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Overview of the shipping sector in India Mr Anil Devli - CEO INSA Email: ceo@insa.org.in
Overview of the shipping sector in India
Overview of the shipping sector in India
Mr Anil Devli - CEO INSA Email: ceo@insa.org.in l
Mr Anil Devli - CEO INSA
Email: ceo@insa.org.in
l

April 1, 2011

OVERVIEW OF SHIPPING IN INDIA  Indian tonnage currently stands at 10.11 million GT and
OVERVIEW OF SHIPPING IN INDIA
 Indian tonnage currently stands at 10.11 million GT and Indian flagged vessels carry 8.4% of Indian
trade cargo. The rest is carried by overseas shipping companies. Coastal shipping accounts for
just 10% or a million GT of India‟s total tonnage.
 In its National Maritime Agenda, the ministry of shipping has estimated that Indian seaborne
trade could increase 3.56 time by 2020 resulting in shortage of tonnage. The Agenda has set a
target for Indian shipping tonnage of 43 million GT by 2020.
 India‟s exim cargo in terms of volumes was 611 million tonnes of which coastal cargo was ~133
tonnes in 2009-10.
 In 2009-10, major and minor ports in India carried a total cargo throughput of 849.89 million
tonnes – indicating a year-on-year increase of 14.27%.
 The Maritime Agenda, trafiic at major ports estimated to grow at a CAGR of 8.03% to 1214.82
million tonnes by 2020, whereas traffic at non-major ports is expected to grow 15.96% CAGR to
1269.59 million tonnes in the same time.
CURRENT CAPACITIES IN EXIM SHIPPING Category wise as on 01.03.2011  Type of Ships No
CURRENT CAPACITIES IN EXIM SHIPPING
Category wise as on 01.03.2011
Type of Ships
No
GRT
DWT
OVERSEAS:
Dry Cargo Liners
17
172569
212597
Cellular Container Vessels
16
186796
235762
Dry Cargo Bulk Carriers
98
2711231
4754352
Ore Oil Bulk Carriers
2
94955
169257
Oil Tankers(Crude Oil Carriers)
64
3424980
6201390
Oil Tankers(Product Carriers)
63
2249357
3937987
Passenger-cum-Cargo Vessel
4
19659
10731
Acid Carriers
4
74817
116639
LPG Carriers
8
208939
240757
Supply Vessel
49
142141
101120
Ro-Ro Container
2
17790
18889
Dredger
6
28933
12641
Tugs
14
15535
13631
Total (Overseas)
347
9347702
16025753
CURRENT CAPACITIES IN COASTAL SHIPPING COASTAL Type of Ships No GRT DWT Dry Cargo Vessels
CURRENT CAPACITIES IN COASTAL SHIPPING
COASTAL
Type of Ships
No
GRT
DWT
Dry Cargo Vessels
72
125342
180636
Tugs
242
72862
23424
Dry Cargo Bulk Carriers
12
237220
364928
Oil Tankers(Crude Oil Carriers)
2
50080
82246
Oil Tankers(Product Carriers)
13
40035
43226
Passenger-cum-Cargo Vessels
32
89435
27232
Passenger Carriers
54
16702
1964
Ethylene Gas Carrier
3
8727
6558
Ro-Ro Vessel
1
956
1386
Dredgers
28
121893
76152
Offshore Supply Vessels
110
118444
133896
Specialized Vessels for Offshore
44
88396
50480
Service
Port Trusts & Maritime Boards
95
45377
15702
Total
708
1015469
1007830
Total (Overseas, Coastal & OSVs)
1055
10363171
17033583
NATIONAL MARITIME AGENDA  The Maritime Agenda document states that “it is an Agenda for
NATIONAL MARITIME AGENDA
The Maritime Agenda document states that “it is an Agenda for consideration rather than an
Agenda for action. At the same time, many of the listed activities are statements of obvious
intentions and “all concerned have to be working towards achieving these goals.”
The Agenda document has set the following as targets to be achieved by 2020.
(a)
To achieve a global market share of 5% by 2020.
(b)
To develop a strong ancillary base in India by 2020.
(c)
To generate additional employment for 2.5 million persons (0.5 million direct and 2.00 million
indirect) by 2020 in the core shipbuilding, ancillary and supporting industry sectors.
(d)
To develop strong R&D facilities and design capabilities for the commercial shipbuilding.
(e)
To be self-sufficient in ship repair requirements of India and to emerge as a dominant ship repair
centre replacing Colombo, Dubai, Singapore and Bahrain.
(f)
To achieve a share of 10% by 2020 in global ship repair.
