assets are fully utilized at the expense of lower rates or better services from other providers. For smaller
companies, a 3PL can provide an immediate level of scale that would otherwise be cost prohibitive.
29.9 A non-asset based 4PL is agnostic in choosing suppliers, concentrating on finding the best
combination of value and service. Typically, a 4PL will have integrated technology offerings that deliver a
high level of visibility into the supply chain for tactical and strategic analysis. Of course, internal resources
are still necessary to manage the 4PL performance, but it should be a higher level of oversight than a 3PL.
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29.10 Warehouse Anywhere has performed as both a 3PL and 4PL for our clients. Recently, we've seen
great success in acting as a 4PL in managing forward-deployed inventories in a variety of vertical markets.
We can localize your inventory in hundreds of U.S. cities in a very short period of time.
29.11 The largest e-commerce companies, like Amazon, act as their own 4PLs by owning and managing
the entire supply chain. Few other companies have the resources to match that, so they turn to 4PLs for
strategic management.
29.12 Over the years, many retailers have used 3PLs for transportation, warehousing and fulfilment. As
e-commerce boomed, retailers often bolted on those capabilities to existing systems, creating parallel
supply chains to meet in-store and online demand. As e-commerce logistics matures, it's become apparent
that an omnichannel approach is a sustainable direction to support customers, regardless of the channel
from which they purpose.
30.0 A 4PL offers the strategic vision to create a new supply chain network that efficiently manages
the flow of product across all platforms. A single view of inventory gives the retailer the power to
allocate inventory and meet customer demand regardless of the status or location of the inventory.
30.1 Forward-deployed inventory can serve both physical locations and e-commerce fulfilment. For
brick-and-mortar locations, the forward deployment supports same-day inventory replenishment as well
as online order fulfilment from the same location.
30.2 With smaller store footprints, there's no room “in the back” anymore. For a retail apparel
customer, we forward deployed inventory within a five-mile radius of stores to replenish popular items
within one hour.
31.0 RECOMMENDED BOOKS:
 FUNDAMENTALS OF LOGISTICS MANAGEMENT (Paperback – Oct 1, 2005) by David Grant,

Douglas M Lambert, James R Stock, Lisa M Ellram.
 Contemporary Logistics (10th Edn) Coyle, Langley, Murphy, Wood.
 Introduction to Logistics and Supply Chain Management by Martin Christopher.
 Supply Chain and Logistics Management Made Easy – by Paul A Myerson.
 Inventory Management Explained – David J Piasecki.
 Managing Transport Operations – Edmund J Gubbins.
 Material Handling – Robert Graves.
 Warehouse Management – Gwynne Richards.
 Essentials of Supply Chain Management – Michael Hugos.
 Essentials of Inventory Management – Max Muller.
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ANNEX-1
JOINT VENTURES, SHIPPING POOLS AND CONSORTIA
1.0 Introduction:
“Wonders are many on earth, and the greatest of these is man, who rides the ocean and
takes his way through the deeps, through wind-swept valleys of perilous seas that surge and
sway.”
The chorus in Sophocles’ Antigone: 422B.C.
1.1 The maritime world is adventurous – but very complex. Thus before understanding these
concepts students may have to go little deeper into the subject of shipping business.
1.2 Any business looks forward to profits. ‘Profit’ is a concept used by accountants and
investment analysts to measure the financial return from a business. It is calculated by taking the
total revenue earned by the business during an accounting period (e.g. a year) and deducting the
costs which the accounting authorities consider were incurred in generating that revenue. The cash
flow of a company, in contrast, represents the difference between cash payments and receipts in the
accounting period.
1.3 In surviving shipping recessions; cash is what matters, while for companies with investors
providing a commercial return on assets is equally important. The main reason cash flow differs from
profit in a particular year is that some costs are not paid in cash at the time when the accountant
considers them to have been incurred. In shipping the best example is the timing of payment for the
ship. The cash transaction takes place when the ship is built. However each year the ship grows older
and loses value.
1.4 Therefore it is apparent that the life of a ship must be utilized in a manner as to provide
returns on the asset in a profitable manner. It requires continuous and gainful employment of the
ship/s. Thus we may infer that success or failure in international merchant shipping depends upon
hiring/fixing the ships of the company at the right freight level, for the right period of time, at the
right time. This is an almost impossible task given the various factors that affect the highly volatile
freight market.
1.5 The original freight market, the Baltic Shipping Exchange, was opened in London in 1883,
though its functions had long been performed, in a less organized way, by the Baltic Coffee House.
At this institution merchants looking for transport met ships’ Captains looking for cargo. The freight
market today remains a marketplace in which sea transport is bought and sold, though the business
is mainly transacted by telephone and telex rather than on the floor of the Baltic. Nowadays there is
a single international freight market but, just as there are separate sections for agriculture and cash
crops in the country market, there are separate markets for different ships in the freight market. In
the short term the freight rates for tankers, bulk carriers & container ships behave quite differently,
but because it is the same group of traders, what happens in one sector eventually ripples through
into the others.
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1.6 Also, because it takes time for ships to move around the world, there are separate regional
markets which are only accessible to ships ready to load cargo in that area. Thus ship owners need
to reduce freight market uncertainties by a judicious mix of short, medium and long term
employment pattern coupled with the use of some alternative techniques such as Contract of
Affreightment (COA), tries to balance the odds against accomplishing this difficult task.
1.7 At this point, it is needed that the basic concepts of the traditional methods of employment
of merchant vessels must be explained as is done in the following paragraphs.
2.0 Bareboat Charter Party:
2.1 By this type of charter, the shipowner leases his entire vessel and the charterer has the
responsibility of operating it as though it were his own vessel. As it implies, the bare vessel is
chartered. The shipowner has, for the period covered by the charter party, lost control of his vessel.
The charterer pays all expenses: fuel, stores, provisions, harbour dues, pilotage, etc. and employs
and pays the crew. There may, however, be a clause in the charter party that the master and the
chief engineer must be approved by the shipowner. The charterer is responsible for the upkeep,
preservation and safety of the vessel. Before delivery to the charterer the vessel is surveyed by
representatives of both parties and the same is done on redelivery. The charter party will stipulate
that she must be redelivered in the same good order and condition as when delivered, ordinary
wear and tear excepted. On redelivery the owner's representatives, usually the port captain and port
engineer may check the logbooks for information pertaining to groundings, striking objects and
collisions.
3.0 Voyage Charter Party:
3.1 This is a charter party for the carriage of a full cargo, not for a period of time, but at a
stipulated rate per ton, for one voyage only, between named ports to be named on arrival in a given
area. It is a frequently used charter party of which there are many varieties, and most commodities
and trades have a particular type to suit their purposes. Shippers of large quantities of bulk cargo
such as phosphate, coal, grain, etc., have charter parties with special titles such as GENCON;
AMWELSH; NORGRAIN etc. In a voyage charter party the charterer assumes no responsibility for the
operation of the vessel but generally pays stevedoring expenses in and out. A statement to that
effect will be included in the charter party. The master is particularly concerned with voyage charter
parties because of the laytime, dispatch and demurrage clauses and the necessity of tendering the
Notice of Readiness to load or discharge. In this type of charter the charterer contracts to provide a
cargo at given rate per day. The charter is generally for bulk cargo, stipulated in tons or cubic feet,
for all or part of the carrying capacity of the vessel.
4.0 Time Charter Party:
4.1 A time charter party is a contract whereby the lessor places a fully equipped and manned
ship at the disposal of the lessee for a period of time for a consideration called hire. The lessor may
be the ship owner or demise charterer and the time charterer will be the lessee. The hire is payable
at specified intervals during the term of the charter. On the other hand, a “time charter for a trip” is
a time charter for a particular voyage or voyages. In such a case, the lessor places the fully equipped
and manned ship with the lessee till the completion of the voyage. In such charter, hire is paid at
periodic intervals.
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5.0 Contracts of Affreightment :
5.1 In one sense all charterparties are COAs, all charter parties are “contracts of carriage by
sea”, but we use the term "contract of affreightment" to mean carriage of a specific quantity of
cargo covering more than one shipment over a period of time. The advantage of a COA over
consecutive voyages or time chartering is that it allows the shipowner/operator an opportunity to
use substitute tonnage and play with the variations in the freight market. A COA has options for
flexibility in the description of voyages, dates, quantities and can be customized to suit the
cargo/cargo interests. Generally being a long term contract it gives some amount of stability to the
ship-owner.
5.2 To add; maritime business has seen the following cycles during 1980 to 2013:
 Depression
 Low returns
 Boom
 Bust
5.3 Thus it has been proved beyond doubt that traditional methods of employing merchant
ships were found inadequate against the effect of long term financial depression, international
politics, war and technological progress. These experiences have led to the development of some
creative methods which aimed to reduce the negative effects of the factors affecting shipping
markets while concentrating on their beneficial effects.
6.0 The non-traditional methods are:
6.1 BULK/LINER PARCELLING:
6.1.1 Usually it costs more to handle small parcels than to handle big ones. Hence the smaller the
parcel size the more expensive to carry per tonne of cargo. Some operators rose to the challenge of
using this as a trading opportunity by specializing in the carriage of groups of small parcels from one
range of ports to another. Parceling has been adapted to dry bulk/liner as well as tanker trades. In
the tanker trades, the liquid liners provide a service similar to that provided by general cargo liners
of the past. Operation of a successful parceling service; calls for specialized skill in safe
loading/unloading and carriage of these goods, segregation as well as scheduling of the cargoes and
services.
6.1.2 But these concepts have largely been modified in the wake of greater levels of
containerization.
6.2 JOINT VENTURES :
6.2.1 Joint Ventures are joint undertakings between two persons/parties wherein ship-
owners/operators controlling tonnage; join forces with the cargo interests.
6.2.2 Ship-owners may find such partners in traders/merchants who may need vessels for short
durations. On the other hand the partner may be a government of a nation and the contract may be
a complex one pertaining to subjects such as the extraction of a nation's natural resources,
development of infrastructure, road, rail and seaways.
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6.2.3 Each such venture is a separate issue and the contract has to envisage and provide for the
requirements at each and every stage of the venture depending upon the scope of the contract as
agreed to by the negotiating parties.
6.2.4 The contract has to be customized to provide some or all of the following:
 Finance - Investment
 Management
 Training
 Operational support
 Shipbroking
 Crewing
 Marketing
6.2.5 Here is a latest report that depicts the current scenario and it will be helpful in
understanding why companies are moving towards joint ventures to sustain.
LONDON—Feb 2015
Five of the world’s biggest dry-bulk carriers have launched a common chartering platform for their biggest vessels, a first step
toward consolidation in a fragmented industry beset by overcapacity and rock-bottom freight rates.
Capesize Chartering—consisting of Antwerp-based Bocimar International NV; Monaco’s C Transport Maritime;

