Ministry Moots A Slew Of Fiscal Sops To Steam Ahead Sagar Mala

New Delhi, Nov 10: | Updated: Nov 11 2003, 05:30am hrs
The government is planning to withdraw withholding tax on external commercial borrowings (ECBs) by shipping companies. The maximum limit of ECBs without the Reserve Bank and finance ministry approvals is also likely to be raised, keeping in view the capital-intensive nature of ship acquisition.

These fiscal measures, which are being proposed by the shipping ministry, will form part of the maritime policy to be pursued by the government under the Sagar Mala project.

ECBs up to $50 million come under the automatic approval route while case-specific clearances from the government as well as the Reserve Bank are required for borrowings above that figure.

Exemption from the withholding tax under section 10(15)(iv) of Income Tax Act of 1961 was available to shipping companies till 2001.

These measures, along with introduction of tonnage tax and rationalisation

of personal taxation of domestic seafarers on Indian flag, are expected to boost gross tonnage to 14 million gross registered tonnage (GRT) during the next 10 years.

The tonnage tax has also been proposed for coastal shipping.

The government will need to follow the special fiscal regime available to shipping fleet in other countries in order to protect the countrys business interest, says the draft outline on Sagar Mala. Majority of global shipping has the benefit of low taxation rate of 0-2 per cent.

The Indian flag tonnage is stagnating and during the past three years it had declined from 7.06 million GRT to 6.17 million GRT.

The share of domestic ships in the carriage of the countrys overseas trade has been declining over the years despite the total value of cargo moving up.

During 2001-02, the share declined to 17 per cent from 22.5 per cent during 2000-01.

To open other specialised areas of shipping to the domestic industry, the government has envisaged that domestic companies will be given at least 26 per cent equity in the subsidiaries of multinationals in transportation of liquefied petroleum gas and liquefied natural gas to the domestic market.

An investment of Rs 15,000 crore is expected to come into the sector through private equity.

The government foresees a requirement of 2,250 vessels in the inland water transport sector and 200 vessels for the coastal shipping due to the Sagar Mala project.

This will require 800 per cent capacity enhancement in ship building sector, says the draft outline.

Two international size shipyards opened through foreign direct investment or private equity besides upgradation of existing public sector shipyard has also been planned.

A 10-year tax holiday will be provided in order to increase viability of shipyards, says an official.

In the inland water transport and coastal shipping sectors, the ministry will be pushing for infrastructure status under the Income Tax Act.

A separate fund for inland waterways is also being proposed along with strengthening of the Inland Waterways Authority of India.