Indian tonnage needs a level playing field - Essar | Creating Value

Indian tonnage needs a level playing field

Sisir Pradhan

Maritime Gateway​

Jul 23rd, 2018

Ranjit Singh, Executive Director & CEO, Essar Shipping Ltd

Of late, there has been a lot of push for relaxing cabotage. Ranjit Singh, Executive Director & CEO, Essar Shipping Ltd, points at the discrepancies in policies which make the going tough for Indian tonnage.

Q How a level playing field could be created for Indian flagged ships?

The shipping industry is leapfrogging in developed countries, while India still lags behind. China ensures that 600 million tonnes of coastal cargo is carried by Chinese flagged vessels. Japanese imports are carried only on Japanese-owned vessels. In the US, at least 30 per cent of the gas exports are ferried on their national fleet.

Absolute cabotage is practiced in each of these countries, while the concept of cabotage is conspicuous by its absence in India. India offers Right of First Refusal (RoFR). But traditionally the lowest bids for carrying Indian cargo have been quoted by foreign vessels. An Indian ship-owner is at a disadvantage because of higher operating costs, costly bunker and taxes when compared to his foreign counterpart. If India relaxes RoFR norms then Indian ship-owners may have to revisit their decision to flag vessels in India.

Q What is your view on Cabotage and exercise of ROFR?

Foreign vessels are not taxed when operating in Indian waters, while Indian ship-owners are burdened with Income Tax for their seafarers. In addition, there is the extra cost of bunkers that are bought on the Indian coast.

Therefore, the purpose of having a RoFR policy is completely defeated. The Government of India recently introduced the Indian Controlled Tonnage scheme wherein Indian ship-owners can flag their ships outside India, as long as they are manned by 50 per cent Indian seafarers. This is designed to help secure easy finances. However, withdrawal of the RoFR will make this scheme redundant.

Q Why are Indian ship owners demanding for a national fleet?

This is in line with other major maritime powers that support their own shipping firms for retaining control and securing the transportation of critical cargo. A national fleet policy mandates that ships engaged in trade must be flagged, or registered, in India irrespective of whether they are owned by Indian or foreign shipping lines.

Foreign shipping lines currently control over 90 per cent of India’s cargo. They should therefore be asked to flag some of their vessels in India and pay taxes. That would create a level playing field.

Q What are the reasons for lack of foreign investment in the Indian shipping industry?

Lack of a proper policy framework, incentives, connectivity infrastructure, ineffectiveness of the RoFR policy, higher operating and financing costs, negligible budgetary support, and eventually uncertainty over the RoI.

Q What needs to be done to encourage ship building in India? How India could improve bunkering?

The ship building industry in India is at its worst because of the cost of imports and duties on machinery & the dwindling steel industry in the country. With the imposition of the anti-dumping duty in the steel segment the industry has now turned and will further improve with the increase in domestic demand. However, it has been cheaper to build ships in China.

At major ports, the fleet available for bunkering is negligible. Adding to this is the 30 per cent extra duty paid on bunker compared to Sri Lanka or Singapore. Berthing issues, lack of infrastructure, cost of bunker, administrative issues at ports, additional cost for bunkering, all lead to unavailability.

Q Are you looking at markets other than India?

We are looking at serving steel companies overseas as well. Our focus is on Qatar, UAE and Bahrain.

Source: Maritime Gateway​ – July 2018