Bermuda’s Golden Ocean Group Ltd.; and Golden Union Shipping Co. and Star Bulk Carriers Corp., both of Athens—will
combine and coordinate chartering services for a combined 80 Capesize ships. Those ships, the world’s biggest general cargo
movers, typically are nearly 1,000 feet long, weigh an average of 175,000 tons and move commodities like coal and iron ore.
The move comes with the Baltic Dry Index, which tracks daily chartering rates, at its lowest levels in about 30 years. It follows
similar downturn-driven consolidation last year in the container-shipping sector, where two major alliances united the world’s
biggest box-shipping companies in terms of capacity. The Capesize Chartering joint venture is the first dry-bulk pool in 15 years;
the previous one lasted for about a year before the then-partners went their separate ways.
Dry-bulk fleets are mostly controlled by deep-pocketed families or sovereign-wealth funds that can endure down cycles, which
usually last around three years. The shipping industry’s current downturn is unusually long, having started in 2008 with the
collapse of Lehman Brothers, and there is no respite in sight: with major commodity importers such as China growing at a slower
pace, commodity prices are at multiyear lows, which in turn pressures freight rates.
“The parties operate in the highly competitive and fragmented Capesize industry, and neither party owns, controls or manages
sufficient Capesize vessels to provide competitively priced bids and efficient trading and operations to serve its customers,” said
Capesize Chartering, which plans to kick off operations in later this month. Capesize daily charter rates are currently around
$6,700, with the break-even point between $5,500 and $8,000. Shares of New York-listed Star Bulk Carriers are down 62% over
the past 12 months.
“We are bleeding big-time,” said a senior executive of one of the companies involved in the alliance. “Sharing ports and ships is
essential to cut costs and have some kind of a collective bargaining power with cargo owners although pricing we will still compete
in freight rates. I expect more companies to join Capesize Chartering going forward, or other such joint ventures being formed.”
The executive added that the alliance is expected to cut operational costs by “hundreds of thousands of dollars annually” for each
partner in the alliance, even though the combined size of Capesize Chartering makes up only 5% of the world’s 1,700 Capesize
vessels. The five partners collectively own 164 Capesize ships, and executives said more would be dedicated to the alliance in the
future.
Analysts say the tonnage in the water of dry-bulk carriers has gone up 85% since 2008, and they estimate capacity is around 20%
above demand. “Unless your ship operates in Australia and exports commodities to China under long-term chartering deals, you are
in trouble,” the shipping executive said. “Most of the other routes are in the doldrums and will stay that way for a while, so some
weaker players will try to consolidate or go belly-up.”
Australia accounts for close to 60% of China’s iron-ore imports, with mining giants BHP Billiton Ltd. and Rio Tinto PLC
extracting and shipping the mineral from their Australian mines in increasing volumes. Australia’s proximity to China is spurring
miners in more-distant countries, such as Canada, Sweden and South Africa, to operate at higher costs, which in turn puts pressure
on dry-bulk companies to keep freight rates low.
Brokers said owners with existing orders of dry-bulk ships are increasingly converting them to tankers, which currently enjoy
booming chartering rates as low oil prices push up demand for crude oil and oil products.
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Dow Jones Reporting: 2015
6.2.6 Another major development is the 2M agreement between MSC & Maersk Lines. Students
are requested to take a look at the same from their websites.
7.0 SHIPPING POOL:
7.1 The nature of shipping pools:
7.1.1 Although there are different models, a standard shipping pool brings together a number of
similar vessels under different ownership and operated under a single administration. A pool
manager is normally responsible for the commercial management (for example, joint marketing,
negotiation of freight rates and centralization of incomes and voyage costs) and the commercial
operation (planning vessel movements and instructing vessels, nominating agents in ports, keeping
customers updated, issuing freight invoices, ordering bunkers, collecting the vessels’ earnings and
distributing them under a prearranged weighting system). The manager may be interested to find
optimum employment for the members of the tonnage pool by a judicious mix of long term, short
term and medium term employment, COA, chartering-in of tonnage to speculate as well as to
supplement the fleet and fulfill pool commitments.
7.1.2 The pool manager’s activities can be important to achieve a level of integration necessary to
obtain the benefits of the cooperation. To achieve this, the pool manager must often have functional
independence and be responsible for providing integrated services. The pool manager tends to act
under the supervision of a general executive committee representing the vessel owners. The
technical operation of vessels (safety, crew, repairs, and maintenance) is usually the responsibility of
each owner. Although they market their services jointly, the pool members often perform the
services individually.
7.2 Merger or cooperative arrangement :
7.2.1 Pools are assessed under competition law either as mergers or as cooperative arrangements
falling short of a merger. The more integrated the pool, the more likely it is to be considered as a
merger.
7.3 Mergers :
7.4 A merger whose participants exceed relevant financial thresholds will generally require pre-
notification and prior clearance from the relevant competition authority(ies). Clearance confers the
benefit of legal certainty, but there is the risk of changes being required or even a negative decision,
although there is possibly a more lenient test for mergers than for cooperative arrangements. But
many pools will not be considered to have the requisite degree of permanence to be considered as
mergers, due for example to the rights of ship-owners to withdraw ships on notice, or will be
regarded as too reliant on their parent companies to be mergers. In some jurisdictions, particulars of
pools falling short of mergers need to be filed with maritime transport regulators in any event.
7.4 Cooperative arrangements:
7.4.1 For cooperative arrangements there will generally be no competition law issue if the
participants are not actual or potential competitors. For example, when ship-owners set up a pool to
tender for, and perform, contracts of affreightment for which as individual operators they could not
bid successfully or which they could not carry out on their own, no competition issues will generally
arise.
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7.4.2 In addition, where the market share of the pool participants in a cooperative arrangement is
low, for example in a fragmented market, competition authorities are unlikely to be concerned to
intervene. This is because the pool participants will not have a significant economic impact on the
market.
7.4.3 But it is usually important that there is a degree of integration between the participants’
activities in the pool: otherwise, the pool could be seen as a bare cartel focused on joint selling, with
the object of coordinating the pricing policy of the competitors, but with no efficiencies. Pools which
do not involve joint selling, but, for example, joint scheduling or joint purchasing will generally only
raise competition issues where the parties have some degree of market power.
Key points to consider include non-compete clauses, lock-in periods and notice periods and
exchanges of commercially sensitive information.
7.5 Efficiencies
7.5.1 The greater the extent to which the pool gives rise to restrictions of competition (for
example the higher the market share of the participants), the greater the efficiencies and pass-on of
benefits to customers there must be. The efficiencies must result from the integration. Such
efficiencies could result from obtaining better utilization rates and economies of scale, improved
geographic spread and consequent reduction of ballast voyages. In addition, each restrictive clause
contained in a pool agreement must be reasonably necessary to attain the claimed efficiencies.
7.5.2 Keeping in mind the short term expediency as well as the long term over-view to achieve
forward fleet planning; these could be the gains:
(1) Zero idle tonnage

