Why India is just not prepared to handle coastal disasters
The Indian maritime authorities can only wait and watch and hope that the tide washes away the aftermath of the recent collision off the Mumbai coast
A basic study and understanding of international law is part of the immense syllabus that a mariner has to undergo before he can hope to become even the 2nd or 3rd in command on a ship. This is further honed by the strict way in which the authorities, especially of late in developed countries, expect ships and people working on them to know as well as adhere to the laws. Especially those laws pertaining to eventualities which impact the environment - a subject that results in liabilities running into hundreds of millions of dollars.
It is obvious that these administrations have to be on the ball before the incident, to not just be ready to counter the effects, but also to ensure that they can collect. Otherwise, it is only so much hot air, while ship-owners and their insurers get away without paying much thanks to the proverbial "fine print". And arresting the crew of a ship, or seizing a ship which is already damaged or a wreck, is not going to help.
It is therefore indeed very amazing to hear people talk about arresting a captain and getting the ship-owner to pay and by further assumption implying that the insurers will be by some magic made to pay for the cost of the post-incident activity including the cleanup, in the midst of the rest of the reportage on the MSC Chitra /MV Khalijia III incident outside Mumbai, as though it were a simple case of collecting from the owner or his insurers, and then settling the bills. If only things were that simple. And if only governance as we know it in India was more on the ball as far as a variety of international treaties and conventions were concerned.
For example, India is still not a signatory to the International Convention on Wreck Removal, 2007, for reasons best known to the administration. This itself puts the Indian administration on the back-foot from the outset itself. And it is not as though this has not happened before, or the urgency is lost on them, the Indian coast is dotted with wrecks rotting away, slowly polluting everything in sight, and becoming a danger to every other user. Just that this time it happened right off south Mumbai.
For those who want to read up more on this subject, this commentary appended below is very apt and interesting, but a short question here is this - why does the Indian maritime administration permit such overage ships in Indian territorial waters without specific separate and pre-verified insurance cover taken out in advance, regardless?
The regardless comes into play here because any insurer worth his or her salt will soon try to prove first of all for a variety of reasons that the ships were not seaworthy at the time of the collision. This is reasonably easy to do for old ships. It still needs to be seen what sort of class and insurance MV Khalijia III had, since she had almost sunk about a month ago while off Mumbai, and it is still not clear when, how, why and by whom she was permitted to make an unescorted move into Mumbai Port.
Likewise, disturbing rumours are surfacing about the loading plan, stability as well as general preparedness for a monsoon sea voyage of the MSC Chitra, and whether full lashing as well as securing had been done prior to departure or not. Incidentally, this is also an elderly ship, having been stopped in New Zealand as well as Australia in the recent past - here again, why was she allowed into Indian ports without specific covers?
The first point here is to find out if both ships were seaworthy at the time of the incident in the legal sense of the word, or not, as simple as that. If it is proved that either or both of the ships were not technically seaworthy at the time of the incident, then the various insurance entities have got a right to simply refuse to provide cover.
That, apparently, is a real possibility if it turns out that MV Khalijia III was not seaworthy. Registered in the Flag of Convenience haven called St Kitts, it will not be easy to get anything from the "owners", as is always the case.
What are the various kinds of insurance payouts possible in an incident like this?
An indicative list, certainly not comprehensive as we go to press, and very subjective since all owners and insurers have their own terms and conditions, would look like this, and all assuming that claims and counter-claims would be settled basis judgements from the Admiralty Courts in Mumbai, allowing a while to work things out. Please also note that every payment would take place via a complicated route of a vast variety of claimants and counter-claimants including charterers, banks, shippers, consignees, those with any sort of a lien on the ship and everything on board, unpaid suppliers, and so on and so forth.
The ship-owner's Hull and Machinery Insurance would cover the cost of the ship as a total constructive loss, via a complicated route of charterers, banks, those with any sort of a lien on the ship and everything on board, including crew, unpaid suppliers, and so on and so forth.
The P&I Club, (Protection and Indemnity Club) would cover the claim on the cargo damage or loss, as well as some part of the environmental damage caused by the ships. It would also cover baggage, health, personal effects and other claims from the crew members, whose wages, incidentally, stopped the moment the ship was abandoned.
Freight is deemed earned by the ship, cargo delivered or not, so somebody will have to pay that to the ship-owner. In most cases, that would be the shipper/consignee's insurers, if not, counter claims on the shipper/consignee.
