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i-maritime Newsletter

Shipping cos may get breather if cargo support scheme is implemented - 2011-12-12

The recession-hit shipping companies will get a breather if the cargo support scheme suggested by a Government-appointed working group is implemented. The group wants all shippers (exporters and importers) with more than a pre-specified annual turnover should compulsorily use Indian ships for carrying a third of their goods. Their export incentives will be linked to fulfilling the shipping criteria, said a member of the working group.
The group has suggested that shippers should be given at least three-six months before implementing the one–third cargo support scheme. Currently, Indian ships carry less than nine per cent of the country's cargo. The scheme is expected to not only boost the cargo share of national carriers, but also will help expand Indian tonnage. Currently, India has a fleet of 1,119 ships of 11 million gross registered tonnage or grt. In container cargo, the share of Indian ships is only 3.4 per cent. Even in oil and petroleum products, in which national bottoms enjoyed more than 50 per cent share a decade ago, the share has come down to 15 per cent. ―The scheme will be a game changer for Indian shipping. It will automatically, increase the national tonnage and it could even lead to FDI inflow‖, the member said. Though India allows 100 per cent FDI in shipping, there has been hardly any foreign investment in shipping as there is no special advantage in operating under the Indian flag. According to Mr S. Hajara, Chairman, Shipping Corporation of India, after 2008, several counties have started taking measures to support domestic industries. China has been following a policy to support its shipping and shipping building. India needs to follow the Chinese model, he said. ―Shipping is international business; there is nothing like an Indian freight rate. Indian lines carry domestic cargo at international rates. We are competing with foreign carriers for domestic cargo. We have to follow Indian rules and regulations and pay taxes, but our competitors need not,‖ said Mr Hajara in a conversation with Business Line. The scheme could be opposed by large Indian shippers particularly oil companies which mainly use VLCCs for import of crude. They will argue that Indian operators will not able to offer the capacity they want at the intentionally available rate. The working is part of the National Transport Development policy Committee, headed by Mr Rakesh Mohan, former Deputy Governor of the RBI. Indian shipowners' lobby thinks that Mr Rakesh Mohan could get the scheme accepted by the Government. He is seen as a friend of the Industry. It was at his recommendation that the Government had introduced the tonnage tax for Indian shipping companies.

Source: Hindu Business Line