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Golden Jubilee Celebrations. INDIAN COASTAL CONFERENCE Presentation by Mr. Vijay K Sheth Managing Director The Great Eastern Shipping Company Ltd. 15 December, 2001.

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Golden Jubilee Celebrations

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Golden jubilee celebrations

Golden Jubilee Celebrations



Presentation by

Mr. Vijay K Sheth

Managing Director

The Great Eastern Shipping Company Ltd.

15 December, 2001

Golden jubilee celebrations

Shipping Sector today encompasses the entire spectrum - international shipping , coastal shipping and inland waterways each charting its own navigational channels

Role of Coastal Shipping in India is accentuated due to :

- efficacy of transportation

- economic interests

- energy security

- strategic security

Constituents of coastal shipping

Constituents of Coastal Shipping

  • Passenger Transportation

  • Cargo Movementdry, wet,container

    - Self propelled

    - Non propelled vessels- barges etc

  • Oil Field Services

    - Drilling rigs (self propelled drillships & semi submersible rigs, non propelled drill barges, jackups & submersibles)

    - support vessels/ ships (AHTSVs, DSVs,PSVs)

    - Offshore construction and maintenance support crafts

    (self propelled or non propelled) pipe lay barges, crane barges, accommodation barges

  • Port Flotillas(dredgers , harbour tugs, pilot vessels,-mooring vessels)

An international perspective to coastal shipping

An international perspective to Coastal Shipping

  • Countries worldwide including the most developed, have a well defined statuteon Coastal Shipping

  • Adaptive Cabotage laws/ practices (indicative.):

    - Jones Law of total protection (US)

    - Mandatory local crew (Norway & Australia )

    - Flag preference (Indonesia/Malaysia) - Mandatory local business participation including investment (Middle East and Malaysia - “BHUMI PUTRA”)

  • Prevalent customs duty structure and taxation policies protect domestic coastal shipping (globally)



Golden jubilee celebrations


  • Absence of long term policy framework

  • Restrictive MS Act,1958 dissonant with the spirit of Cabotage and demands of growth in varied sectors

  • Indian Customs Act, 1962 results in ambiguity in definition of territorial boundaries

  • Unreasonably high safe manning levels (e.g.50% for tugs, 30% for containers) are a deterrent

  • Mandatory coverage of H&M insurance with Indian insurers mars competitiveness

Golden jubilee celebrations


  • Higher corporate tax rates at 35.7% as against low tax regime for the foreign counter parts

  • Applicability of Customs Duty (5%) on tug acquisitions and (65%) on spares

  • Differential depreciation rates

  • Discriminatory taxation on Indian seafarers’ salaries - shifting of talent pool to foreign flags

  • Applicability of sales/service/lease tax resulting in additional burden of 4 - 13%

Golden jubilee celebrations


  • Lack of Industry stature and recognition though a forex saver and employment generator

  • Port inefficiencies effecting growth of coastal trade

  • Lack of hinterland transportation ( rail & road ) connectivity to major/minor ports

  • Sea time during coastal voyages not recognised

Major cost disadvantages to indian flag vessels

Major Cost Disadvantages to Indian Flag Vessels *

  • On Acquisition Cost : Cost of finance impacted by country rating

  • Manning Costs(except crew accommodation)

    Tanker Dry Bulk Container ATHSV Tugs

    Numbers 9 6 5 3 3

    Wage bill 300 260 553 130 80

    $ /day

  • Customs Duty on additional equipment's ($)

    Container ATHSV Tugs

    4400 31245 19529

    * Cost (in USD) over comparable foreign flagged vessels



Golden jubilee celebrations


  • A comprehensive National Policy/Act on Coastal Shipping addressing every constituent of Coastal Shipping

    • Passenger Movement

    • Cargo Transportation

    • Oil Field Services

    • Port Flotillas

  • Broadbasing provision of Cabotage

  • Renewal of Indian Customs Act 1962

  • Rationalisation of safe manning levels

  • Flexibility to access international insurance markets

Golden jubilee celebrations


  • Adoption of tonnage tax regime

  • Employment in Coastal Shipping to be treated at par for Income Tax applicability in case of seafarers employed outside India

  • Enhanced depreciation rates

  • Rationalisation of Sales/Lease/Service tax

  • Fiscal incentives to induce investments and increase participation in coastal activities

Golden jubilee celebrations


  • Industry status to Coastal Shipping

  • Dedicated berths at ports for coastal vessels

  • Simplification of customs procedures

Imperative action sought

Imperative Action Sought !

  • Need for Government to take a pragmatic approach to issues pertaining to coastal shipping and outline a policy framework to create level playing conditions for Indian flag vessels vis-a-vis foreign flag vessels.

  • Critical need for creating a conducive operating environment to trigger tonnage accretion especially in view of the gap in achievement of 9th five year plan

  • Consider the strategic nature of industry, its future perspective, India’s long coastline and aggressive offshore activities for future oil and energy security

Navigation chart

Navigation Chart

  • Quick action on policy formulation

  • Strengthen the Regulatory Authority

  • Correctly emphasizethe scope of Coastal Shipping

  • Adopt policies to stimulate the sector

  • Fiscal incentives

  • Level playing field by giving first right of refusal to Indian flag vessels versus foreign flags

Looking forward to

Looking forward to .....

  • Self Reliance

    • Technological expertise

    • Foreign Exchange Saver

    • Employment Generator

    • Development of ancillary sectors

  • Energy Security

    • Development of Oil / Gas field services

  • Fortified second line of Defense

  • Extension of Indian Coastal Shipping operating on foreign coast

    • Foreign Exchange Earner

    • Employment Multiplier

Golden jubilee celebrations


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