Mumbai - Mitsui O.S.K. Lines, Ltd (MOL), the Japanese transport giant and the world’s third largest ship owner by fleet size, will likely open a unit in the Gujarat International Finance Tec-City (GIFT City) for leasing and owning ships.

The shipping lines has separately opened talks with Larsen & Toubro Ltd (L&T) to build an oil tanker at its Kattupalli yard near Chennai under the ‘Make in India’ program, multiple sources said.

The GIFT City is India’s first International Financial Services Centre (IFSC) under the Special Economic Zone Act – a tax-free offshore enclave within India that seeks to onshore India focused business carried out in other parts of the globe.

MOL’s plan is to open a new entity in GIFT City and use it to lease or build vessels in India under the ‘Make in India’ initiative.

“MOL will be setting up a unit in IFSC soon,” one of the sources briefed on the matter, said. MOL will look at leasing ships to begin with and follow it up by taking a separate license from the International Financial Services Centres Authority (IFSCA) to own and operate ships, potentially including vessel/s made in India, the source said.

The ships leased by MOL’s planned IFSC GIFT City entity will fly the foreign flag, but if it succeeds in constructing a ship locally, it will be registered under the Indian flag.

A shipping consultant said that MOL will “look at building a very simple ship” for a start under the Make in India initiative, to avoid the risks associated with constructing complex and technology intensive ships such as liquefied natural gas (LNG) carriers.

“MOL will start with something very simple such as a medium range oil tanker which has a standard design worldwide,” the shipping consultant revealed. A medium range (MR) tanker currently costs about $45-48 million to build from scratch.

“Banks are very strict on constructing the ship per the time schedule,” the consultant said.

Sakura Energy Transport Pvt Ltd, the Indian unit of MOL, runs three very large gas carriers, two very large crude carriers, two medium gas carriers and two product tankers since starting operations in April 2021.

MOL’s Indian unit is engaged in owning and chartering tankers such as oil, gas and chemical carriers to entities, including state-run oil refiners such as Indian Oil Corporation Ltd. MOL’s move to open a unit in IFSC GIFT City to own and operate Indian flag ships would boost the government’s efforts to woo global fleet owners to the tax haven with the aim of augmenting India’s dismal shipping tonnage.