Status of Indian Shipping Industry:

The shipping industry’s share in transporting goods is shrinking even as exports and imports are growing by over 20%. The current 14% share of Indian ships may shrink further with 44% of the existing vessels touching the retirement age by 2012.

The Indian shipping industry is  not growing fast even with the  total overseas trade is growing by over 20%. From over 40% in the late 1980’s, the share of Indian shipping industry in handling cargo (both dry and wet bulk) has declined to about 14%. The worst is not yet over. It is expected that the decline would be steeper in the next five years unless corrective measures are taken.

A slew of taxes and lack of government support have exposed domestic shipping companies to fierce foreign competition. Most of the foreign shipping liners operate from zerotax regimes like Singapore or countries like UK where they pay nominal taxes of 1% or even less. Over 80% of international shipping operates from fiscal regimes providing a near zero taxation level.

The Indian shipping industry does not have a level-playing field even as it faces tough global competition. While on the one hand the government introduced the tonnage tax in 2004 giving respite to shipping companies, on the other hand the industry has been burdened with new taxes, including service tax and fringe benefit tax. Indian shipping companies suffer total 12 types of taxes.

Shortage of manpower and the high rate of attrition in the shipping industry have also affected its global competitiveness. “Crew taxation is a major problem, with the impact that the industry is losing out on better quality people, who are joining foreign shipping lines which offer better tax structures. As a result, many Indian shipping companies are flagging out to zero tax regimes to escape the high taxation burden in the country, leading to a loss in cargo carried under the Indian flag.

Industry is also demanding some preferred treatment, a global practice. “The government should introduce a cargo support policy, ensuring that at least one ship is registered under the Indian flag. For instance, even in countries like the US, cabotage rules demand that domestic shipping be restricted to American flag carriers as per Indian National Shipowners’ Association (INSA) . Shipping industry do not ask for price preference but cargo preference.

Experts fear that unless urgent steps are taken to revitalise the industry, Indian shipping companies will be completely marginalised. Even the existing 13.7% share of Indian ships in handling total cargo is under threat. With 44% of the existing fleet of Indian shipping companies being over 20 years of age and ready for replacement, the industry will have to replace the loss of tonnage within the next five years. “To maintain a share of 13%, the industry would need a capital requirement of $20 billion by 2010..
According to INSA data, out of a total of 81,900 Indian seafarers comprising of officers and ratings, 63% are employed on foreign flag vessels, with just 37% working aboard in Indian flag carriers.

The shipping ministry, on its part, has sent a proposal to the finance ministry asking for various tax waivers. The government is also considering allowing employment of foreign
nationals aboard Indian carriers to help bridge the shortage of skilled seafarers. Worldwide, the shipping industry is booming due to the huge volumes of international trade. As the full order book positions of shipyards in the country indicate, the demand in the shipping sector is likely to continue with an upward trend. The challenge before the country, however, is to retain a sizeable share in the growing pie as more and more international players enter the market.