Shipping reforms: Duty cuts, port development on government agenda
The government plans to remove the 25-30 percent customs duty levied on
fuels used by Indian ships and ease other logistical hurdles to push for
more usage of the sea route for both domestic and international cargo,
official sources said.
The move follows Shipping Minister Nitin Gadkari’s plans to develop the
sector that is seen as essential in providing the much-needed
connectivity for Prime Minister Narendra Modi’s ‘Make in India’ campaign
to transport goods manufactured in India in a cost-effective way.
“We have managed to convince the finance ministry’s revenue department
to relax the 25-30 percent tax on fuels used by trans-shipment ships
sporting the Indian flag when they ferry items to and from Indian
ports,” a senior official told IANS, not wishing to be named.
“During a presentation we made recently, the prime minister apparently
was surprised that such a levy was being imposed. He was in favour of
removing such a tax, which is more of an irritant than any
revenue-generating proposition,” he said.
Officials said the immediate impact of such a move will be a revenue
loss of just around Rs.60 crore per annum but its potential in driving
the use of sea route for moving goods for domestic and export markets is
seen at an additional Rs.1,000 crore.
Shipping Secretary Vishwapati Trivedi also hinted at this possibility.
“Our mission is to make a sustained effort to help the shipping industry
overcome issues like funding and logistics so that dispatching goods
from India becomes easier,” Trivedi told IANS.
In spite of India’s total exports topping $314 billion, and 45 percent
of it by sea, any or every cargo coming and going from India is
trans-shipped to mega hubs like Colombo or Singapore where mother ships
weighing 165,000 tonnes or more are loaded.
Trans-shipment means a cargo first moving to a port nearby in smaller
ships and then loaded to a larger “mother” ship for the final
destination. This, despite the fact that India has 12 major and 187
minor ports located around the 7,517-km long coastline of the country.
“There is a strong linkage between the relaxation of cabotage (or
shipping from port—to-port) rules and developing the Indian ports to
become trans-shipment hubs - similar to Singapore and Colombo,” said
Samar Nath, chief executive of DHL Global Forwarding.
“This could lead to larger ships to be brought into India as a
trans-shipment hub. These do not operate in India currently,” Nath said.
Trans-shipment of goods adds to the overall cost of shipping from India,
making a cheap industrial base like India lose its competitive
advantage. Currently, 45 percent of India’s trade is trans-shipped
through ports at Colombo, Salalah and Jebel Ali.
“An Indian trans-shipment port will be able to capture the market share
for containers that are otherwise handled from competing international
ports. This will entail huge cost savings,” said Adil Zaidi, director,
government and transaction advisory services with Ernst and Young.
With the development of a trans-shipment port and entry of larger ships,
the per unit cost of the export-import sector is expected to come down,
benefiting both the trade with lower costs and the customer in
competitive pricing, experts said.
” ‘Make in India’ is a great initiative but it will not deliver as
expected unless logistics costs come down,” Julian Michael Bevis, senior
director, group relations in South Asia, The Maersk, a global trade and
shipping conglomerate, told IANS.
“Very large container vessels will continue to dock elsewhere so long as
legislative and other related environment in India does not promote the
development of hubs.”
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