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Friday, August 19, 2022

Maritime Logistics Professional

Indian Shipping-Growth & Metamorphosis

Posted to Indian Shipping-Growth & Metamorphosis (by on December 24, 2012

Though Indian shipping tonnage has been growing steadily with little support there is need for ports and other logistics sectors to catch up with the increasing demand


Unlike other maritime nations, Indian shipping has had to contend almost relentlessly with little government support since independence when the gross tonnage of Indian fleet stood at 0.19 million tones. This could be said to be one of the reasons for its laboriously slow growth over the years while at the same time seeing a kind of metamorphosis which has placed the Indian shipping in a kind of embarrassing position. What is strategically disparaging is that the share of Indian ships in the carriage of the country’s overseas trade which was 40% in late 1980’s has now crashed to a mere 8% presently. This puts the nation in a critical situation where its economy which has been literally gasping is on one hand losing its international freight to foreign companies and at the same time in the event of a conflict with its belligerent neighbors could find the country’s security seriously compromised.

These were some of the analytical observations presented at the Seminar on "25 Years of Indian Shipping - Growth & Metamorphosis" organized under the aegis of the Indo-Belgian-Luxembourg Chamber of Commerce and Industry in Mumbai. But taking a holistic view there have been many redeeming features in other spheres of the Indian maritime industry, especially in ship management, maritime training, manning, et al. 

      

The boost to maritime training came with the setting up of Directorate Marine Engineering Training (DMET), the Training Ship Dufferin, which later was replaced by the shore based academy T.S. Rajendra and then by T.S. Chanakya. This contributed significantly to the creation of quality seafarers who helped create a brand image on the international shipping scene. With the government throwing open maritime training to private sector and the number of training institutes spiraling to around 130, India’s contribution to the global seafaring community touched 3 per cent a few years back and now exceeds 6 percent. Because of this brand image ship manning and management companies the world over are being managed by Indians. But a heart-rending issue that is creating a set-back for the Indian shipowners striving to bring in quality is the seafarer’s tax. Indian seafarers on Indian vessels have to bear the burden of tax where as those serving on foreign ships are exempted from it. This is resulting in Indian seafarers on Indian vessels getting wooed away by foreign ship owners despite the fact that the Indian ship owner may have spent heavily in grooming the budding cadets.  

 

The Gross tonnage of Indian fleet which was at 0.19 million following independence in 1947 continued its tardy growth to gain its present strength of 1,135 ships of 11.03 million GT as on 31.3.2012, as a result India today owns less than 1.3 % percent of the world fleet. It was only in 2004 - 05 when the Tonnage Tax for shipping was introduced by the government that the shipping tonnage underwent a significant rise. But that was not to be for long. It has continued to lag behind the growth of India’s EXIM trade because there is no facilitative regime.

 

“According the Maritime Agenda 2010-2020, the government has targeted shipping tonnage at 43 million by 2020 which will include chartered as well as owned tonnage,” informed Mr. Hajara. “Of this, 30 million GT may be the Indian owned tonnage. For achieving this tonnage an investment of around Rs. 120,000 crore is estimated, including private investment. Need for core fleet for international trade competitiveness, moderating freight costs and for Energy and Maritime security of nation.”

 

But this appears to be a tall order as ship owners are saddled with different taxes which have taken the wind out of the growth sail. S. Hajara, CMD of SCI pointed out that during the Indo-Pakistan war Indian lines had to carry 98 per cent of India’s oil requirement because foreign ships refused to carry it.

                                      

Port traffic has been growing threefold. It has been the minor ports viz. the non-major ports that have played a significant role in capacity building. If this type of growth continues government has decided on the public-private partnership route for expediting port capacity building.

 

As per the Maritime Agenda, 2020, the traffic at major ports is likely to grow at a CAGR of 8.03% from 561.09 Million Tonnes in 2009-10 to 1214.82 Million Tonnes by 2019-20. For Non-Major ports, the traffic will grow from 288.80 MT in 2009-10 to 1269.59 Million Tonnes by 2019-20 at CAGR of 15.96%. Thus, the anticipated traffic at Indian Ports would grow to 2484.41 Million Tonnes by 2019-20 from the level of 849.89 Million Tonnes in 2009-10 at CAGR of 11.32%.

 

India spends 13% of its GDP on logistics compared to an average of 10% in other developing countries. 2/3 of this overall logistics costs estimated is from transportation & warehousing. Third Party and Fourth Party Logistics (3PL/ 4PL) has been growing rapidly but still in nascent stages. Market share of organized logistics players is also expected to double to approximately 12 per cent by 2015.

 

Currently economic loss due to poor logistics infrastructure is placed at USD 45 bn, i.e., 4.3% of GDP and is expected to increase up to USD 140 bn or more than 5% of GDP by 2020. In an integrated and coordinated manner and by reducing India’s transport fuel requirement by 15 per cent to 20 per cent this loss can be reduced significantly.

 

Logistics infrastructure is a critical enabler of India’s economic development. Recognizing this pivotal role, logistics infrastructure spend has been tripled from around US$ 10 billion in 2003 to around US$ 30 billion in 2010. Despite this increase, the country’s network of roads, rail and waterways will be insufficient as freight movement would have increased by about 3 fold in the coming decade.

 

India has dependence of merely 6% on water as mode of transport against USA of 14% and China of 30%. Further, overdependence on roadways to 57% and railways to 36% also need to be realigned with international standards. A balanced modal strategy would be the best way forward and there is a need to have a National Integrated logistics Policy (NILP) to move from a strategy to implementation.