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Ports and shipping sector is all set to ride on a high wave of policy support.
In his maiden Budget, Finance Minister Arun Jaitley announced that the Government would come out with measures to expand Indian shipping tonnage, port capacity, and also to promote domestic shipyards. To provide relief to the recession-hit shipping firms, he exempted short-term shipping contracts (less than 30 days) from the purview of Service Tax and cut the tax incidence to coastal shipping. Customs duty on ships imported for breaking was lowered to 2.5 per cent from 5 per cent. The Minister also announced fresh plans to develop Inland waterways, beginning with the ₹4,200 crore Ganga Jal Marg Vikas project.
“These along with the measures announced in the Railway Budget will be a big positive for the shipping and port sector,” said Samir Kanabar, partner and logistics expert at consulting Ernst and Young.
The Minister said “a policy for encouraging growth of Indian controlled tonnage will be formulated to ensure increase in employment of Indian seafarers.”
More tonnage Indian shipping companies have been seeking a scheme to have “Indian controlled tonnage,” by allowing domestic shipping firms to operate foreign flag vessels. Currently, Indian shipping lines mainly operate services abroad through foreign subsidiaries. This is because Indian flag vessels are not allowed to employ foreign crew, while some countries insist on employment of crew from their countries as a condition to operate services on their waters. But the subsidiaries cannot repatriate their entire profit.
If Indian lines are allowed to operate foreign flag vessels, their earnings will come directly to India. These vessels will be part of Indian tonnage (though not eligible for coastal cargo). “This will also help Indian shipowners to raise funds overseas at lower rates,” said a shipping company official.
In the port sector, besides the plan to award 16 new projects, the Budget proposes to revive SEZ-linked development. SEZs will be developed at Kandla and Jawaharlal Nehru Port Trust. The SEZ proposal of JNPT has been waiting for five years.
A first “Around ₹3,000 crore investment is expected in the project,” said NM Kumar, JNPT Chairman. The Government will also develop the outer harbour at Tuticorin port at a cost of ₹11, 635 crore. Domestic shipyards hit by lack of orders have been seeking renewal of subsidy and tax relief.
“This is the first time in many years the Budget has something for this key infrastructure segment,” a shipping analyst said.
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