Essar Shipping Limited

12/11/2019 | Press release | Distributed by Public on 12/11/2019 03:28

A message to India

A message to India


Dec 11th, 2019

India's private shipping companies are looking for big changes in the government's approach to an industry that should be a strategic engine for economic growth.

Ranjit Singh, executive director and chief executive of publicly traded, Mumbai based Essar Shipping, says the domestic industry can be competitive, but 'various regulatory and financial issues' hamper its competitiveness.

'The taxation structure, duties on ship acquisition, higher domestic interest costs are among the major issues that need immediate redress,' he adds.

India is the world's 16th-largest maritime nation, with a coastline of about 7,520km (4,670 miles). It has 12 major and 200 minor and intermediate ports, and most cargoships sailing between East Asia and Europe pass through its territorial waters.

But its ports need significant modernisation, while efforts to encourage shipbuilding and repair have been slow.

India's main ports have traditionally been state-owned and mostly managed by trusts. Over the past 20 years, private-led greenfield port projects and public-private partnership (PPP) projects have emerged across several states. The national government's Port Trust-led projects have also been expanded through private participation, to bring in much-needed investment.

Recent government measures to encourage shipping include up to 100% foreign direct investment for port construction and maintenance projects. Enterprises engaged in these projects can enjoy a 10-year tax holiday.

However, although the government's Maritime Agenda 2010-20 set a target of creating a port capacity of 3.2bn tonnes by next year, it is currently only 1.5bn tonnes, according to Vishwas Udgirkar, Deloitte's India-based partner and leader of infrastructure and capital projects.

The government added weight to the 2020 agenda by complementing it with the Sagarmala Programme, which focuses on port-led and coastal community development, logistics corridors and integration with special economic zones.

Shipbuilding was identified as a key industry to boost the economy under the government's Make in India and Sagarmala plans. The maritime agenda sought to increase its global share of shipbuilding to 5%, from less than 1% today, as part of a projected $120bn spend on more than 600 projects to modernise and develop port infrastructure between 2015 and 2035.

The government recently revised guidelines to provide a right of first refusal to ships built in India, which implies that domestically manufactured ships will be given first preference for chartering, Udgirkar says.

Such a move could give a huge fillip to domestic shipbuilding, but he adds: 'Given that our ports are already underutilised, government must re-look at expansion efforts and focus instead on multimodality, adoption of digital technologies and skill augmentation.'

PPP efforts can come to fruition only when long-standing core concerns of private-sector leaders are dealt with, according to Udgirkar.

'The private sector has been echoing concerns regarding regulatory issues, tariffs, land policies and environmental clearances, while also having to deal with manpower challenges, port connectivity and provision of social infrastructure such as housing and education.'

Flagship government schemes do talk about port connectivity, but a fast-tracked pace is needed to demonstrate commitment, he adds.

Inadequate terminal infrastructure, inefficient storage and poorly maintained facilities are weighing the sector down.

'Investors are wary of getting involved,' Udgirkar says. 'There is an urgent need for upgrading infrastructure and adopting new technologies to stimulate growth.'

The national statistics agency, Indiastat, estimates that major ports have been underutilised by a factor of close to 60% since 2014-15. Udgirkar says this indicates that capacity expansion plans should be judiciously focused on sectors where there is cargo demand.

India's rank in the World Bank's Logistics Performance Index fell from 35 in 2016 to 44 last year, below Asian peers including Vietnam, Thailand and Malaysia, while its infrastructure score fell from 3.34 to 2.91.

Average turnaround times for all vessels have fallen from 82.3 hours in 2016-17 to 60.5 hours in the period leading up to October 2018 due 'to policy interventions, procedural changes and mechanisation', Udgirkar thinks. There is still ample scope for improvement, as the global average is around 30 hours, according to the Ministry of Shipping and the UN Conference on Trade and Development Review of Maritime Transport 2018.

One of the biggest agencies involved in undertaking and regulating shipping activities is the Directorate General of Shipping within the vast Ministry of Shipping. Its remit encompasses shipping and ports, shipbuilding and shiprepair, waterways and inland water transport.

A comprehensive policy package is seen as necessary to address a complex set of interlocking problems faced by maritime companies. But it has not happened.

The capacity of government-owned and operated port berths and cargo-handling equipment needs to be vastly improved, if only to cater for the growing requirements of overseas trade.

Industry leaders express their desire to carry higher shares of seaborne trade in local vessels. But this is unlikely to happen while port infrastructure is still so weak and hefty levels of investment are slow in coming.

Singh says a healthy shipping industry can support job creation and the Make in India initiative. 'At a time when there are geopolitical tensions, reliance on the domestic shipping industry becomes a necessity.'

Source :TradeWindsNews