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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.

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Golden Jubilee Celebrations

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

  2. 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

  3. 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)

  4. 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)

  5. IMPEDIMENTS

  6. 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

  7. 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%

  8. 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

  9. 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

  10. SOLUTIONS

  11. 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

  12. 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

  13. Allied • Industry status to Coastal Shipping • Dedicated berths at ports for coastal vessels • Simplification of customs procedures

  14. 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

  15. 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

  16. 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

  17. THANK YOU

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