The Kerala Government should approach the Reserve Bank of India through the Maritime State Development Council for issuing a directive to banks for providing finance tocoastal shipping vessels at concessional rates for a certain period.

This was among the suggestions by Deloitte Touche Tohmatsu India Pvt Ltd in its draft report submitted to the Directorate of Ports, Kerala, as part of ‘Preparation of strategy roadmap-cum-action plan for development of coastal shipping in Kerala'.

As the shipping sector is capital intensive, it requires huge funds.The banks are reluctant to offer finance to the shipping companies and several coastal vessel owners are finding it difficult to avail themselves of finance at competitive rates for purchasing of ships.

There have also been demand for dedicated Coastal Shipping Development Fund However, arranging a corpus of the required sum is a big challenge. The State Government should incorporate this in its agenda for pushing it through the Union Government, the report said.

VAT relaxation

The consultants suggested government level intervention in exempting duties on bunker oil to make coastal shipping more economical. The coastal ships, unlike ocean going vessels, have to pay duties on bunker oil, besides facing competition from road transport for which the diesel is subsidised. The Kerala Government has reduced VAT from 12.5 per cent to 0.5 per cent for bunker supplied to foreign-bound vessels at the Puthuvypeen SEZ.

With a view to promoting coastal shipping, the Government should strongly put the case for removal of the duty on bunker for coastal ships and also extend VAT relaxation on fuel to coastal vessels.

It is pointed out thatcoastal shipping accounts for significantly lower share in domestic cargo movement in the country though it acts as inter-modal transportation and plays an important role in integrated logistic chain in developed countries.

Lack of adequate infrastructure and absence of efficient cargo operations discourage coastal vessels from calling at a port. The action plan suggested the need to upgrade basic port infrastructure.

Service tax issue

The Centre should also extend service tax exemption for coastal ships similar to transportation by road, which is currently at 75 per cent. The Union Budget had proposed exemption of 25 per cent in respect of services rendered in relation to transport of coastal goods and goods transport through National Waterways and inland water.

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The consultants also suggested intervention at the State Government level to assure definite volume for cargo shipping service providers as they are reluctant to operate regular services.

The Government should consider providing guarantee for minimum throughput for chosen ship service providers for operating regular and reliable services.

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