Sea saw: will they recharge the barges?

India’s tonnage (size of ships) has been on a steady decline, and is currently hovering around 6.2m gross registered tonnage (GRT) as on January 1, the lowest in a decade. If the government continues to “neglect� long-standing demands by the industry, there could be a further erosion in the tonnage size, say industry officials.
Over the last decade, the total national tonnage had hovered in the range of 6.5-7m. “With Indian companies either selling or scrapping their ships, the country’s total tonnage has fallen drastically over the last one year. Though there is a net addition of 55 small ships to make the total to 617 ships registered under the Indian flag, many big vessels were sold off or scrapped during the current financial year,� says a senior official from Indian National Shipowners’ Association (INSA).
Industry officials said the delay in the divestment of Shipping Corporation of India (SCI) had forced the Indian shipping major to put its vessel acquisition programme on hold, while Great Eastern Shipping Company (GE Shipping), a potential bidder for SCI till a couple of months ago, halted all its acquisitions to fund their bid. However, now that SCI is going ahead with its acquisition of VLCCs and GE Shipping’s four new-building tankers are joining its fleet over the next 12 months, India’s total tonnage would move up to 7m, provided they flag the vessels from India.
Industry officials claim the sector will take off if the government heeds three major demands from industry — a tonnage tax regime for shipping companies, income-tax waivers for Indian seafarers on Indian ships and a 40% depreciation on vessels. “If the government regulations are non-conducive, we may be forced to look at flagging our vessels from other countries, to save on taxation,� says Bharat Sheth, MD of GE Shipping.
The industry is hoping the budget will finally usher in a new tonnage tax regime, as against the usual corporate tax system. The tonnage tax regime is a tax structure based on the net tonnage of each company, and is not dependent on the income/profit clocked by the respective companies. During the current financial, the Rakesh Mohan Committee had recommended a tonnage tax regime for shipping companies, though the Kelkar Committee refused to give any commitments, claiming that it doesn’t come under its purview.
Though Indian companies say they are saddled with a “non-friendly� attitude at the North Block, the year ’03 has begun on a positive note for them. “There is a substantial spurt in cargo throughput. Also, Indian ports have seen a major augmentation of cargo handling facilities, especially in the container segment. Higher freight/charter rates in the tanker, bulk and container segments are now boosting the bottomlines of most shipping companies,� says SS Rangnekar, director (liner), SCI.
Over the last one year, India has attracted a clutch of foreign container shipping lines to its shores. The government and major ports have come together, and drawn up a blueprint to attract private investments into India’s port sector. The cargo traffic at all major Indian ports is expected to reach about 540m tonnes in the next three years, thanks to increasing trade volume in India, which has been growing at an annualised rate of 7-10% over the past decade.
Global shipping lines have acknowledged India’s fast growth, and have launched a slew of services, direct and indirect, from Indian ports. “India is one of the fastest growing container markets in Asia. We have started one direct service to the US east coast, and are planning another direct service to the US west coast,� says Tom Knudsen, vice president (liner), Maersk India.
Bulk trade out of India has seen an unprecedented spurt as the country climbed up the chart of the world’s leading rice-wheat exporting countries. All these have led to a multiplier effect on the bottom lines of ports, shipping agencies, logistics providers, traders, et al. Ports like Kandla, Mumbai, Mundra and Vizag have seen a substantial increase in the number of bulk carriers visiting their berths.
Over the last three months, the tanker market has taken a U-turn, with a few crucial issues positively impacting the charter rates — the `Prestige’ tanker tragedy, the increased use of large crude carriers to attain economies of scale and the looming threat of a war on Iraq.
The war scare has led to re-stocking of oil, and that could be playing a vital role in the ongoing tanker market surge. Many of the world’s major oil consumers are getting fidgety over their exposure to a potential interruption in supplies. The Indian government has already directed the state-owned oil companies — Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum — to bring in some extra oil from the Middle East.