Indian shipping industry yearn for equitable treatment on their own turf to withstand global competition
Let down once again by the government in its latest budget proposals, Indian ship owners have raised their pitch taking on a do or die approach for securing a level playing field in order to face competition from foreign shipping.
Spearheading the fight to the finish is S Hajara, Chairman & Managing Director of the Shipping Corporation of India (SCI) and President of Indian National Shipowners’ Association (INSA)known for his relentless crusade to provide a face to the Indian shipping industry.
“The shipping industry in India does not have a level playing field because the levels of taxation including the indirect taxes are as high as 8% to 10%,” he substantiates. “In most countries, and not just in the open registry, these heads are either exempted from tax or have zero rating. They have a very specific regime for the shipping industry. Unfortunately in India when we talk of taxation, our policy makers come up with some logic that excluding indirect taxes the taxes for shipping come to only 5% while that for automobile industry and others is far higher. But that is no consolation for us because we are not competing with the automobile industry in India.
The treatment meted out to aviation is on a much higher trajectory than that of shipping he contends. The major disparate is that foreign airlines cannot land their aircraft at any Indian airports without landing rights from the Director General of Civil Aviation. But when it comes to shipping, foreign flag vessels can call at any Indian ports without requiring permission from any section of the government. The entry is completely free.
“That is why we need a level playing field because we are competing with foreign shipping on our own turf,” Mr Hajara asserts. “Globally, foreign flag vessels pay only around zero to 0.5% tax as compared with Indian shipping which has to pay around 8%. So how do we compete?”
More than Indian ships flagging out, what is a matter of concern is India’s loss of international cargo to foreign shipping. At one time Indian shipping lines used to carry around 40% of India’s international trade but this has come down to only 8%. The reason being the growth of Indian tonnage has not kept pace with India’s EXIM trade because of the lack of opportunity for Indian shipping to grow or for that matter for the Indian entrepreneur to get encouraged into Indian shipping.
Our foreign trade being over $ 200 billion the trade component is $ 30 billion. Out of this around $ 27 billion freight is outbound. A study has shown that if Indian shipping lines earned this freight, then 67% of this would get ploughed back into the Indian economy whereas with foreign shipping lines earning the freight, only 10% gets ploughed back into our economy by way of port charges, etc. It is flight of capital from the country and for an emerging economy which wants to grow obviously the way would be to plough back the money into its own economy. Hence there should be a facilitate regime both commercial and financial.