While a whopping $785 billion of India?s import and export are carried out through the country?s ports, the share of Indian shipping carriers in this mammoth value of trade has been steadily declining from 85% in 1981 to around 32% in 2009 due to variety of reasons, including multiple taxation, high bunker (fuel) costs and high port calling cost.
Speaking to FE on the sidelines of a recent maritime conference organised by Ficci, Essar Ports CEO & MD and co-chairman of Ficci?s national committee on infrastructure, Rajiv Agarwal said that the industry was reeling under a plethora of taxes, including minimum alternate tax (MAT), dividend distribution tax, sales tax, lease tax, customs duty on import of spares and service tax, which had rendered the Indian shipping carriers uncompetitive.
?Globally, shipping industry is free of all charges whereas that is not the case with India. The transchart arrangement of supporting Indian shipping carriers by mandating the carriage of government and government-controlled cargo by the Indian flags has become defunct,? he said. Pitching for policy impetus to expand Indian fleet, he said the country should improve its manufacturing competitiveness like South Korea, which is now emerging as a hotspot for vessel building against the established players of Europe, Japan and China.
The liberalisation of ports is expected to attract a total investment of R2.77 lakh crore in ports and R1.20 lakh crore in shipping infrastructure that would create a capacity of 2,500 million tonne by 2020, Rajiv said. The dead weight tonnage, or simply the total cargo carrying capacity of Indian carriers, is expected to jump to 30 million gross tonne, he added.
However, he was quick to remind and reiterate the steps needed to be taken to reach the ambitious growth. ?For the rapid expansion of Indian fleet, government can negotiate with the oil industry for long-term charter contract of wet cargo. The government could expedite the possibility of introducing globally acclaimed shipping finance models like KG model of Germany and KS model of finance evolved by Norway, ? he said.
?On the tax reforms side, the MAT on infrastructure projects should be withdrawn. The 100% refinancing of the initially rupee funded projects via external commercial borrowing route should be permitted. The high interest rate regime in the domestic market is a big dampener on the project finance?, the Essar CEO& MD said.