Indian Seafarers Face Mounting Financial and Compliance Risks Amid West Asia Conflict

What Happened

Indian seafarers working on merchant vessels transiting through the Strait of Hormuz, Red Sea, and surrounding waters have become inadvertent victims of the escalating West Asia conflict. The crisis has resulted in attacks on commercial shipping, vessel diversions, and heightened security risks that disproportionately affect Indian nationals who constitute a significant proportion of global maritime workforce—approximately 175,000 seafarers are estimated to be working on international vessels at any given time.

Vessel owners and operators have been forced to implement costly measures including rerouting around the Cape of Good Hope instead of the Suez Canal, extended voyage periods, enhanced security protocols, and increased insurance premiums. For Indian seafarers, this has translated into extended periods away from home, delayed wage payments, heightened workplace hazards, and psychological stress. Several Indian crew members have been stranded on vessels caught in conflict zones, unable to disembark safely or access regular communication with families.

The Indian government, through the Ministry of Shipping and the Directorate General of Shipping, has issued advisories and directives, but implementation challenges persist. Insurance claims have become contested, wage disputes have escalated, and repatriation protocols have been strained by logistics and bureaucratic delays.

Why It Matters

From a financial and compliance perspective, this crisis presents multi-layered implications for Indian shipping companies, manning agencies, and maritime employers. First, the financial statements of shipping enterprises must now reflect significantly elevated insurance and operational costs. War risk premiums on hull and machinery policies, as well as freight, demurrage and defence (FD&D) insurance, have spiked substantially, creating material cost pressures that affect profitability and working capital management.

Second, there are employment law and contractual compliance dimensions. Extended voyages trigger additional wage provisions, overtime calculations, and statutory benefits under Indian law. Companies must ensure compliance with the Maritime Labour Convention (MLC, 2006), which India has ratified, regarding seafarer welfare, repatriation, and compensation entitlements. Delays in wage payment or failure to secure safe repatriation can expose employers to liability under the Employees' Compensation Act, 1923, and Indian Labour Code provisions.

Third, revenue recognition becomes complex. Companies operating under the percentage-of-completion or voyage-based recognition models may face complications in recognizing revenue when voyages extend unexpectedly or when vessels are diverted. Provisions for contingent liabilities related to claims from stranded crew members or regulatory penalties must be assessed and disclosed appropriately under Ind-AS standards.

Finally, there is a broader systemic risk to India's maritime competitiveness and forex earnings. Repatriated earnings from seafarers contribute meaningfully to India's balance of payments. Operational uncertainties and safety concerns may deter Indian maritime professionals from pursuing careers at sea, creating workforce shortages and pushing costs upward industry-wide.

Practical Impact

For CFOs and finance teams at Indian shipping and maritime companies, immediate actions are required. Insurance coverage must be reviewed—ensure marine policies explicitly address war and terrorism exclusions and that coverage limits are adequate. Additionally, evaluate whether additional war risk insurance is economically justifiable or whether voyage selections should be revised.

Audit and compliance teams should undertake detailed review of revenue contracts for force majeure clauses and their accounting treatment. Provisions for crew repatriation costs, wage adjustments, and potential compensation claims must be quantified and appropriately recognized. If operating internationally, ensure compliance with the MLC, 2006, including documentation, medical certifications, and wage payment records, which are subject to port state control inspections and can result in vessel detentions and penalties.

Taxpayers should evaluate whether heightened operational costs and extended voyage durations affect GST input credit eligibility or create transfer pricing complications for multinational shipping groups. Companies should also monitor any government relief schemes or tax incentives that may be announced to support the maritime sector.

More broadly, this situation underscores the importance of maintaining robust contingency funding, insurance architecture, and contractual clarity in maritime operations. Organizations should engage regularly with the Directorate General of Shipping and the Ministry of Shipping regarding crew welfare protocols and ensure internal policies align with evolving regulatory expectations. Risk disclosures in financial statements must reflect geopolitical exposure comprehensively so that stakeholders and auditors can appropriately assess business continuity threats.

Key Takeaways

• →Indian shipping companies must conduct urgent reviews of marine insurance policies, particularly coverage for war risks, terrorism, and extended voyage scenarios; war risk premiums have risen materially and coverage gaps expose organizations to significant financial liability
• →Revenue recognition policies and voyage-based contracts require revaluation given force majeure implications and extended transit times; ensure Ind-AS 115 treatment is robust and adequately disclosed to auditors and stakeholders
• →Maritime Labour Convention (MLC, 2006) compliance, including crew wage payment, repatriation provisions, and medical certification documentation, must be strengthened immediately to avoid port state control detentions and regulatory penalties
• →CFOs should quantify and separately disclose in financial statements all contingent liabilities arising from crew repatriation costs, wage disputes, and potential compensation claims to ensure transparency with auditors and compliance with Ind-AS 37
• →Engage proactively with the Ministry of Shipping and Directorate General of Shipping to understand relief schemes, tax incentives, or regulatory accommodations available to the maritime sector and communicate implications to tax and corporate governance functions

Disclaimer: This update is for general information only and does not constitute legal, tax or professional advice. Regulatory positions may change. Please consult APRA & Associates LLP for advice specific to your business. Contact us.