New rules to provide impetus to Indian shipping industry

In an effort to rescue local shipping companies affected by the global commodities downturn, Indian state-owned firms may have to give half their freight business to local shipping firms.

India's cabinet could consider making it mandatory for state-owned oil, steel, coal and fertiliser importers to route at least half of their cargoes through local shipping companies as part of a broader agenda of Prime Minister Narendra Modi to shore up and protect the ailing sector, a government source said.

New Delhi is proposing importers sign five-year contracts with local shipping firms in a move designed to shift freight worth billions of dollars to Indian flag carriers and help boost fleet companies like Shipping Corp of India, Mercator Ltd, Great Eastern Shipping Co and Essar Shipping.

In 2013-14, India paid about $57 billion in freight payments to foreign firms. "We have already received comments from the related ministries on this proposal ... we hope next month the cabinet will consider this proposal," the source said, adding the five-year contracts would help firms raise funds to expand their fleets.