The first victim of clause 5.4 from the Import-Export policy - Handbook of Procedures of the commerce ministry - has been Essar Shipping. Essar had acquired a second hand capesize vessel in the last week of August.

However, the customs officials seem too have "stumbled" over this norm, a top SCI official said, which existed without being implemented. This has led to the capesize vessel being rested in a dry dock at Baharain in absence of registration from the Directorate General (DG) of Shipping.

Essar had the option to register the ship under a different flag, but their officials did not divulge details despite repeated follow ups. Essar officials, despite repeated attempts, did not reveal the official version on the entire event.

Clause 5.4 states "Import of second hand capital goods which are not more than 10 years old shall be allowed on surrender of special import licence (SIL) equivalent to five times the CIF value of imported capital goods."

According to a top official at DG of shipping, the practice for acquiring second hand ships were changed from April 1 this year with the deletion of a para in clause 5.3, which led to the substitution of the guidelines of ministry of surface transport (MOST) with clause 5.4.

The clause has put the shipping industry in fix as it does not export and finds it unfeasible to pay premium to buy special import license. The issue of licenses earlier handled by the MOST is now being "delegated" the ministry of commerce with this new norm, he said. The clause should have exempted the shipping industry as it is unfair on account of low profitability, making it unattractive for investment, a SCI official said. The norm has pushed the shipping industry, which is already otherwise languishing, down the cliff, he added.

Essar Shipping, had in the first week of August, disclosed its intentions of acquiring a second hand capesize vessel with a dead weight tonnage (DWT) of 1,50,000 for roughly US $12 million. This was to be followed by another second hand capesize vessel in the first week of October.

The new capesize vessel was acquired at a time when the freight market had improved considerably. The new vessel was to generate a revenue of US $ 17,000 per day while the operational cost would have been in the region of US $ 4,000 to 5,000 per day, company officials had said in the light of the buoyancy in the market.