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*-rT*DIRECTORATE GENERAL OF SHIPPING, MUIIBAI
Dated: 14.01.2021
DGS Circular No. 02 of 2021
(Shipping Development)
Sub.:
Backsround, Legal Provisions and Policv:
whereas section 406 of part XtV of the Merchant shipping Act, 1958 [control of lndian
ships and ships engaged in coasting Tradel, mandates that rndian ships and other ships
chartered by lndian citizen or a company or a society, needs to be licensed by the Director
General of shipping. such license can be granted subject to such conditions as may be
specified by the Director General of Shipping.
2.
Whereas section 407 ofthe same Part ofthe Act mandates that ships otherthan lndian
ships or ships chartered by rndian entities, intending to engage in coastal trade of rndia, need
to be licensed by the Director Generalofshipping. such license can be granted subjectto such
conditions as may be specified by the Director General of Shipping.
3.
whereas, in exercise of powers under the above sections of the Act, the Director
General of shipping has by way of Shipping Deveropment Circurar No.-2/2002 dated
08.11.2002 [F.No. sD-g/cHRT (82)/97 -|1, issued guidelines to provide the right offirst refusal
to the lndian flag vessels before grant of license to foreign flag vessels.
4.
whereas, as of now, the Right of First Refusal (RoFR) is avairabre to rndian frag vessers,
as stipulated under shipping Development circular 02 of 2002 dated 0g.11.2002, issued by
the Director General of Shipping, Gol.
5.
Whereas, in addition to the existing policy to encourage flagging of ships in lndia, it is
also the express policy of the Government of rndia to encourage and promote manufacture
and production of goods in rndia under 'Make in rndia', with a view to enhance income and
employment. To give effect to this policy, the Department of lndustrial policy and promotion
(DIPP) has issued public procurement and 'Make in rndia,orders dated i.5.6.2017 and
28.05.2018, and 04.06.2020.
6.
Whereas, Government of lndia has taken several steps to promote ship bu ild ing in
lndia especially by providing long term subsidy for ship building under the shipbuild ing
financial assistance policy (2016-2026). J-rro
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Whereas, Government of lndia intends to further incentivise shipbuilding by providing
additional market access and business support to ships built in lndia.
8.
Whereas, it is felt that demand for the ships built in lndia can be promoted if some
preference is given to Ships built in lndia, in chartering of vessels and for engaging in coastal
trade.
9.
Whereas, a need has also been felt to review the licensing conditions keeping in view,
(i) the Government of lndia's policy of promoting the Make in lndia initiative, (ii) the Ministry's
existing policy to promote flagging of ships in lndia (iii) the Public Procurement and Make in
lnd ia orders dated 15.6.2OL7,28.05.2018 and 04.06.2020 issued by DIPP, (iv) the need to give
a long term strategic boost to the domestic shipping and shipbuilding industry, (v) the need
to encourage the domestic shipping industry to support the domestic shipbuilding industry,
and (vi) the need to develop self- reliance and a strong synergy among these vital industries
for the overall long term development and economic growth of the country.
10.
Whereas, the Notification No.2 of 'Make in lndia' dated 13.02.19 [F.No. Sy-
130t7 /412017-SBRl, was issued by the Ministry of Shipping, Govt. of tndia, requiring the
review ofthe guidelines on RoFR issued by the Director General of Shipping.
11.
Whereas, the ShippinB Development Circular 02 of 2002 was superseded by Shipping
Development Circular No. 02 of 2019 dated 22.03.19.
12.
Whereas, members of INSA were having certain objections on the provision covered
in the circular on RoFR and the said Circular No 02 of 2019 was challenged in the Hon'ble Delhi
High Court.
13. Whereas, the Notification No. 2 of 'Make in lndia' dated 13.02.19 [F.No. Sy-13017/ 4/20t7 -
SBRI has been withdrawn by the then Ministry of Shipping, Got (now Ministry of ports,
Shipping and Waterways) on 20.O7.2O2O.
14. whereas, the shipping Development circular No. 02 of 2019 dated 22.03.19, has also been
withdrawn by the DG Shipping, Got on 07.08.2020.
