Responding to repeated shippers calls, the government of India is planning to provide tax waiver and other incentives to attract big conglomerates for setting up international standard shipping lines in the country.
The incentives may be announced in the budget for the next fiscal year, which will be placed in the parliament next month. The Ireland model of taxation for shipping firms is under exploration in this case to encourage the investors.
India annually exports goods worth around US$323 billion while its import from the rest of the world is nearly US$478 billion. Hardly 10% of export cargo is being transported by Indian flagged ships while their share in carrying import cargo is further lower.
The establishment of its own shipping lines felt necessary as the Covid-19 pandemic has multiplied shipping costs worldwide and India had to pay nearly US$65 billion for transportation in 2020, with the shippers fearing it may cross US$100 billion in 2021.
The Federation of Indian Export Organisations (FIEO) demanded the government to encourage investors to set up an Indian shipping line of global repute.
FIEO President, Dr. A Sakthivel stated, “When we are looking at increasing our international trade to US$2 trillion in an economy of US$5 trillion, the outgo on transport services will increase to US$150-200 billion.”
“Since the Shipping Corporation of India is being disinvested, we need to encourage large Indian entities to build an Indian shipping line of global repute. Such shipping lines, even if it gets 25% of the total business, can save US$30-40 billion annually, and will also reduce our dependence on foreign shipping lines and their dictates,” pointed out FIEO President.
Furthermore, Sakthivel said the export sector was facing an acute shortage of containers as the country is dependent on imported containers, while coastal shipping is gradually gaining traction in the country.
“Container manufacturing requires a special kind of steel which provides a competitive edge to China which manufactures over 80% of global containers. We need to encourage domestic manufacturing of containers by providing fiscal benefits, which is required as we are looking to US$1 trillion exports in the next five years,” he noted.
In the first week of December, an Indian parliamentary panel also called the shipping ministry to have Indian shipping liners which can have global repute.
To assist the Indian exporters now, with freight rates remaining mountain high, the government is also planning to continue with the Transport and Marketing Assistance (TMA) scheme in the next fiscal year. Under the scheme, the central government of India reimburses shippers a certain portion of freight charges, 50% for shipment by sea and 100% for air shipment of cargoes.
Sharar Nayel
Asia Correspondent
