The Hindu Business Line : Indian shipowners seek fiscal sops from Govt

Sail trail
Call to add 16 m gross tonnage in next five years.
That is to maintain ship-owners’ existing 13.7% in export-import trade.
Though FDI is permitted in the sector, it’s been unable to get it.
For ship owners, the Dept of Shipping has sought several tax exemptions.

Sushanta Patronobish (file photo)

Mr S. Hajara, CMD, Shipping Corporation of India. —

Our Bureau

New Delhi, Aug. 10 Pointing out that the Indian ship-owning firms require $20 billion investments over the next five years to add 16 million gross tonnage, Shipping Corporation of India (SCI) Chairman and Managing Director, Mr S. Hajara, on Friday sought fiscal incentives from the Government.

This addition in fleet is required to maintain the Indian ship-owners’ existing share of 13.7 per cent in the country’s export-import trade.

The shipping companies need to own 20 million gross tonnage over the next five years. “Indian firms have 8.8 million gross tonnage now, and would scrap about four million gross tonnage over the period. Thus we have to add about 16 million gross tonnage,” said Mr Hajara.

Support means

There are two ways for Government to promote Indian ship owners. “Government can extend fiscal incentives that brings us on par with the regime in countries like Dubai and Singapore. Additionally, vessels with Indian flags must be given preferred access to handling Indian cargo,” Mr Hajara said, adding that the Indian National Ship-owners Association (INSA) has taken up this issue with the Government.

Mr Hajara also pointed out that several Indian firms have started getting their vessels registered under foreign flags. “Moreover, even though foreign direct investment (FDI) is permitted in the sector, we are unable get any FDI,” he said.

Tax turn

For the past few years, the domestic shipping sector has been seeking reprieve from the multiple taxation regime such as minimum alternate tax, corporate income tax, withholding tax, and income tax for seafarers. These taxes are putting extra burden on Indian ship owners whereas their foreign counterparts do not have pay such taxes.

Last year, the Department of Shipping had sought that ship owners in the tonnage tax regime should be exempted from the minimum alternate tax on profit of sale of vessels. It had also sought removal of corporate Income Tax on other income (interest etc).

For the Indian ship owners, the Department had sought exemption from withholding tax liability on charter hire payments to foreign ship owners, exemption from withholding tax on interest paid to foreign lenders (for external commercial borrowing loans), exemption from custom and central excise duty of capital investments on shipbuilding and exemption of service tax on shipping and ship repair services. However, these issues were not addressed in the Union Budget 2007.