(2) Minimum ballast voyages
(3) Reduced waiting time for cargoes
(4) Continuous and regular employment for the tonnage through proper scheduling
(5) Next cargo already fixed prior completion of previous cargoes
(6) Maximization of space utilization, elimination of accepting part cargoes
7.5.3 Other functions in a pool could be:
(1) Advertising
(2) Collecting market intelligence and market reporting
(3) Cargo contracting
(4) Hedging -- through chartering and freight futures
(5) Consultancy to owners/operators
7.6 Conclusion
7.6.1 Ship-owners may find pools attractive for a number of reasons. Pools can be an effective
way for ship-owners to cooperate and gain efficiencies without losing their independence. However
in order to survive, the pools must decide on an optimum number of members since having too
many members will result in lack of effective administrative control over the group, whereas if the
pool is solely dependent on one or two members then their individual reverses or losses, or their exit
from the pool, may lead to its collapse. Type of tonnage could be a factor. Most pools are comprised
of homogeneous tonnage though the dependence on one or two niche sectors only or on one type
of market may lead to collapse of the pool because it is extremely difficult, if not impossible, to find
a weighting system for widely different types of tonnage.
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7.6.2 Small or medium size ship-owners may not be in a position to exploit the commercial
opportunities though aware of them. Joining a shipping pool at the cost of sacrificing total
independence; offers a shipowner the advantage of belonging to a larger market force, thereby
enabling him to take advantage of such opportunities. The profits generated by different methods
benefit the common pool and in optimum conditions individual ship earnings are higher than those
of a similar vessel of a traditional fleet. But each shipowner retains the responsibility for obtaining
and financing his own vessels and crewing or manning the ship though he may sub-contract whole or
part of his responsibility to a ship management company.
7.7 Profit/revenue and cargo pools:
7.7.1 Profit/income sharing in pools can be done by various ways. Gross pool income minus
operating expenses equals net pool income. Net pool income divided by individual vessel weighting
factor equals to individual distribution. In liner conference pools, because of the nature of the trade,
pool members may collect the earnings and incur the costs themselves and thereafter pool their
gross or net earnings into a common pool account prior to receiving their entitled share of the
overall income. In a gross earnings pooling arrangement, the individual member bears his expenses
himself and that has no effect on the gross total earnings remitted to the pool. In the net earnings
pooling arrangement there is little incentive for an operator to restrain his operating expenses to a
reasonable level because the low cost, more efficient, operator subsidizes his less efficient, higher
cost, net earnings colleague.
7.7.2 A consortium of ship-owners operating in marketing but not fully pooling their vessels may
have an arrangement amongst themselves whereby the members collect their vessels' earnings and
retain from it an agreed amount usually a lump sum amount and remit the remainder to the pool for
sharing. This provides a greater degree of independence to the individual operators and greater
vessel control.
7.7.3 The costs of administering the pool wages, rent, communication and insurance, can be
funded by lump sum fees payable by the members at regular intervals or by means of commission
which is a percentage of the gross/net earnings of the pool and it should be adequate to cover the
expenses and profit in case of a pool which is administered by a separate body.
8.0 SHIPPING ORGANISATION & CONFERENCES:
8.1 Shipping is a global service industry that by general acknowledgement provides the lifeline
of international trade. Technological developments in ship design and construction, and the ensuing
economies of scale of larger ships, have also promoted trade – particularly those of developing
countries – by making economical the transportation of goods over long distances. This has
expanded markets for raw materials and final products and has facilitated the industrialization of
many countries around the world.
8.2 Traditionally, the shipping industry is categorized in two major sectors (markets): the bulk
shipping sector – engaged mainly in the transportation of raw materials such as oil, coal, iron ore
and grains – and the liner shipping sector (involved in the transportation of final and semi-final
products such as computers, textiles and a miscellany of manufacturing output). From a market
structure point of view, the two sectors are as different as they could be bulk shipping uses large and
unsophisticated ships, such as tankers and bulk-carriers, to transport goods in bulk on a contract
basis. The service requires minimal infrastructure, and in this respect, it resembles a taxi service
whereby the contractual relation between passenger and driver (cargo owner and ship owner)
expires upon the completion of the trip. The industry is highly competitive with prices (freight rates)
fluctuating wildly even in the course of a single week.
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8.3 On the contrary, liner shipping is geared to the provision of regular services between
specified ports, according to timetables and prices advertised well in advance. The service is in
principle open to everyone with some cargo to ship, and in this sense, it resembles a public transport
service, like that of a bus or a tram. The provision of such a service – often of global coverage –
requires extensive infrastructure in terms of terminals and/or cargo handling facilities, ships,
equipment, and agencies. For instance, the provision of a weekly service between Europe and South
East Asia requires investments in excess of one billion US dollars. Understandably investments of this
magnitude may, on the one hand, lead to undesirable capital concentration and, on the other, pose
considerable barriers to entry for new-comers.
8.4 Containerization impacts: Expensive and often strongly unionized port labor is thus
bypassed; pressure on port space relieved; ship time in port is minimized. These developments have
increased ship and port productivity and system reliability immensely, thus allowing ships to become
even bigger, achieving economies of scale and low transport costs. Nowadays, containers are
increasingly carried by specialized cellular container ships many of which are able to carry more than
8000TEU-s. Such mammoth ships could cost anything about 100 to 150$ USD and it could take up to
eight o them to run a weekly service between Europe and South East Asia.
8.5 The capital intensity of these ships is equivalent of a jumbo-jet in aviation – obliges them to
limit their ports of call at each end to just a few hub ports or load centers such as Singapore, Hong
Kong and Rotterdam from where huge number of containers are further forwarded / feedered with
smaller vessels to local ports. Complex hub and spoke networks have thus evolved whose fine tuning
and optimization bears directly on consumer pockets.
8.6 In the UNCTAD Code of Conduct for Liner Conferences (UNCTAD, 1975), the term conference
or liner conference is defined as:
“ a group of two or more vessel operating carriers which provides international liner services
for the carriage of cargo on a particular route or routes within specified geographical limits
and which has an agreement or arrangement, whatever its nature, within the framework of
which they operate under uniform or common freight rates and any other agreed conditions
with respect to the provision of liner services.”
8.7 To them, the word "conference" denotes not a single system but is a generic term covering a
wide range of common services and common obligations undertaken by ship-owners serving a
particular trade.
8.8 Broadly speaking the term denotes a meeting of lines serving any particular route aimed at
agreements on uniform stable rates of freight and the provision of services under agreed working
conditions in the trade. It ranges from very informal associations to a well-developed organization
with a permanent secretariat behind it. The parties to such an agreement undertake towards one
another obligations that vary as widely as the agreements themselves.
8.9 Agreements organized by shipping lines to restrict or eliminate competition, to regulate and
rationalize sailing schedules and ports of call, and occasionally to arrange for the pooling of cargo,
freight monies or net earnings. They generally control prices, i.e., freight rates and passenger fares.
The nature of their organization varies considerably, depending on the market structure of the trade
route. Some have been conferences quite literally – informal oral conferences but many have
employed written agreements establishing a permanent body with a chairman or secretary, and
containing but carefully described rights and obligations of the conference membership. Limitation
of price competition has enabled conference members to compete on quality of service. Some
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experts feel that conferences, while often being considered as monopolists, do not actually earn the
corresponding monopoly profits. When price is fixed, differentiation on quality is the only way
conference members can create the edge.
8.10 The broad conference aims are to:
(a) Control competition by eliminating avoidable competition internally within the

