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The following are extracts from the speech delivered by Mr Shatrughan Sinha, Union Minister of Shipping, at the two-day conference on oil and gas shipping in Mumbai.

WITH the faster pace of economic developments, import of crude oil to the country increased manifold from 18 million tonnes in 1970 to 62 mt in the year 1997-98.

The demand for petroleum products has also been increasing at a tremendous rate, surpassing the earlier established refining capacity. From the year 1999-00, approximately 30 mt of products was being imported on a yearly basis.

Oil sector has gone through the liberalisation process and licences were issued for setting up refineries in the private sector. Reliance has set up a giant refinery with a refining capacity of 27 mt per annum.

The liberalisation process has resulted in reduction of import of products, but crude imports have increased considerably to meet the increased energy demand of the nation.

The Government has taken great strides in liberalisation of pricing mechanism by dismantling the Administered Price Mechanism system for products and linking it with the international parity price.

With the entry of more and more foreign automobile companies in India, the automobile market has been expanding. This combined with the high growth of the Indian economy, the demand for petroleum products has increased many folds and so has the costal transportation demand.

Since energy is an essential requirement for economic development, we have no option but to import substantial quantities of crude to feed the public and private sector refineries. Therefore, it is important for the oil companies to appreciate and acknowledge the need for an adequate and stable national tanker tonnage in order to meet the requirement of the present and future. For such a national tonnage to exist in a viable manner, it is also important that some mechanisms are worked out to compensate shipowners for owning and satisfactorily maintaining such tonnage. Such an approach would benefit both the industries and lead to minimum dependency on foreign flag vessels. It also needs to be stressed that similar approaches are being practised today in Korea and Japan.

It is a matter of introspection that a nation which provides some of the finest manpower for the shipping industry worldwide is stagnating and stunted in its own growth of shipping tonnage. The share of Indian ships in the transportation of India's cargo continues to be at a very low level of 30 per cent. However, the situation is much better when it comes to the share of Indian flag tonnage in the oil and gas sector. The participation of the Indian fleet is to the extent of 55 per cent. It is important to discuss how this share of the Indian fleet can be increased to a higher percentage even when the requirement of the oil & gas industry in India is going through a paradigm shift. The idea behind the conference is to see and understand the challenges and opportunities that are emerging out of this shift.

The shipping industry is also experiencing a paradigm shift in tonnage requirements of India's oil and gas industry. The dismantling of the APM regime has introduced a series of structural changes in the oil and gas industry in India. This has thrown a challenge to the shipping industry to adjust to these changes in terms of providing tankers best suited to the industry under the changing scenario of infrastructure, economies of scale and stringent environmental regulations.

There are other challenges the industry faces and must overcome. While 90 per cent of the world shipping enjoys the benefit of very low taxation under specially devised schemes such as Tonnage Tax, Indian shipping is burdened with much heavier tax and yet must compete with world shipping even for the "Indian" cargo. Indian seafarers on Indian flagged ships face adverse taxation policies while the same persons when on a foreign flagged ship escape such incidence of tax. This has resulted in continued drift of top quality officers and ratings away from Indian flagships. The industry continues to face serious shortage of officers even after training due to their inability to retain them under such adverse policy.

Environmental concerns have added a new dimension to the profile of the world tanker fleet. The global commitment is for phasing out all single-hull oil tankers by the year 2015 or earlier. All new tankers built after 1996 are required to be double hulls. The environmentally disastrous accidents of `Erika' and `Prestige' in the pristine European waters have forced the lawmakers to hasten the phase-out of single-hulls even further, causing great concern amongst ship owners worldwide.

These are some of the areas on which the industry will have to keep its attention focused to maintain a growth trajectory in the coming years. Out of the world's total fleet of about 525 million GRT, India's share is a minuscule 7 million. Even its share in its own cargo is an unsatisfactory 35 per cent. The possibility of growth is vast.

Sagar Mala: Besides these, the industry's attention is now required in a focused manner towards the "Sagar Mala Project" announced by the Prime Minister on Independence Day this year. This ambitious project envisages rapid capacity expansion and modernisation of ports along the West and East Coasts of India and its efficient linkage with the sea-transport. It aims to promote inter-port connectivity, augment coastal shipping particularly in terms of movement of specialised cargo, reduce transaction cost to benefit Indian trade and strengthen the maritime sector to face the future challenges. The "Sagar Mala" Project is estimated to cost about Rs 1,00,000 crore. A SagarMala Development Authority will be set up to channel budgetary support and implement the assigned projects.

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