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Shipping industry says `ahoy!'

Our Bureau

Mumbai , July 8

THE shipping industry is rejoicing over the introduction of the long-proposed tonnage tax regime in the Union Budget, with expectations looming large that the Indian shipping tonnage will significantly increase in the coming years.

Although the precise mechanism for computing the tonnage tax is yet to be worked out, shipping companies can expect their tax liability to fall drastically to less than two per cent of their taxable income, which would significantly improve their bottomlines.

However, as Mr P.K. Srivastava, Chairman and Managing Director of the Shipping Corporation of India (SCI), puts it, the industry will now have to "deliver the goods," now that it has been put on a level playing field with foreign companies.

Mr Srivastava told Business Line that with the introduction of tonnage tax, the Indian tonnage would go up, as one of the conditions that has been proposed is that 20 to 30 per cent of the book profits would have to be ploughed back into acquisition of new tonnage. He also expected foreign direct investment in the domestic shipping industry under the new tax regime.

Mr Vijay Sheth, Managing Director of Great Eastern Shipping, India's biggest fleet owner in the private sector, also welcomed the decision, stating that "shipping has at last found its true place" in India. In fact, it may be mentioned here that, the company had taken an in-principle decision last month to flag out some of its vessels in the event of the new tax regime not finding a place in the Union Budget.

Mr Sanjay Mehta, Managing Director of Essar Shipping Ltd, said the new tax regime will provide Indian shipping industry a level playing field. "This is the first time that the Government has made a cohesive move to syncrhronise the shipping industry and port infrastructure, which would provide a competitive edge to the Indian maritime industry," he said

Our Kochi Bureau adds: Capt Verghese Kuruvilla, Vice-President, German Express Shipping Agency (India) Pvt Ltd, said the tonnage tax is an absolute necessity for Indian shipping companies so as to remain profitable in the global shipping scenario as it would provide a level playing field for Indian companies with the rest of the world.

"There is a good chance for our shipping companies to acquire large number of ships following the introduction of this tax system. Many companies planning to put their money outside the country will now have a rethink," he added.

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