Golden Jubilee Celebrations

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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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• 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

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Constituents of Coastal Shipping

• Passenger Transportation
• Cargo Movement dry, 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)

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An international perspective to Coastal Shipping

• Countries worldwide including the most developed,
  have a well defined statute on 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)

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IMPEDIMENTS
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• 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 HM insurance with Indian
  insurers mars competitiveness

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• 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

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• 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

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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

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SOLUTIONS
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• 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

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• 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

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

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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, Indias long coastline and
  aggressive offshore activities for future oil and
  energy security

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Navigation Chart

• Quick action on policy formulation
• Strengthen the Regulatory Authority
• Correctly emphasize the 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

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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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• THANK YOU