15. Whereas, the Ministry of Shipping (now Ministry of ports, Shipping and Waterways), Gol,
has issued a Notification No. sy-13017/a/2017-sBR dated 23rd october, 2020 on promotion
of Make in lndia initiative- RoFR for lndian built and lnd ian flagged ships through amendments
to Guidelines for chartering of vessels done through tender process for all types of
req uirements.
16. whereas, the said Notification of the Ministry dated 23d october, zo2o provides the
manner for exercise of Right of First Refusal.
17. whereas, the said Notification of the Ministry dated 23d october, 2020 provides that all
vessels flying the flag of lndia (i.e. registered in lndia) up to the date of issue of new circular
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lr+fby the Director General of Shipping shall be deemed to be lndian built vessels and will fall in
category (i) of the RoFR hierarchy given under Para 7 of the said Notification.
18.
Whereas, in view of the above background a need has been felt to review the
guidelines on Right of First Refusal under Shipping Development Circular 02 of 2002 and
Shipping Development Circular No O2 of 20L9 (now withdrawn), to balance the interests of
the shipping and ship building industries keeping in view of the policy of the Government to
make lndia, Self-Reliance lndia [Atma Nirbhar Bharat) in maritime sector.
19.
Now therefore in exercise of powers conferred under Section 406 and 407 of the
Merchant Shipping Act, 1958, the Director General of Shipping, in supercession of previous
guidelines relating to chartering and licensing of the vessels, is pleased to issue the following
guidelines, for Right of First refusal in chartering or engagement of foreign flag vessels.
20. Charterinq or engagement of foreign flag vessels done through tendering process, for
all tvpes of requirements: -
20.1. The cha rtering/en8agement of vessels through "tender process" as mentioned above
shall only be applicable for open/global tenders and chartering/engagement by other means
shall be considered as "charterin&/engagement through non-tender processes". The "tender
process" shall be considered valid within the following definition:
20.1.1. Tenders shall be open or global tender, for which a tender advertisement has been
duly published in a national or international newspaper or commercial websites or website of
the agency/organ ization/company floating the tender;
20.L.2. Tender contains technical specifications and commercial terms and conditions of the
vessel provided in the tender advertisement. lf there is a dispute relating to technical
specifications of the vessel given in the tender advertisement, the matter may be referred to
DGS for decision as to whether the lndian vessel with a slight difference in specifications
should be chartered/engaged, and not the foreign flag vessel. As far as practicable, this
decision will be taken after discussion with the concerned parties.
27.
Risht of First Refusal: "Right of first refusal" is a right which accrues to a bidder in a
tendering process, who offers a vessel from the category listed at Para 21.3.4, subject to his
matching of the lowest rate offered by a bidder who offers a vessel not listed under para
21.3.4. The order of preference for right of first refusa I will be as indicated at para 21.3.4. This
right is conferred based upon the practices ofthe industry, and the deliberate intention of
the Central Government towards encouragement and development of the lndian ship-
building industry and the lndian shipping industry.
21.1. Unless the vessel offered is successful in the evaluation of technical bid, the bidder
concerned will not be eligible to exercise the Right of First Refusal under this circular.
21.2. whenever cha rter/engagement of vessel is undertaken through a tender process
specified in Para 20, the provisions of these guidelines are required to be incorporated.
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3Whether the guidelines have been incorporated in any tender or not, the said guidelines
would be deemed to have been incorporated as a part ofthe tender documents.
27.3. The instances under which the RoFR may be exercised are:
21.3.1. The L1 bidder is a Foreigner or an entity registered outside lndia, offering a vessel not
listed at Para 21.3.4.
2t.3.2.The L1 bidder is a Citizen of lndia OR company registered in lndia OR Society registered
in lndia with a vessel not listed at Pa.a 2L.3.4.
21.3.3. From amongst the bidders eligible to exercise RoFR, the priority to exercise this Right
would lie in sequence mentioned in Para 21.3.4 below and in case more than one bidder is
available in a particular category, then from the lowest to the highest bidder within the
margin of purchase preference. The exercise of RoFR would cease as soon as an eligible bidder
in order of priority matches 11. The first priority would be given to any bidder who offers an
lndian built, lndian flagged and lndian owned vessel. ln the absence or unavailability of lndian
built, lndian flagged and lndian Owned vessel, the RoFR will move to Foreign built, lndian
flagged, lndian owned vessel and then to lndian built, foreign flagged and foreign owned
vessel.
