The Hindu Business Line : Shipping industry eyes forex reserves for acquisitions

Pitching for
The Shipping Ministry has forwarded the industry's plea to the Finance Ministry as part of its "budget wish-list".
Maritime infrastructure has helped the economy to earn or save gross forex in excess of Rs 10,000 cr: Industry

Advertisement

Mumbai Feb. 19

The shipping industry is eyeing the bulging foreign exchange reserve of the country to get a slice of it for funding ship acquisitions.

With a proposal being mooted that a scoop of the forex reserves could be used to develop infrastructure in the country, the industry is trying to peddle shipping as part of infrastructure so as to get this benefit.

Sources said the industry has proposed to the Shipping Ministry that if a slice of forex reserves were to be used to develop infrastructure projects in the country, shipping should also get a proportionate share in the scheme, as it was part of the infrastructure. The Ministry, in turn, has forwarded the industry's plea to the Finance Ministry as part of its "budget wish-list", the sources said.

Pros & Cons

Incidentally, India saw a record $5 billion flow into its forex kitty last week, taking the total reserves to $185 billion.

The idea of using a part of the reserves to finance critical infrastructure projects in the country was mooted some time ago. In fact, a high-level committee had been appointed to look into the merits and demerits of the proposal.

The industry's argument is that maritime infrastructure has facilitated the economy to earn or save gross forex in excess of Rs 10,000 crore. "If shipping services were to be outsourced, the nation would stand to lose this entire contribution," a member of the Indian National Shipowners Association (INSA) argues.

TERI report

Some time ago, a report by The Energy and Resources Institute (TERI) had revealed that the average gross value added (GVA) from the shipping industry per unit of gross tonnage (GT) per year was Rs 2,211. This implies that on an average, the value added by the shipping industry in a given year for an additional unit of GT is Rs 2,211.

Based on the TERI report, INSA has estimated that in the first 50 months of the introduction of tonnage tax, the GVA from the industry on account of addition of 1.65 million GT resulted in value addition of Rs 365 crore to the Indian economy.

The industry has also pointed out that the share of Indian ships in the carriage of the country's overseas trade has been declining over the years — from about 40 per cent in the late 80s, it is now at about 13.7 per cent.

As on January 1, 2006, India ranked 20th in the world maritime nations, with over 40 per cent of the fleet being above 20 years of age.

Inadequate capacity

INSA, in its annual review for 2005-06, has pointed out that inadequate capacity of the national fleet to participate in the country's trade has been one of the major problems facing India, as well as other developing countries.

As a result, India had to depend on foreign ships to a considerable extent, resulting in higher freight payments.

It is early to say whether the shipping industry's plea would have a sympathetic echo in the corridors of the Finance Ministry, but the captains of the industry are at the moment not sparing any effort.