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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
Golden Jubilee Celebrations

INDIAN COASTAL

CONFERENCE

Presentation by

Mr. Vijay K Sheth

Managing Director

The Great Eastern Shipping Company Ltd.

15 December, 2001

slide2

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)
slide6
Regulatory
  • 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
slide7
Fiscal
  • 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%
slide8
Allied
  • 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

slide11
Regulatory
  • 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
slide12
Fiscal
  • 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
slide13
Allied
  • 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
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