Conference.
(b) Protect members through co-operation from external competition.
8.11 The conference is simply an association of shipping lines acting in co-operation to provide
regular services at uniform rates. In case a closer co-ordination is required it leads to formation of
pools. Such pools may be cargo or revenue pools or a mixture of pools. Cargo pooling is a method
whereby each participant is given a share of the traffic (based on his past performance) which he is
entitled to carry.
(i) The cargo pool may be devised for a list of certain commodities -- partial pool
comprising of commodities constituting the bulk of the trade.
(ii) Total cargo pools where all the cargo is pooled and shared.
8.12 Even in a total cargo pool, certain commodities remain outside the purview of the quota
system, viz. IMO cargoes. There is another angle to the issue of pooling -- particularly non-
remunerative cargoes too; may be pooled and carried by all members; to share the loss thus
ensuring that such cargoes find transportation. But looking at the sheer number of the conferences
it may be inferred that there are extremely complex operational mechanisms.
8.13 Revenue Pool: Conferences may also pool revenues. As discussed earlier, the pooling of
revenue may be on gross income or net income basis and the revenue pooling may also be a partial
pooling (minimal amounts pooled) or a total revenue pooling.
8.14 The effect of revenue pooling is that since the revenue is shared in any way, the members
avoid cut-throat competition to carry more remunerative cargoes instead of low freight earning
cargoes.
8.15 Most conferences which have pools, pool both revenues and cargoes as per a suitable recipe
meeting their requirements.
8.16 As of date there are 150 conferences in existence worldwide. A few important ones are:
 Aqaba rate agreement