NATIONAL MARITIME AGENDA (COASTAL SHIPPING)  The National Maritime Agenda has put forth a set
NATIONAL MARITIME AGENDA
(COASTAL SHIPPING)
 The National Maritime Agenda has put forth a set of recommendations for coastal shipping
which includes promotion of river sea vessels, manning relaxation without compromising on
safety, providing financial incentives and upgrading existing infrastructural facilities.
 Improvement of minor ports: The Agenda has proposed that a port regulator should be set up for
non-major ports to regulate service levels, and technical & performance standards.
 Major ports are under the control of the central government while the non major ports are under
state control and therefore there is a need for uniform application of systems, rules and
processes.
OVERVIEW OF GLOBAL SHIPPING  According to the World Trade Organization, global trade growth will
OVERVIEW OF GLOBAL SHIPPING
 According to the World Trade Organization, global trade growth will increase 13.5% in 2011, the
biggest year-on-year increase since 1950, following a faster-than-expected recovery in trade
flows. Still, the development of the shipping industry will be restricted by excess freight capacity
as newly built ships are delivered to owners. New deliveries and over-capacity are hurting
recovery of shipping.
 The levels of scrapping are lagging far behind newbuilding deliveries. According to Clarksons
data, some 957 vessels entered service in 2010, with just 115 scrapped, bringing the global dry
bulk fleet to a total of 8,154 at the end of the year. This compared with 550 deliveries in 2009
versus 265 scrapped, which saw 2009 end with a fleet of 7,295.
 The world liner fleet has reached 15 million TEUs in March 2011, according to Paris based analyst
Alphaliner. The growth of the world fleet has coincided with growth in containership sizes and as
a result the dwt per slot has dropped from 15.7 dwt per TEU in July 2001 to 13.1 dwt per TEU in
March 2011.
WORLD BANK OUTLOOK FOR GLOBAL GROWTH AND TRADE  THE World Bank in January 2011
WORLD BANK OUTLOOK FOR GLOBAL GROWTH AND TRADE
 THE World Bank in January 2011 outlook expects global economic growth to slow down to 3.3%
this year, from 3.9% in 2010, before edging up to 3.6% in 2012 – indicating continued moderate
recovery.
 Trade growth is expected to moderate from the strong bounceback in 2010 to steady, if
unspectactular, trade growth of about 8-9% and associated demand growth for shipping
capacity is expected in the next two years.
 Emerging economies, including China and India, have regained pre-crisis levels and are
expected to continue setting the pace with their growth forecast at 6%. It put China‟s growth this
year at 8.7% and India‟s 8.5%.
 The global economy will continue to face challenges with significant downside risks, in particular
rising food prices, commodity prices and oil prices that could dampen growth prospects.
 Large trade imbalances and interest rate differentials could generate further tensions over
currency exchange rates and affect trade.
The India story
The India story
WHAT INDIAN SHIPPING NEEDS  Cargo support: The need for a strong cargo support policy
WHAT INDIAN SHIPPING NEEDS
 Cargo support: The need for a strong cargo support policy – backed by an equally strong coastal
cabotage policy and cargo assurance policy for exim trade. This would attract investment and
ensure that there is not only capacity building in this sector but also efficiencies due to
competition and larger supply. This would also lead to accelerated development of transport
infrastructure.
 Taxation: Policies should be framed keeping in mind that Indian shipping companies directly
compete with international players and therefore taxation and technical issues should give
Indian companies a level playing field, if not an edge, vis-à-vis international players.
 Upgradation fund: Need for cheaper funds made available through an upgradation fund with
interest subvention for building tonnage.
 Infrastructure status: This would empower the sector to raise long term and low cost funds, and
avail tax holidays on direct taxes and concessions on indirect taxes.
INSA’S ESTIMATES FOR GROWTH IN TONNAGE Growth of Indian overseas trade and the cargo carried
INSA’S ESTIMATES FOR GROWTH IN TONNAGE
Growth of Indian overseas trade and the cargo carried by Indian ships
Year
Major ports*
Total (Major
Y-O-Y
Cargo carried by Indian
ships
% share
& Minor)*
growth %
2003-04
344.80
345.65
47.59
13.8
2004-05
383.75
400.58
15.9
54.86
13.7
2005-06
383.63
447.14
11.62
61.12
13.7
2006-07
463.78
497.81
11.33
60.86
12.2
2007-08
519.16
576.35
15.78
54.65
9.5
2008-09
530.53
598.70
3.88
50.43
8.4
2014-15**
1194.45
100.33
8.4
*million tonnes
** Projected
Growth of India’s overseas trade and fleet size
Actual
Projected
(2008-09)
(2014-15)
India’s overseas trade (million tonnes)
598.70
1194.45
Percentage of growth of overseas trade (yoy)
12.20
12.20
Overseas fleet as on 31-3-2009 (million GT)
8.32
16.55
Overseas fleet as on 31-08-2010 (million GT)
8.72
Share of Indian shipping in India’s overseas trade (million tonnes)
50.43
100.33
Percentage share of Indian shipping
8.40
8.40
Projected addition to the fleet (million GT)
10.05
WAYS & MEANS TO ENHANCE CAPACITIES  Maritime Strategy for India: India needs a long
WAYS & MEANS TO ENHANCE CAPACITIES
 Maritime Strategy for India: India needs a long term maritime strategy with financial commitments
and targets from the government .
