Relief for shipping Cos as Indian coast is piracy-free - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Friday 9 October 2015

Relief for shipping Cos as Indian coast is piracy-free

By Ajai Shukla
Business Standard, 10th Oct 15

From December 1, there will be relief for ship-owners who have been paying exorbitant “war-risk” insurance premiums for ships transiting across the piracy-prone Arabian Sea. Now, in an acknowledgement of the success of the Indian Navy and coast guard in checking piracy along the Indian coastline, it will no longer be designated a “High Risk Area” (HRA).

Since 2010, the HRA has extended from the West Asian and East African coast all the way across the Arabian Sea to India’s territorial waters. From December 1, it will extend only halfway across the Arabian Sea, acknowledging the eastern Arabian Sea as piracy-free.

Since 2011, the Indian National Shipowners’ Association (INSA) has pushed for reducing the HRA. According to INSA, insurance premiums for a single voyage to India had skyrocketed from $500 earlier, to over $70,000. Instead of just three days of insurance for transiting through the piracy-afflicted Gulf of Aden, cargo vessels had to be insured for ten days of transit through the Arabian Sea.

These rates applied to about $50 billion worth of Indian imports, and $60 billion worth of exports that were being shipped through the Gulf of Aden, according to the Ministry of Shipping.

This trade will now require lower insurance premia. A press release on Thursday from the European Union, which currently chairs the international Counter-Piracy Contact Group, states: “The piracy High Risk Area in the Indian Ocean will be reconfigured on December 1st to reflect the progress made in fighting piracy off the coast of Somalia. This is the outcome of an industry-led review of the High Risk Area that was conducted at the request of the Contact Group on Piracy off the Coast of Somalia”.

This release, however, is misleading, because there is no change in the HRA off the coast of Somalia. The “progress made in fighting piracy” is actually off the western coast of India, from where the HRA has been lifted.

India’s western coast was afflicted by piracy in the mid-2000s, when Somali pirates shifted focus here after sustained pressure from an international counter-piracy coalition, which began using warships to escort merchant vessels off the Horn of Africa.

Besides a sharp rise in insurance rates, this led to international mercenary groups, operating from “floating armouries” in the Arabian Sea, which rented out well-armed gunmen to beat off pirate attacks. Some countries deployed soldiers on merchant vessels, leading to the tragic incident on February 15, 2012, when two Italian marines, deployed on an anti-piracy “vessel protection detachment” on the Italian oil tanker, Enrica Lexie, shot dead two Indian fishermen in the Arabian Sea, whom they mistook for pirates.

This spread of piracy to the Indian coast (and the consequent rise in insurance rates) elicited a sharp response from the Indian Navy and Coast Guard in 2008. According to figures provided to Business Standard, the navy has deployed 53 warships in Goa since then, escorting a total of 3,179 merchant vessels along the Indian coast. Since 2012, there has been no incident of piracy in these waters.

Piracy, mainly perpetrated by Somali pirates operating from that country’s lawless territory, has evoked a successful international response. The UN Security Council has issued resolutions against piracy. An international cooperation mechanism, the Contact Group on Piracy off the Coast of Somalia (CGPCS) was formed in 2009.

Since 2008, 33 countries and 14 international organisations have participated in the Shared Awareness and Deconfliction (SHADE) initiative, which holds meetings in Bahrain to coordinate activities between the countries and coalitions engaged in military counter-piracy operations in the western Indian Ocean.

In 2012, India, China and Japan entered into a trilateral agreement for “coordinated patrols”, in which warships from the three countries would coordinate timings for escorting merchant shipping convoys in the Gulf of Aden. This arrangement, which has worked well so far, continues. 

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