 Asia Westbound Rate Agreement
 Eastbound Management rate Agreement
 Europe Middle East Rate Agreement
 Europe Mediterranean Rate Agreement
 Europe West Africa Rate Agreement
 Far Eastern Trade Agreement
 India-Pakistan-Bangladesh- Ceylon Conference [ oldest 1875]
 Jeddah Service Group
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9.0 COFERENCES UNDER SCANNER:
9.1 It will be interesting to find out the scrutiny that the liner conferences are facing today.
There is no international agreement or standardized legislative approach to liner shipping
conferences. Under the auspices of both the United Nations (UN) and the Organization for Economic
Cooperation and Development (OECD) formal statements on liner shipping and conferences have
been adopted, but not all nations participate in or endorse the work generated by these two
organizations.
9.2 The "United Nations Convention on a Code of Conduct for Liner Conferences", developed by
the United Nations Conference on Trade and Development (UNCTAD), was adopted in 1974 and
came into force in 1983 with ratification by the requisite number of countries representing 25% of
the total volume of world trade. It effectively allows the lines of the countries at each end of the
conference trade to enter into commercial sharing agreements that allocate equal shares of the
cargo between their ships. Third country shipping lines have the right to acquire a significant part of
the conference trade, such as 20%. This provision for discrimination in favor of national flags is
considered by many to be inconsistent with the principle of free and fair competition. India is also a
party to the UN Code for Liner Conferences.
9.3 European Union:
9.3.1 The Organization for Economic Cooperation and Development (OECD) is guided by a "Code
of Liberalization of Current Invisible Operations" (CLIO) that was originally adopted in 1961. Under
the Code, governments refrain from taking action which would be contrary to the principle of free
circulation of shipping in international trade and free and fair competition. As an extension to the
CLIO, the Council of the OECD endorsed a set of "Common Principles of Shipping Policy for Member
Countries" in 1987. The Principles advise OECD member governments to safeguard and promote
open and fair competition, prevent the abuse of a dominant position by any commercial party, and
limit involvement to minimal intervention. Nevertheless, Annex II of the Common Principles
recognizes that liner shipping conferences may be advantageous when basic guidelines and rules for
them have been established and followed.
9.3.2 Many OECD countries have traditionally granted some form of anti-trust immunity or
exemption to liner conferences. For comparison purposes, examples of conference legislation in
different jurisdictions are important to consider and understand. India’s major over-seas trading
blocs is the EU which cannot be separated from liner shipping.
9.3.3 In the European Union, there is no sectoral exemption of maritime transport from European
Commission (EC) antitrust law. However, under EC Council Regulation No. 4056/86, there is a block
exemption from the prohibition of liner conference agreements, decisions and concerted practices
which restrict or distort competition. The Regulation stipulates certain conditions for the exemption
of shipping conferences. For example, the conference agreement, decision or concerted practice
should not cause harm to ports, transport users or carriers. Rates and conditions should not differ
according to the country of origin or destination, or the port of loading or discharge, unless such
rates or conditions can be economically justified. EC decision has helped clarify the way Regulation
4056/86 is to be interpreted. For example, Individual Service Contracts (ISC) between conference
members and shippers are not to be restricted by a conference, and setting inland rates jointly is not
considered to be within the scope of permitted practices covered under this Regulation.
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9.4 United States :
9.4.1 Historically the U.S. government has played a more active role in regulating carriers in the
U.S. liner shipping markets although the trend has been one towards deregulation. In the early part
of the 20th century, during an era of monopoly busting in other industries, the U.S. followed the lead
of the British government and granted the ocean shipping industry limited protection from antitrust
regulations in the U.S. by allowing companies servicing the liner shipping markets in the U.S. to form
conferences and benefit from a system of price-fixing. This limited immunity to antitrust regulations
was put forth in the Shipping Act of 1916.
9.4.2 Continued pressure from shippers to make the liner industry more competitive, along with
the advent of containerization and intermodalism, led to the more market oriented provisions of the
U.S. Shipping Act of 1984. The spread of containerization and the undermining of shipping
conferences by the US Shipping Act of 1984 boosted the share of the market held by non-member
shipping companies, making it increasingly difficult for shipping conferences to impede the activities
of non-member vessels.
9.4.3 This prompted shipping conferences to establish stabilization agreements (also known as the
“discussion agreements”). The purpose of stabilization agreements is to stabilize shipping routes
through initiatives such as sharing information regarding matters such as shifts in supply and
demand on certain routes and agreeing guidelines in relation to rate restoration and surcharges.
9.5 JAPAN:
9.5.1 Shipping conferences and other international shipping cartels were also sanctioned under
the Marine Transportation Law and were exempted from the Antimonopoly Act on the condition
that they were reported to the Minister of Transport.
9.5.2 Following the US Shipping Act, the Japanese Marine Transportation Law adopted the
principle of open membership whereby it was not permitted to refuse membership to companies
applying to become members of a shipping conference. Similarly, the law also introduced tight
restrictions on the conduct of shipping conferences, including provisions preventing deferred rebate
systems, the practice of fighting ships and the discriminatory treatment of shippers using non-
member shipping companies.
9.5.3 All carriers, regardless of conference membership, must make tariffs for all cargo public and
any falsifications of said tariffs are prohibited under the Law. In addition, carriers are not allowed to
unfairly discriminate between shippers with respect to cargo space and loading or unloading of
cargo or between Japanese exporters and foreign exporters
9.6 INDIA:
9.6.1 In India, there is no specific Anti-trust Immunity or Block Exemptions granted to the Liner
Conferences. Nor, for that matter, is there any particular statute governing the anti-competitive
practices except the Monopolies & Restrictive Trade Practices (MRTP) Act, 1969 which governs all
the industries and activities. Although existing for more than thirty years, it has failed to do much in
checking the cartels that have operated in several industries. It was only in 2003, a comprehensive
Competition Act was enacted on the recommendations of a high level committee, shifting the focus
of the law from curbing monopolies to promoting competition. The Act seeks to repeal the MRTP Act
and to dissolve the MRTP Commission from the date it is notified as such by the Central Govt. Such a
notification is yet to be issued by the Central Government.
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9.6.2 The Competition Act, 2002, prohibits any agreement which causes, or is likely to cause,
appreciable adverse effect on competition in markets in India and cartel agreements are presumed
to have appreciable adverse effect on competition, in markets, in India In line with the international
trend, in the Competition Act 2002, cartels meant exclusively for exports have been excluded from
the provisions relating to anticompetitive agreements as they are not expected to have appreciable
adverse effects on the competition in the Indian markets. Thus, section 3(5) of the Act exempt the
right of any person to export goods from India to the extent to which the agreement relates
exclusively to the production, supply, distribution or control of goods or provision of services for
such export.
9.6.3 Anti-competitive activities, including cartels, taking place outside India having effects on
competition in India would fall under the ambit of the Act, and can be inquired into by the
Commission. The Act, thus, has extra territorial reach (section 32). If, for instance, cartelization in
Europe’s paper industry does not affect India, it is not of our concern then, however, if there is
cartelization in the European shipping industry, it will affect India, as we are their trade partners and
Indians will have also have to bear the burden of high amount charged by them, and thus, fall under
the ambit of the Competition Act, 2002. Keeping this in mind, Competition Commission of India have
reportedly made a reference to the Union Ministry of Shipping recently to advocate the shipping
firms not to decide freight collectively and the Ministry should have advised the shipping firms not to
indulge in anti-competitive practices.
9.6.4 The brief overview of the competition legislation governing liner shipping of various
countries in the preceding section suggests that there are more similarities than differences in the
general approach to exemptions. While some economies such as the European Union describe the
general conditions for granting exemptions, others tend to be more specific by listing particular
sectors or activities, such as in the United States. In almost all of the economies reviewed, the
competition laws apply to both public and private sector enterprises, and exempt areas that are
covered by other government legislation and regulations.
10.0 CONSORTIA :
10.1 Consortium is an association of ship-owners and traders. At one time the term "consortium"
essentially implied that the carrier companies formed a separate corporate body which operated as
an independent entity to the exclusion of the member lines own identity. In any consortium such an
entity manages the ships and services of its companies for the defined service or sector allowing the
members of the consortium to enjoy sufficient market share in the trade as well as offering a good
cost effective service. Large size of the investment and risks involved in starting a containerized
service led to the idea of consortia which is essentially a creation of containerisation revolution, the
aims being rationalization of services and exploitation of the economies of scale.
10.2 The consortium is the entity that co-ordinates and administers the activities of a group of
container service providers jointly serving one trade. The consortium has a separate identity from
those of its members and serves as their agent, collecting and distributing revenues and agency fees
to members, rationalizing the service, scheduling the services and apportioning the cargo share to
each member. Each member retains his identity even though his activities are integrated and
coordinated within the scope of the activities of the consortium. The members of a consortium are
its components and relationship can be regarded as a "sophisticated limited partnership
agreement."
10.3 The creation of consortia changes the balance of power within a conference and brings
about more rationalization in services and co-operation and co-ordination amongst the various
members. More than one consortium can operate within the same conference provided the trade
248
volumes and conditions permit. Consortium system eliminates rate competition to a large extent by
rationalization of cargo and revenue sharing. Consortium may also own and administer a port
infrastructure apart from operating liner services.
10.4 The rates and services provided by the members being of the same standard this system
forces the service provider to focus on service quality while allowing members to achieve sufficient
scale of operations to provide quality services economically.
11.0 VSA and VDA
11.1 “Vessel Sharing Agreement” or VSA means an agreement in which the members of such
agreement shall only discuss and agree on operational arrangements relating to the provision of
liner shipping services, including the coordination or joint operation of vessel services, and the
exchange or charter of vessel space. The agreement shall not include any agreement or
recommendation relating to rates and tariff on transport users.
11.2 “Voluntary Discussion Agreement” or VDA means an agreement in which the liner shipping
operator members of such agreement may exchange and review market data, supply and demand
forecasts, international trade flows and industry trends, and discuss and agree upon voluntary and
non-binding guidelines and shall only be limited to such similar commercial issues.
12. REATRICTIONS IN VSA & VDA:
12.1 Vessel Sharing Agreement -
(i) shall only be for the sharing of vessels, joint operation of vessel, services, exchange
or charter of vessel space, between the liner operators
(ii) shall not include any inland carriage of goods occurring as part of through
transport including services provided by logistics providers, forwarders, depot
operators, truckers, railroads, off-dock consolidation facility service providers, and
off-dock storage and warehousing service providers, whether or not such entities
are affiliated with liner operators;
(iii) shall be for a reasonable period of time;
(iv) shall not contain any element of price fixing price recommendation or tariff imposed
by the parties on transport users;
(v) shall not require the disclosure, whether to other liner operators or otherwise, of
confidential information concerning service arrangements by the liner operators;
and
(vi) shall allow any party to the agreement on the basis of an individual to enter into any
confidential contract and to offer his own service arrangements and pricing.
12.2 Voluntary Discussion Agreement:
(i) shall only be for the sharing of information relating to the industry and shall be non-
binding on the parties;
249
(ii) shall not include any inland carriage of goods occurring as part of through transport
including services provided by logistics providers, forwarders, depot operators,
truckers, railroads, off-dock consolidation facility service providers, and off-dock
storage and warehousing service providers, whether or not such entities are
affiliated with liner operators;
(iii) shall be for a reasonable period of time;
(iv) shall not contain any element of price fixing , price recommendation or tariff by the
parties imposed on transport users;
(v) shall not impose any penalty or financial loss on any party departing from any term
of the agreement or exiting the agreement;
(vi) shall allow any party to the agreement to withdraw from the agreement on giving a
reasonable period of notice;
(vii) shall not require the disclosure, whether to other liner operators or otherwise, of
confidential information concerning service arrangements by the liner operators;
(viii) shall allow any party to the agreement on the basis of an individual to enter into any
confidential contract and to offer his own service arrangements and pricing.
13.0 With the economy struggling in recent years, the shipping industry has been seeing more
and more cut backs which have sometimes led to more efficient shipping. Vessel sharing agreements
have become a part of this. Vessel sharing only makes sense since it means that container shipping
companies are getting together to share space on their ships to allow for higher capacity. The vessel
sharing agreements or "VSA"'s have become more of a standard practice as shipping lines fight their
lower capacities in certain trade lanes.
13.1 As a result, many shippers are finding out that their containers are not going on the ships
they thought they would. The good part is that their rates, contacts and contracts do not change
with these agreements. It seems VSA's are actually good for the shipping industry. Since they are
between the carriers outside of their customer's, the agreements allow for the shipping lines to keep
freight costs lower since they do not need to account for empty spaces on their ships.
13.2 These agreements are also better for the environment since there are less unnecessary ships
giving off pollutants into the air. For shippers, these agreements should not affect much except that
they may be paying a different rate for the same commodity on the same vessel as one of their
competitors. Unfortunately there is very little they can do about that except be diligent in their
shopping for rates. Overall, VSA's have enabled more competition without as much strain on the
steamship lines. With so many parts of the shipping industry struggling to survive, these smart VSA's
have become a necessary element to keep international cargo moving.
13.3 The Competition Commission of India has exempted Vessel Sharing Agreements from the
purview of some sections of the Competition Commission Act.
250
14.0 GAAP (Generally Accepted Accounting Standards) Vs IFRS (International Financial
Reporting Standards):
14.1 A new dimension of financial reporting has been introduced that might guide the observers
and authorities who oversee the functioning of the pools-conferences-joint ventures to examine the
real state of affairs. However it has been recognized that many countries are swiftly adopting
International Financial Reporting Standards (“IFRS”) and local GAAPs were likely to be superseded in
the next couple of years.
14.2 Other than the US, we can expect companies based in all the major shipping countries to be
reporting on a consistent basis as IFRS adoption continues at a pace. The challenge remains for
preparers and users alike, as to how to adopt the principles of IFRS in the world of shipping – where
choices exist, or judgment is required, differences in interpretation or application are inevitable.
Possibly these areas are most sensitive to the operational reality of the shipping industry – be it the
nature of the assets and liabilities or the contractual arrangements most commonly entered into.
14.3 The shipping industry commonly operates through various structures and arrangements
such as pool arrangements, joint ventures and technical and commercial management agreements.
The rights and obligations arising from the structure or arrangement for each entity may vary. For
example, two entities may enter into an arrangement whereby one investor contributes capital to a
joint venture while the other investor contributes vessels and management in lieu of cash. Or, a ship
owner may allocate only one of its vessels into a pool arrangement or may contribute an entire fleet.
Additionally, entities may enter into profit sharing arrangements whereby a minimum rate per day is
earned and additional profits are allocated between the charterer and the charteree based on a
formula.
14.4 The International Accounting Standards Board (IASB) recently issued three new standards
which affect the way that entities account for and disclose their ownership and involvement in other
entities — IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, and IFRS 12 takes
acre Disclosure of Interests in Other Entities.
14.5 The new standards will require a reassessment of an entity’s existing structures and
arrangements and could result in consolidation or deconsolidation or movement from the equity
method of accounting to proportionate consolidation, or vice versa. For example, often an entity
may contribute its assets to a pool arrangement and act as a manager of the pool at the same time.
Under the new consolidation requirements, the entity will need to consider whether it is considered
to control the pool and therefore, required to consolidate. This will depend on whether the pool
manager is acting as a principal or agent, which requires the parties to assess, amongst other things,
the decision-making ability of the pool manager, rights of others, and its exposure to variability in
returns.
14.6 The new standards are applicable for annual reporting periods beginning 1 January 2013.
However, this does not provide entities with a two year lead time to prepare for the impact of these
standards as all three standards require retrospective application. This would mean that for any joint
venture, investments held from as early as 1 January 2011 would be required to be accounted for
under the revised standards in the future. Therefore, an early assessment of its implications may
allow shipping companies to revise existing contracts, partnership and management agreements as
well as their investments to avoid undesirable consequences once the standards are effective.
ooooo
251
1. What is the basic aim of a conference?
2. Name 5 conferences. Which is the oldest one?
3. What is the basic aim of a consortium?
4. How is the consortium concept different from that of conferences?
5. Describe the UNCTAD liner code of conduct.
6. Why did the consortium gained in importance?
7. Is there any common ground between the two?
8. What is the advantage of COAs over voyage charter or time charter?
9. Why must one use extra caution while framing clauses for a COA?
10. Compare gross income pooling and net income pooling.
11. Can there be several consortia within one conference?
12. What is the status of conferences in USA/ Japan / EU & India?
13. How does revenue pooling ensure the carriage of less remunerative cargoes within a
conference?
14. Write short notes on:
(a) Joint ventures
(b) Control of pools
(c) GAAP
(d) IFRS
(e) Efficiencies in pooling arrangement
It is expected that this section has whetted the students' interest in the topic sufficiently for him/her
to refer to some of the following:
1. Shipping Conferences – A study of their origins, Development and Economic Practice – B. M.