Now we come to the big bucks - and you can already spot the greens as well as the politicians salivating - the cleanup for environmental pollution. Thanks to being a signatory and participant in good order to the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001, India has access to vast amounts of funds here. However, putting it bluntly, the "fund" works in a very commercial manner, and low claims by the Indian government can certainly be compensated by benefits to individuals.
It will be very interesting to track this and see how much the Indian government does claim from this fund. The simple fact that the government was just not ready to fight the pollution caused is itself reason enough for the fund not to pay. Now do we understand the real reason why there is a delay in setting up the mechanism to counter such pollution?
Traditionally, the developed countries claim and get compensated a lot, in oil-pollution cases - whether cargo or bunkers. That's because they have kept the resources ready for such eventualities - which the fund will pay for, anyways.
Developing countries, on the other hand, claim lower. People who follow will understand. Briefly - it appears as though developing countries contribute to the fund so that developed countries can claim. It is a lovely arrangement for all except those who got hit in the developing countries if you look at it through the prism of the realities involved.
Another area where the administration can claim and get paid a lot under a variety of international conventions and treaties, too many to be mentioned in a short article, would be claims pertaining to loss of business for the ports, hotels, tourism industry, urban and rural sufferers - made by the administrations on behalf of such categories. This is another segment where the fiddles are expected to take place by those claiming to represent the affected - the procedures for individual claimants are too complex and rigorous, even for the best of us. Once again, see the greens snarl at everybody else in public, while behind the scenes the claims are worked on. Bhopal was nothing compared to the numbers expected in such cases - especially if it involved oil tankers.
Then there will be the more interesting claims from the ships which have been delayed due to the port being shut down. They will claim this from, yes, you got it right, the government of India as well as the port authorities. Who will pay this?
This list goes on, but the root cause for this remains the same - the Indian maritime administrations refusal to severely handle the issue of old and unsafe ships from heading for Indian ports and territorial waters is now an issue which cannot be left unresolved.
The problem here, however, is this - letting them in and then working the benefits of such incidents, is now a money-spinner for all. So why bother? Let the rust buckets and derelicts keep heading for Indian ports, then stand in the wings, say the correct things on television - and then collect.
More in Moneylife
TODAY'S TOP STORIES
Keep your Money Safe: Avoid money traps and MLM
- Phaneesh Murthy: Let off by Infosys, sacked by iGate over sexual harassment charges
- Is the interest in Gold ETFs waning?
- OMCs to stop LPG deliveries to houses with multiple-connections from 1st June
- BSE to shift 29 scrips to T group category for failure to comply with demat norms
- Sun TV Networks announces 11% jump in its net profit
- S&P cautions India of rating downgrade; retains negative outlook
- COMPAT orders cement cos to pay 10% of the Rs6,307 crore penalty
- ITC net profit up 19.4%, aided by non-cigarette and agri-business segments
- Vikram Pandit to buy stake in JM Financial, to head its proposed banking arm
- MMM India, another MLM taking people for “double-your-money” ride
- RBI tells HDFC Bank not to make up its own KYC verification rules
- Why I-T returns of Pawar, Jindal and Gandhi are exempted from RTI?
- The draconian LBT: Local Body Tax explained
- How much longer can the FM, RBI ignore HSBC in India?
- Aadhaar: Private ownership of UID data- Part I
- Aadhaar: Who owns the UID database? –Part II
- Did HSBC Bank resort to toxic churning and illegitimate transactions to earn commissions?
- PNB Metlife refunds Rs25,000 to the correct policyholder: another Moneylife victory
- The draconian LBT: Local Body Tax explained
- Goa’s Advocate General is the highest paid across the country, reveals RTI
- Mass mis-selling: 59,000 investors in Kolhapur are alleged to have lost money in LIC ULIPs
- Do FIIs buy high and sell low – I? Maximum buying at peak index levels
- Investors lost Rs1 lakh crore due to poor regulation. Will there be a CBI probe?
- Directors of public sector banks: The ground reality
- Do FIIs buy high and sell low–II? Momentum-chasing
- Do FIIs buy high and sell low–III? Panic-selling during declines
- Has Rakesh Maria tried to salvage his image through Ram Gopal Varma’s film on the 26/11 attack?
What's your say?
What you said
Thanks for casting your votes! View Previous Polls
Join 22, 000 Others
- Daily & Weekly newsletters
- Access to www.moneylife.in to comment, create alerts
- Your own profile in Moneylife.in
- All special mailers
- Basic membership to MSSN, our new initiative
- Free ebooks
- Invitation to events
- Invitation to round-table meets
- Access to Insurance helpline
- Access to counselling sessions
- Access to Reading room in Mumbai