21.3.4. For further clarity the order of grant of RoFR would be as follows:-
a) lndian built, lndian flagged and lndian owned,
b) Foreign built, lndian flagged and lndian owned,
c) lndian built, foreign flagged and foreign owned.
Provided that:
1. All vessels flying the flag of lndia (i.e. registered in lndia) up-to the mid night of 15.01.2021
shall be deemed to be lndian built vessel and will fall in category [a] above.
2. The Foreign flagged vessels permitted by the DG Shipping, under section 406 of the MS Act,
1958, for chartering by an lndian citizen/company/society, who is building a ship in an lndian
shipyard for registration under lndian flag, as a temporary substitute for the lndian Ship under
construction, meeting the following two condition, shall be deemed to fall under category [a]
above:
a) The 25% ofthe contract money has been paid to lndian shipyard.
b) The 50% of the hull fabrication has been completed, as may be certified by a Recognized
Organ ization.
The duration of licences to such chartered vessel shall be limited to period of building of the
Ship, as mentioned in the shipbuilding contract.
tt'-ryrfi^21.3.5. Further, RoFR shall be applicable to all inquiries for in-charter offoreign flagged vessels
with in a 2Oo/o margin of purchase preference (price band) i.e. the maximum extent to which
the price quoted by an lndian Company may be above the L1 for the purpose of purchase
preference.
21.3.6. ln case none of the bidders eligible to exercise RoFR matches the L1 quote, then the
charter shall be awarded to the L1 bidder.
21.4. The bidder who exercises RoFR should meet the commercial requirement by matching
the lowest Composite Effective Price. lt is further clarified that there shall be no price
preference in favour of any vessel. The Composite Effective Price is the derived figure from
the various price inputs submitted by a bidder/participant in a tender process, wherein allthe
costs/inputs are summarized. While working out such Composite Effective Price, inputs such
as daily hire/daily rate, mobilization/demobilization charges, call out rates and conversion
charges etc. are taken into account.
22 Any grievance arising out of implementation of these guidelines shall be referred to the
DG Shipping, Gol.
23. This Circular will come into force w.e.f. 15.01.2021 and shall supersede all the previous
DGS circulars on Right of First Refusal.
fum,,hr,t
Director General of Shipping
& Additional Secretary to the Gol.
To,
1.
All stakeholders/All Charterers/Shippers/All tndian Shipping Companies, through the
official website of the DGS, Gol.
2.
INSA/ICSSA/FOSMA/MASSA/Shipyards Association of tndia/CSL,/tSBA/NUSt/MUt/tMF
3.
lndian Private Ports and Terminals Association.
4.
Shipyard Association of lndia.
Copv also forwarded for kind information to the:
1. PS to Hon'ble Minister of State (lndependent Charge) for ports, Shipping, and
Waterways. Gol.
2. Secretary to the GoW. of lndia, Ministry of Ports, Shipping, and Waterways, Transport
Bhawan, 1, Sansad Marg. New Delhi-110001
3. CEO, NlTl Aayog, New Delhi.
4. Secretary, Department of Defence, South Block, Ministry of Defence, New Delhi.
5. Secretary, Department of Defence production, Ministry of Defence, South Block, New
Delhi- 110011.
6. Secretary, Department of lndustrial policy & promotion, Udyog Bhawan, New Delhi_
110011.7.
Secretary, Ministry of Petroleum and Natural Gas, A-Wing, Shastri Bhawan, Dr.
Rajendra Prasad Road, New Delhi- 110011.
8.
Secretary, Ministry of Chemicals and Fertilizers, A-Wing Shastri Bhawan, Dr. Rajendra
Prasad Road, New Delhi-110011.
9. Secretary, Ministry of Steel, Udyog Bhawan, Dr. Maulana Azad Road, New
De1hi,110011.
10. Secretary, Ministry of Home Affairs, North Block, Central Secretariat, New
De1hi,110001.
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