Deakin (Cambridge University Press) 1973
2. Shipping Conferences -- Amos Herman, 1st Ed., 1983.
3. Liner Shipping Conferences -- Janson & Shneerson, 1st Ed., 1987.
4. Sea Transport -- P. M. Alderton, 4th Ed., 1995.
5. Shipping Pools -- W. V. Packard, 2nd Ed., 1995.
6. Business of Transportation – Editor Darren Prokop 2014 ( 2 volumes)
************
252
ANNEX - 2
WRECK REMOVAL
1.0 INTRODUCTION:
1.1 The Nairobi International Convention on the Removal of Wrecks enters into force on
Tuesday (14 April 2015). The Convention places strict liability on owners for locating, marking
and removing wrecks deemed to be a hazard and makes State certification of insurance, or other
form of financial security for such liability, compulsory for ships of 300 gt and above. It also
provides States Parties with a right of direct action against insurers.
1.2 The Convention fills a gap in the existing international legal framework by providing a set
of uniform international rules for the prompt and effective removal of wrecks located in a country’s
exclusive economic zone or equivalent 200 nautical miles zone. The Convention also contains a
clause that enables States Parties to “opt in” to apply certain provisions to their territory, including
the territorial sea.
1.3 The Convention provides a legal basis for States Parties to remove, or have removed,
wrecks that pose a danger or impediment to navigation or that may be expected to result in major
harmful consequences to the marine environment, or damage to the coastline or related interests
of one or more States. The Convention also applies to a ship that is about, or may reasonably be
expected, to sink or to strand, where effective measures to assist the ship or any property in
danger are not already being taken.
2.0 Provisions in the Convention include:
• A duty on the ship’s master or operator to report to the “Affected State” a maritime
casualty resulting in a wreck and a duty on the Affected State to warn mariners and the
States concerned of the nature and location of the wreck, as well as a duty on the Affected
State that all practicable steps are taken to locate the wreck;
• Criteria for determining the hazard posed by wrecks, including depth of water
above the wreck, proximity of shipping routes, traffic density and frequency, type of traffic
and vulnerability of port facilities. Environmental criteria such as damage likely to result
from the release into the marine environment of cargo or oil are also included;
• Measures to facilitate the removal of wrecks, including rights and obligations to

