Bunker sales fall 90% post-GST

Ships are avoiding re-fuelling in India since July after an 18% Goods and Services Tax (GST) raised bunker (ship fuel) costs substantially, forcing vessel owners to tank up in Colombo.

Bunker sales in India touched 2 million tonnes in the year to March 2017 with average monthly sales hitting as much as 150,000 tonnes.

“Bunker sales have dropped by as much as 90% with the introduction of GST,” said an industry official. “Sales are happening only on account of emergency situations where ships are stuck due to wrong calculations on bunker requirements,” he added.

Sales in Mumbai dropped from 8,000-10,000 tonnes a month to about 500-1,000 tonnes post-GST, said industry officials.

In Kochi, monthly bunker sales have tanked to 3,000-4,000 tonnes from about 25,000-30,000 tonnes.

GST has wiped out the business of Matrix Bharat Pte Ltd (MXB), a joint venture between Singapore’s Matrix Marine Fuels Pte Ltd and Bharat Petroleum Corporation Ltd, India’s second largest state-run oil refining and marketing company.

MXB has not sold even 1 kg of bunker since July. “We are talking in kgs, forget about tonnes. We used to do a minimum 100 tonnes earlier,” said a MXB official.

Hindustan Petroleum Corporation Ltd (HPCL) sold about 1,200 tonnes in August, compared with about 10,000 tonnes earlier.

The steep fall in bunker sales is having a cascading effect on foreign exchange earnings, logistics, barge operations and ancillary services, said Dilip Bhanushali, CEO and founder at Bharat Chemical.

Prior to GST, the value added tax (VAT) on bonded bunkers sold to ships engaged in a foreign voyage was in the range of 0-4 per cent, varying from one state to another.

Bonded bunker rates are based on the Mean of Platts Singapore (MOPS), the average of a set of Singapore-based oil product price assessments published by Platts, a global energy, petrochemicals, metals and agriculture information provider and a division of McGraw Hill Financial.

Assuming an MOPS of 300, the VAT was $1.5 a tonne in Kochi at a VAT rate of 0.5 per cent. With GST at 18 per cent, the VAT on bunker has jumped by $54-60 per tonne in Kochi.

“For a vessel owner, the same bunker costs $325-330 a tonne in Colombo. Why would a ship spend $30-40 extra to buy bunker in Kochi?” an industry official asked.

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