 Infrastructure status: The shipping industry should be granted infrastructure status and given access
to cost-effective finance with an interest subvention scheme.
 Controlled FDI: There is a need for controlled FDI in coastal trade.
 Absolute cabotage for Indian flag: The latter should be a “pre-requisite” for trade from India.
 Continued cargo support: In the form of long term contractual arrangements between the Industry
and Indian shipping companies for cargoes such as oil, cotton, cement, steel, coal and fertilizers.
This cargo assurance will lead to higher investments and aid financing in the shipping sector.
 Funding support: Need for cheaper funds made available through an upgradation fund with
interest subvention for building tonnage. This fund could be like the ones set up for automobile,
textiles, IT and telecom industries.
WHAT WOULD EXPANDING CAPACITIES MEAN TO INDIA?  Development of coastal shipping will have a
WHAT WOULD EXPANDING CAPACITIES MEAN TO INDIA?
 Development of coastal shipping will have a positive impact on the environment in terms of
energy conservation and reduction in GHG from carbon emissions. Promotion of coastal shipping
would reduce the carbon footprint of India‟s transportation sector as it shifts the burden of cargo
traffic from road and rail traffic.
 In its report “Measures to promote growth of Indian shipping 2009”, SBI Capital Markets Ltd said
that development of the shipping industry creates a favorable impact on Indian overseas trade
by effectively lowering freight costs. The table below by UNCTAD, 2007, illustrates this point.
Country group
Estimate of total
freight costs of
imports (mill)
Value of imports
(c.i.f.)
Freight costs as % of
import value
World Total
632.4
10712.2
5.9
Developed countries
341.1
7035.7
4.8
Economies in
24.1
317.5
7.6
transition
Developing countries
259.9
3359
7.7
 Development of the shipping industry will help in meeting the country‟s strategic defense and oil
requirements. A national fleet also acts as a source of ships and seafarers for defense in times of
need.
THE DETERRENTS TO CAPACITY EXPANSION IN INDIA (TAXATION)  The taxation issue has vexed Indian
THE DETERRENTS TO CAPACITY EXPANSION IN INDIA
(TAXATION)
The taxation issue has vexed Indian ship-owners consistently over the years. Policies should be
framed keeping in mind that Indian shipping companies directly compete with international
players and therefore taxation should give Indian companies a level playing field, if not an edge,
vis-à-vis international players.
Differential taxation for seafarers – a burden on Indian companies: The Indian seafarers on Indian
ships have to pay income tax while Indians on foreign flagged ships are exempted from paying
income tax. In the UK, a March 2011 government-appointed review of tax allowances has
concluded that seafarers‟ income tax concessions and the tonnage tax scheme were crucial for
the future of the UK Merchant Navy.
The 2011 finance bill and Customs and Excise notifications issued have proposed to introduce a
levy of 1% Excise duty (5% on imports) accompanied by a special additional custom duty (SACD)
on ships (used for transportation) and other vessels. Historically, ships purchased in a foreign
country are exempted from all customs duty and this is a practice internationally. Such a levy
would create inconsistencies between Indian and international regulations and cripple the
competitive ability of Indian tonnage.
Service tax: A service tax abatement of 25% was given for „transport of coastal goods and goods
transported through national waterways or inland water in the 2011 budget.‟ But with this, the
CENVAT credit on inputs was taken away. The shipping industry believes that this concession
takes away the benefit accruing through 25% service tax abatement.
Withholding tax: The deduction of tax at source by Indian companies hiring foreign vessels for
coastal cargo movement adversely affects the profitability of Indian companies. Bunkers used for
coastal trade are also levied 33% custom duty which is not so in exim trade.