remove hazardous wrecks, which set out when the shipowner is responsible for removing
the wreck and when the Affected State may intervene;
• Liability of the owner for the costs of locating, marking and removing wrecks - the
registered shipowner is required to maintain compulsory insurance or other financial
security to cover liability under the convention;
• Settlement of disputes.
253
3.0 The Convention was adopted by a five-day International Conference at the United Nations
Office at Nairobi (UNON), Kenya, in 2007.
3.1 The States Parties to the treaty as at 14 April 2015 are: Antigua and Barbuda, Bulgaria,
Congo, Cook Islands, Denmark, Germany, India, Iran (Islamic Republic of), Liberia, Malaysia,
Marshall Islands, Morocco, Nigeria, Palau, and the United Kingdom.
3.2 The Convention has come into force for Malta on 18 April 2015 and for Tuvalu on 17 May
2015.
3.3 Merchant Shipping Act 1958 (India) is being amended to incorporate the provisions of
Wreck Removal Convention. The Rules would also be made to implement this Convention in
India. The Rules would be available on D.G. Shipping’s web site ‘www.dgshipping.gov.in’.
3.4 Technical Circular No.: 04/2015 Date: 17th March 2015 is enclosed along with the DG
Shipping’s M S Notice No 2/15 dated 4/3/2015 which gives an understanding of the application,
change /amendment of the MS Act and the CIFOS certification.
3.5 There is however an interesting dimension to this as wrecks sometimes is considered as

heritage by UNESCO. The different legal ramifications are explained hereinafter. Shipwreck law
determines important legal questions regarding wrecks, perhaps the most important question
being the question of ownership. Legally wrecks are divided into wreccum maris (material washed
ashore after a shipwreck) and adventurae maris (material still at sea); although some legal
systems treat the two categories differently, others treat them the same.
3.6 Wrecks are often considered separately from their cargo. For example, in the English case
of the Lusitania [1986] QB 384 it was accepted that the remains of the vessel itself were owned
by the insurance underwriters who had paid out on the vessel as a total loss by virtue of the law
of subrogation (who subsequently sold their rights), but that the property aboard the wreck still
belonged to its original owners (or their descendants).
3.7 Military wrecks, however, remain under the jurisdiction–and hence protection–of the
government that lost the ship, or that government's successor. Hence, a German U-boat from
World War II still technically belongs to the German government, even though the Third Reich is
long-defunct. Many military wrecks are also protected by virtue of their being war graves.
3.8 However, many legal systems allow the rights of salvors to override the rights of the
original owners of a wreck or its cargo. As a general rule, non-historic civilian shipwrecks are
considered fair game for salvage. Under international maritime law, for shipwrecks of a certain
age, the original owner may have lost all claims to the cargo. Anyone who finds the wreck can
then file a salvage claim on it and place a lien on the vessel, and subsequently mount a salvage
operation
ooooo
254
Kindly provide the attachment so that the chapter is complete & the circular specifically mentions
the date of ratification by India. Additionally I am sending a form of certificate (very recent) that is
submitted by the agents for entry of ships in ports)
255
Three Model Test Papers have been kept below
for each subject.
Every Correspondence Student is to

