By Raunak Bhiwal
Earlier in April, an association of Indian shipowners urged the government to consider the establishment of a national fleet, in line with several other maritime powered nations to ensure control over transportation of critical cargo. 95% of the volume of total cargo transported in India is handled by the shipping industry, but domestic companies are struggling to compete with foreign competitors.
Arun Singh, Chief Economist, Dun & Bradstreet India, said that 90% of all cargo is carried by foreign shipping lines. After the economic survey of 2016, which revealed that 42% of all Indian vessels were over 20 years old, the government recognised the need to revamp the sector and decided to pour in money to modernise the industry and set up new ports.
Anil Devil, CEO of the Indian National Shipowners Association (INSA) said in an interview with the Hindu,If foreign shipping lines control over 90% of Indias cargo, why should they not be asked to flag some of their vessels in India and pay taxes like us. Indian shipowners have long complained about having to pay tonnage and other corporate taxes to the government, pushing up their costs and leaving them unable to match prices with foreign competitors that often register their vessels in tax havens such as Panama.
Additionally, countries like Japan, China, the US, Malaysia, and various European nations follow absolute cabotage. Cabotage is the restriction of operation in the sea, air, and other transportation services to the domestic players. Similarly, China ensures that at least 600 million tonnes of cargo are carried solely by Chinese shipping lines. Even the Trump administration has proposed that at least 30% of the gas exports are done by domestic shipping lines. India on the other hand, does not have any such policy to help and promote its domestic shipping lines.
Foreign shipping lines have also been lobbying to the government to remove the clause of Right of First Refusal (RoFR) endowed by India to the local shipping lines. Under the same, domestic shipping lines have the right to match the lowest bid offered by the foreign carrier and win the contract. Foreign players have been arguing that the RoFR is a protectionist policy and cabotage in another form.
The need of the hour is to perpetuate structural changes in the Indian shipping industry to make it more competitive and increase its contribution to employment and revenue. The Indian shipowners’ demand for the establishment of a national fleet seems like the first step of the process.