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Wednesday, February 8, 2023

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India Shipping Summit 2013 - a game changer

Posted to India Shipping Summit 2013 - a game changer (by on October 24, 2013

This years’ Shipping Summit finds that India will keep its tryst with victory despite the many setbacks

Was India Shipping Summit 2013 successful in unraveling the “secret” said to provide stakeholders and other industry professionals with solutions to surmount the myriad hurdles in the way while helping them to keep their tryst with victory? Bringing into focus crucial issues said to beleaguer the industry, the two-day event justified the need for putting projects on a fast track and kindled the hope of seeing the industry overcome the malaise.

This ‘king’ of shipping events is considered to have the pulse of the maritime sector in India. In fact, it serves as a benchmark for those involved in organizing similar conferences and events in the country. Putting things in proper perspective the Summit advocated an innovative approach for resolving problems; and the need for harnessing the extensive talent and trained manpower available; as well as to exploit the huge potential and resources on hand; and a resolve to bring together all sections of the industry to work as one to achieve the common goals.

It is generally felt that there is a strong case for getting the government to provide a level playing field not just for ship owners but also ship builders, dredging companies, etc. However, this has been found to be agreeable as long as it does not encompass protectionism. For ship owners’ to flag out their vessels is considered advantageous. Besides, carrying Indian import cargo is a burden since Indian ship owners are liable to pay service tax and other expenses while foreign ship owners are exempted from the said tax. Thus, both flagging out and preferring not to carry Indian import cargo is a better option for Indian shipping since it is seen to have the blessing of the Indian government’s policies.

But there was a general consensus that relaxing the cabotage law on a piecemeal basis did not make sense and should be made applicable for all ports and not just Vallarpadam. Indian shipowners have been opposing any relaxation of the Cabotage law on the ground that there is a need for cargo support to Indian companies, a practice prevalent in some countries including the United States which has the Jones Act that lends support to its national stakeholders. However, it was pointed out that this argument did not hold water here since the Indian National Shipowners’ Association (INSA) had itself given a ‘No objection certificate’ (NOC) to the Director General of Shipping (the Indian Administration) while permitting in-chartering of nearly 340 vessels during the past year as these were not in a position to carry the cargoes themselves.

India being a democracy it was felt that unless the industry makes it voice heard nothing would help. The country is surfeit with talent and professionals and extensive resources and the industry needs to take advantage of the huge opportunities that exist. As in the IT sector which initially neither got any support from finance companies nor any encouragement from the government yet it surmounted all obstacles and reigned supreme. So also the shipping industry should stop thinking in terms of getting concessions or have the government serving as a crutch for growth. In fact there are several opportunities available for the industry. They could partner with cargo producers and go in for long term contracts; the demand for LNG and coal has been soaring. LNG imports would soon touch 180 million tons and coal 135 million tons thus requiring vessels for transport; and there is need to dredge the approach channels of the port to allow large vessels to call at the ports. It is a well known fact that often support and protectionism brings with it a tendency for apathy and unconcern. Also instead of acquiring new buildings which only adds to the capacity, it is better to go for second hand vessel or chartering. In other words, it is time to make departures from the traditional system of operation.

On the port side, the combined capacity of Indian ports is around 1300 MMTPA; against this the cargo handled in 2012 – ’13 was 934 MMTPA. The port traffic is slated to shoot up to 2,500 MMT by 2020 and hence this calls for capacity requirement of 3,130 MMT viz an additional 1,800 MMTPA capacity needs to be created within the next 6 years, that is, an addition of 300 MMTPA needs to be added each year. But this may be difficult to achieve as several impediments threaten to stall infrastructural development taking place. There is a need for proper dispute resolution system for PPP (Public Private Partnership) projects to safeguard the project from market uncertainties.

Port based industries should be encouraged to develop dedicated cargo handling facilities. Tariff should be completely deregulated and revised guidelines need to be issued allowing greater flexibility even to increase the tariff by more than 15%. Capacity of existing ports can be increased substantially without further land requirement but by integrating mechanization, increasing the draft and improving the connectivity. All the statutory clearances should be obtained even before bids are invited for any project. ECB refinancing norms for the project should be relaxed as ports are not able to get much benefit. Tax incentives should be provided in direct tax by waiving off the MAT and in indirect tax by providing custom duty exemption on imported equipment. Major ports should be corporatized and more freedom should be provided to take decisions, since decision making is currently process a very slow process.

To sum it up India has all the ingredients to grow. Good manpower, professional banking system, skilled professionals, etc. Indian owners abroad can also participate in the India’s growth. It is time to learn from other economies which have succeeded. The secret is that India can do it.