DETERRENTS TO CAPACITY GROWTH  Rational tax structure: To provide Indian shipping companies a level
DETERRENTS TO CAPACITY GROWTH
 Rational tax structure: To provide Indian shipping companies a level playing field vis-à-vis foreign
players. The table below highlights the differential tax treatment meted out to Indian shipping
companies which makes it difficult for them to compete with foreign ship owners.
Financial Year 2009-10
India
(Rs. In mn.)
Singapore
(In Rs mn)
TAXES PAID/PAYABLE
On tonnage income
33.6
Nil
Profit on sale of ships (A)
294.45
Nil
Other income/treasury operations (B)
94.44
94.47
Taxes paid/payable on non-tonnage
income
388.89
94.47
TOTAL TAXES PAYABLE
388.89
94.47
% of taxes on profit before tax
9.73%
2.19%
% of taxes on gross revenue
1.87%
0.42%
MANAGING THE ENVIRONMENT  India has tried to ensure that UNFCCC which backs the principle
MANAGING THE ENVIRONMENT
 India has tried to ensure that UNFCCC which backs the principle of common but differentiated
responsibility (CBDR) continues to be the central body with respect to greenhouse gas (GHG)
reduction norms and has tried to prevent IMO which backs the principle of common responsibility
for all from getting full control of this issue.
 The Cancun Agreements reached on December 11, 2010 digress from the previous Bali Action
Plan which had agreed on the principle of CBDR for greenhouse gas (GHG) emissions.
 The Cancun Agreements instead established a regime of measurement, report and verification
(MRV) based on common commitments/actions – which is not favourable to developing
countries. On a positive note, these Agreements are currently silent on the responsibility of the
shipping industry.
MANAGING THE ENVIRONMENT  But the Energy Efficiency Design Index (EEDI) for new ships and
MANAGING THE ENVIRONMENT
 But the Energy Efficiency Design Index (EEDI) for new ships and Ship Energy Efficiency
Managements Plans (SEEMP) for all ships proposed by Marine Environment Protection Committee
(MEPC) are not so benign. Though these protocols will be voted on in July 2011, they are likely to
be implemented as IMO is heavily influenced by developed countries who are backing these
measures.
 An other adverse outcome of these deliberations for developing countries could be the
implementation of market based measures (MBMs) by IMO, in case technical and operational
measures are found inadequate to reduce GHG commitments.
ABOUT INDIAN NATIONAL SHIPOWNERS’ ASSOCIATION (INSA)  India‟s premiere national association representing
ABOUT INDIAN NATIONAL SHIPOWNERS’ ASSOCIATION (INSA)
 India‟s premiere national association representing shipowners
 Founded in 1929
 Member companies own ~90% of Indian tonnage
 Works towards integrating Indian shipping industry with the world economy
and endeavors for a competitive positioning in the global market.
 Promotes development of national shipping for fullest participation in the
carriage of cargo and passengers in inland, coastal and overseas trade and
for cross trades outside India.
 Securing adequate representation for the association, national shipping and
allied industries on public, government and non-government platforms.
 Collecting, collating and disseminating statistical and other information in India
and abroad regarding shipping and allied industries.
PROFILE OF INSA MEMBERS TOP 10 Top 10 INSA member companies as on 01.02.2011 No.of
PROFILE OF INSA MEMBERS
TOP 10
Top 10 INSA member companies as on 01.02.2011
No.of
% of
S.No
Name of the Company
GT
ships
INSA
% of Indian
Shipping
1 Shipping Corpn. of India Ltd.
96
3781301
41.65
36.43
2 Great Eastern Shipping Co Ltd.
37
1446038
15.93
13.93
3 Mercator Lines Limited
18
566873
6.24
5.46
4 Essar Shipping ports & Logistics Ltd.
22
483451
5.33
4.66
5 India Steamship
6
342002
3.77
3.29
6 Varun Shipping Co. Ltd.
12
314215
3.46
3.03
7 Pratibha Shipping Limited
9
281543
3.10
2.71
8 Tolani Shipping Ltd.
7
249493
2.75
2.40
9 Sanmar Shipping
6
190122
2.09
1.83
10 Five Star Bulk Carriers Pvt. Ltd.
6
176811
1.95
1.70
Total of top ten companies
219
7831849
86.27
75.45
Other INSA members
245
1246537
13.73
12.01
Total INSA members
464
9078386
100.00
87.45
Total Non INSA members
586
1302283
12.55
Total Indian Shipping
1050
10380669
100.00
(Source : DGS tonnage statement)
QUESTIONS? Mr. Anil Devli- CEO INSA • Email: ceo@insa.org.in
QUESTIONS?
Mr. Anil Devli- CEO INSA
• Email: ceo@insa.org.in