The Hindu Business Line : Concern on falling share of Indian ships in trade

Notwithstanding the growth of the Indian fleet, the share of ships carrying the country's overseas trade continues to decline; it touched 13.7 per cent last fiscal.

The country's total overseas trade was 400.58 million tonnes during 2004-05, of which the volume of cargo carried by Indian ships was 54.88 million tonnes. "However, the overall percentage share of Indian ships in the country's overseas trade is expected to show an upward trend with further increase in tonnage," says the recent Annual Report of the Indian National Shipowners Association (INSA).

Indeed, the inadequate capacity of the national fleet to cater to the country's trade has been a major problem for India and other developing countries. These countries have to depend on foreign ships to a significant extent, resulting in higher freight payments.

The Unctad Review of Maritime Transport says that against 5.4 per cent freight cost of the total CIF import value in world trade, the share of freight costs in the imports of developing countries, at 9.1 per cent, continues to be higher than that of the developed countries, at 3.9 per cent.

Fleet additions

The INSA report points out that the Indian fleet increased from 686 ships of 8.01 million GT as on March 31, 2005 to 739 ships of 8.46 million GT as on March 31, 2006, representing a 5.6 per cent increase.

Since April this year, the fleet strength further increased, touching 756 vessels as on July 1. Over 30 per cent of the fleet (2.39 million GT) consisted of bulk carriers, while 39.2 per cent consisted of crude oil carriers.

With the fleet acquisition plans of shipping companies, INSA hopes that the Indian fleet will cross the 10 million GT mark shortly.

The average age of Indian fleet is 17.9 years, with 42.2 per cent of the ships being over 20 years. Mr Yudhisthir Khatau, INSA President, said that about 50 per cent of the Indian fleet needed to be replaced in five years.

"The industry may have to spend $3-4 billion during the next five-seven years to replace the aged fleet," he said, adding that about Rs 1,300 crore has been set aside by the industry as Tonnage Tax Reserve, as per the mandatory requirement, in the last two years. "If this amount is leveraged for bank borrowings, the commitment for acquisitions will be about Rs 5,200 crore," he pointed out.

LNG shipping policy

INSA feels that the Cabinet Committee decision giving LNG importers the freedom to go in for CIF purchases, delivered "one of the greatest setbacks" to Indian shipping's foray into LNG transportation. It also overruled the chartering guidelines issued by the Directorate General of Shipping. "Like in container shipping, India may also miss the LNG shipping boat, if the policy is not reversed," INSA says.

Liner shipping

INSA has requested an early amendment of the Indo-Pak Shipping Protocol of 1975, which prevents carriage of a third country cargo by Indian/Pakistan vessels. This has resulted in the missing of huge business opportunities.

On cargo support to Indian ships through Transchart, the chartering arm of the Shipping Ministry, INSA notes that after the Government allowed IOC to make its own shipping arrangement, the oil company reported favourable results.

"Encouraged by the IOC experiment, the Government is now considering similar relaxations to other oil PSUs. INSA has appealed to the Government to continue involving Transchart, which helps increase the brand value of the Indian flag at no extra cost to the consumer," says the report.