Maritime services and domestic vessel operations: Call for regulatory stop on foreign exchange drain

In the absence of local regulations independent of international requirements, all our domestic vessels operated from our ports and in the coastal waters are unduly compelled to comply with internationally laid down regulations just as foreign-going vessels at an unnecessarily high cost, major part of which is spent as foreign exchange by way of imported goods and services described herein 

By Capt. Ranjith Weerasinghe

Sri Lanka’s maritime service vessel operation is a major part of maritime services in the country. It is essentially a 100% foreign exchange earning service. All of them are locally owned local operations providing maritime services to foreign ships calling our ports earning valuable foreign exchange continued even during this difficult times with the COVID-19 pandemic. 

Whilst the earnings are 100% in foreign exchange, a considerable component of expenditure is also in foreign exchange that can easily be reduced to a bare minimum if the Government could provide the required regulatory framework as discussed below.

Service vessels providing maritime services to ships calling our ports are all registered under the Sri Lanka flag as; bunker tankers, fresh water tankers, slop/sludge barges, repair barges, tugs, crew/supply/service/work boats, etc. Whilst maritime services provided by them relates to their description, there are other service providers using them particularly by bunker suppliers, slop collectors, ship repairers, ship chandlers, ship technical surveyors, crew managers and ship security providers and ships agents in general.

In the absence of local regulations independent of international requirements, all our domestic vessels operated from our ports and in the coastal waters are unduly compelled to comply with internationally laid down regulations just as foreign-going vessels at an unnecessarily high cost, major part of which is spent as foreign exchange by way of imported goods and services described herein.

Classification

Vessels registered under the Sri Lanka flag are required to be classed by a Classification Society within IACS group (International Association of Classification Societies) as per a gazette 1469/22 of 31 October 2006 much against the historical norm of ‘owner’s prerogative’ of classification. 

Our domestic vessels must comply only with locally laid down Statutory Regulations if we had, with Single Statutory Certificate under Government survey regime as in many countries including developed countries in the East and West (good example widely known in Sri Lanka is JG Coastal – Japanese Government Coastal vessels as most of our coastal vessels are used Japan coastal vessels). 

Vessels need to be built as per class rules but there is no need to maintain internationally recognised classifications or ‘Class Certificate’ if proper Statutory Regulations are in place. Maintenance of class is at a huge cost and all of which would be a drain of foreign exchange as all Classification Societies are foreign organisations. All 12 IACS Classification Societies are stationed in Sri Lanka and there is no doubt they play an important role on behalf of all flag states of international trading vessels calling our ports and in ship building.

Necessary equipment

When locally operated vessels are to be maintained as per Class rules and International Maritime Organizations (IMO) conventions, first of all there has be a large array of equipment totally unnecessary for domestic operational requirement, particularly radio equipment when coastal vessel trading within 12 miles from land can be contacted by any Mobile or CDMA phone onboard. 

Similarly safety equipment, navigation equipment, pollution prevention needing internationally stipulated such stringent standards not required on domestically operated vessels; but in absence of locally laid down rules and standards, all are needed to be type approved/class approved purchases from foreign sources whereas most of them can be made in this country if only the authorities had regulations to authorise the locally made items without compromising on the quality of them. 

During the COVID-19 pandemic this country proved the capability of producing innovate equipment. Even a local fire safety company cannot service fire extinguishers on a domestic vessel as they all need to be class approved whereas local fire service firms are capable of servicing fire equipment of billions of worth multi-storey buildings.   

Marine insurance

There is no reasonable law that stipulates the requirement for a local vessel to have own H&M Insurance (Hull & Machinery) and P&I (Protection and Indemnity) insurance against third party claims. In the absence of any law, the Ports Authority believes the local vessels should have a P&I cover as high as $ 5-10 million as any foreign vessels of comparable size entering the port. 

$ 5-10 million P&I cover for a local supply vessel of average value below $ 400,000 will never be at an economical premium. It invariably has to be from British, American or European P&I Clubs at a huge draining of foreign exchange again. What must be in place first is the stipulated P&I insurance requirement on local vessel to be reasonable. They cannot be in million dollars. 

But if it is a few thousand dollars, the local insurance companies should be able provide a cover within their treaty permitted by Sri Lanka Insurance Board. Reinsurance by local insurance companies anyway would have the economic advantage of standard bulk reinsurance volume. 

Ship repairs

Ship repairs are also governed by International Regulations and Class Regulations and are carried out by yards having foreign interests who are catering to large ship repairs where small local vessels can never be accommodated economically. A large sum of foreign exchange is drained out of the country by such exorbitant prices slapped by local ship yards on local vessels just like on large foreign vessel. There are enough of local ship repair parties who can carry out such repairs at a reasonably lower cost, but there are no such yards or dedicated areas for small vessels to be taken for repairs in any of the Sri Lanka ports. The repair and docking cost of local vessels are also going out as foreign exchange as long as we do not have smaller local repair facilities.

Slop collection 

Another maritime service offered by Sri Lanka service providers is collection of slops (waste oily water) and oily sludge from ships calling in our ports or outer anchorages as it is compulsory requirement to discharge all oily mixtures, collected in ships to shore reception facilities preventing the discharge of oily waste into marine environment. This process is stringently controlled by International Maritime conventions in which contracting governments have undertaken to provide reception facilities; service of such has become a means of income to the country as any ship needing this service must pay for the service. 

There are some 20 odd companies licensed as waste oil collectors engaged in this service. This service in Sri Lanka is conducted under the supervision of Marine Environment Protection Authority or MEPA and further regulated by Customs and permitted by Ports Authority under the vigilance of SL Navy. The process has never been made easy for the service providers and thus is expensive. In the resulting competition there apparently said to be occurring undue practices; one of them is undue payment to the party requiring the service instead of the service provider getting paid by them. Thereby money is going out of the country instead of earning it to the country by not conducting this service as required by the laws of the land. 

Competitiveness

As a result of all above and many more, the maritime services provided from Sri Lanka may not be as competitive as it should be. Thereby the volume of business attracted and the earnings is not at the best levels. It is the hope of the industry at this juncture where government is keen to reduce the drain of foreign exchange expenditure and increase the earnings to the country; immediate action is required to bring Sri Lanka’s maritime services under a very clear transparent, simple ‘Local Regulatory Regime’ covering all aspects discussed above.