compulsorily answer two Test Papers on
each subject and send them back to the
Institute before 31st December, 2020 in
order to be eligible to take up March 2021
Examination.
~t
******************
FIRST YEAR
CURRENT SHIPPING ENVIRONMENT
THE TEST PAPER GIVEN BELOW IS ONLY TO ASSIST THE STUDENTS IN PROBING THE
DISTANCE EDUCATION PROGRAMME STUDY MATERIAL FOR PROPER ANSWERS AND
IN NO WAY REFLECTS THE PATTERN OF THE ANNUAL EXAMINATION QUESTION
PAPER.
All questions carry equal marks. Total marks are 100. Any 5 questions candidate has to attempt
out of 8 questions in three hours time.
TEST PAPER 1
1. Write a short note on any four of the following.
a) SSAS b) INSA c) 3PL/4PL d) ILO e) ITF f) Northern Sea Route
2. The problem of Piracy is continuing to be a cause of concern to the International trade, particularly for
India. Explain with reasons.
3. What are facilities / infrastructure that port needs to offer to its users? Explain in detail.
4. Role and responsibility of Flag state and Port state control.
5. What is Logistic? Explain terms inventory, material handling,supply chain management.
6. Write a note on Containerization in India, progress made and difficulties faced
7. ISM code and its effect on shipping for enhance safety.
8. Explain Ships registry, and Open registry (Flag of Convenience) its (FOC’s) advantages and disadvantages.
Why ITF targets these ship (FOC) ?
************
256
TEST PAPER 2
1. Write a short note on any four of the following.

a) Indian Merchant Shipping Act
b) Seismic Survey Vessels (SSV)
c) FROR
d) INMARSAT
e) BMP
f) IMB
2. Explain in detail the Ship Vetting and SIRE.
3. What is Ship management. Explain Manning management in detail.
4. Write a note on ship building and ship breaking scenario in India?
5. Explain in detail Inland Container Depot (ICD) and its functions. Also explain diffence between ICD
and CFS.
6. Explain Organograme and administrative frame work of Indian Maritime Administration and its
functions.
7. What is Port State Control (PSC) ? Explain in detail its functions and its importance.
8. “Public Private participation in the Ports has contributed to the growth of Non Major ports in the
country” Discuss.
***********
257
TEST PAPER 3
1. Write short notes on any four of the following:

a) Shipping Master b) World Health Organization (WHO )
c) AISC d) INSA
d) OSV f) Sagarmala
2. Write a note on Indian Ship breaking industry. What is Hongkong conventionand its affect on Ship
Breaking.
3. Explain ISM code and two certificates - Document of Compliance (DOC) and SMC and their validity,
issuing authority. How these areobtained by ship owner and how these certificates are issued by
issuing authority?
4. Explain Indian Offshore scenario and overall progress / problems of this sector.
5. Write a note on technological developments in shipping.
6. Discuss briefly the role of IMO and its slogan ”safe, secure and efficient shipping on clean
oceans”.
7. Explain Ship’s Registry and Flag state. Explain in detail FSC’s functions, responsibilities and its
importance.
8. Write a note on Maritime piracy and marine frauds. And how it can be avoided.
****************
258

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6

CURRENT SHIPPING ENVIRONMENT

FIRST YEAR 2019

CURRENT SHIPPING ENRIRONMENT FIRST YEAR

4. Students are also requested to study a book on “INTRODUCTION TO THE MARITIME

Problems and Responses:

REGISTRATION OF SHIPS AND OPEN REGISTRIES

1.0 REGISTRATION OF SHIPS:

2.0 REGISTRATION OF INDIAN SHIPS:

 No need to open Subsidiary outside India to manage foreign flag vessels.

 Level playing field with competitors abroad.

 Expand their operations and business on foreign shores.

3.0 OPEN REGISTRY OR FLAGS OF CONVENIENCE:

3.4 Internationally "Flag of Convenience" is now considered a derogatory terms. Instead

3.6 There exist numerous criteria applied to the Open Registries:-

3.11 SOME OF THE ADVANTAGES ARE:

1. Easy procedure for registration.

3.12 SOME OF THE DISADVANTAGES ARE:

Antigua and Barbuda 853 Bahamas 1,418 Barbados 121

Madeira 576 Malta 2,205 Marshall Islands 3,419

Mauritius 28 Moldova 151 Mongolia 265

Myanmar 95 North Korea 274 Panama 7,914

RECOMMENDED FOR FURTHER READING:

1. Sea Transport -- P.M. Alderton, 4th Ed., 1995.

INTERNATIONAL MARITIME ORGANIZATION

1.0 Background & objectives:

2.0 Structure of IMO:

2.3.1 Other functions of the Council are to:

(a) Coordinate the activities of the organs of the Organization;

3.0 Technical Committees:

 The Marine Environment Protection Committee (MEPC)

3.1 Maritime Safety Committee:

1) Sub-Committee on Human Element, Training and Watch keeping (HTW): to address

2) Sub-Committee on Implementation of IMO Instruments (III): to address the effective

3) Sub-Committee on Navigation, Communications and Search and Rescue (NCSR): to

4) Sub-Committee on Pollution Prevention and Response (PPR): to consider technical and

5) Sub-Committee on Ship Design and Construction (SDC): to consider technical and

6) Sub-Committee on Ship Systems and Equipment (SSE): to consider technical and

7) Sub-Committee on Carriage of Cargoes and Containers (CCC): to consider technical and

3.3 Technical Co-operation Committee:

3.4 Legal Committee:

3.5 Facilitation Committee:

4.0 IMO Budget:

5.0 CODES & CONVENTIONS:

6.0 Adopting a convention:

7.0 The important ones:

Maritime security is an integral part of IMO's responsibilities. A comprehensive security

Annex III – Prevention of pollution by harmful substance carried in packaged form, or in

Annex IV – Prevention of pollution by sewage

Annex V – Prevention of pollution by garbage. - In force from 31st Dec. 1988.

The Protocol on Preparedness, Response and Co-operation to pollution Incidents by (HNS)

This is a very important Convention as it ensures adequate compensation is available to

10.2 International Convention on the Establishment of an International Fund for Compensation

The 1992 Fund pays compensation when:

CLC and the insurance is insufficient to pay valid compensation claims.

11.0 “Other Matters” :

This aims at preventing unnecessary delays in maritime traffic by providing uniformity in

11.2 International Convention on Tonnage Measurement of Ships, 1969 – TONNAGE 1969 – in

11.4 Nairobi International Convention on the Removal of Wrecks:

11.4.4 Articles in the Convention cover:

11.5 International Convention on the Control of Harmful Anti-fouling Systems on Ships.

 Ships will be required to carry ship specific inventory of hazardous materials. An

13.0 Seafarers’ training and certification: