Corona-hit maritime and logistics sectors seek rescue package as trade slows

India’s maritime industry, the backbone of the export-import trade, is seeking a relief package from the government to deal with a looming crisis as the coronavirus pandemic takes a toll on the global economy.

Industry executives say that the devastation brought on by the pandemic has had a “disastrous effect on almost all container terminals, bulk cargo terminals, container freight stations (CFS) and inland container depots (IDCs) across India”.

“While industries such as hospitality, airlines and tourism have come under stress, we are underestimating what is going to happen to the ports and logistics sectors in the country. It is going to completely collapse in the next two to three months,” said the managing director of a port logistics company.

“The government should recognise that the industry will go through a severe Black Swan event and support the sector. Ports and related logistics segments are an essential service; it’s a large employer and there needs to be continuity,” he added.

“Ports and logistics are a high-risk industry and the pain will be massive,” he said.

Ports, given its interface with other countries on trade, has been hit by a steep drop in volumes owing to disruptions in global supply chain and uncertainty prevailing on how long it will continue.

The volume decline, combined with delay in collection of dues from customers, are driving the maritime industry to the brink of default in payment of statutory dues, dues to port trusts, dues to banks and financial institutions, payment of salaries and wages to employees and contractual workers and default in payments to suppliers including small and medium enterprises.

The difficulties faced by the industry are extremely severe and cannot be eased without the support of the government, said a spokesman for the Indian Private Ports and Terminals Association (IPPTA).

The short-term (90 days) relief sought by the marine and logistics industries include moratorium on payment of interest and principal amount to banks /FIIs, waiver of interest and penalty on non-payment of GST, TDS and other taxes, and instructions to insurance companies to treat COVID–19 as a natural disaster and process the insurance claims on the basis of Business Interruptions (BIs).

Banks/FIIs should be directed to disburse funds under the sanctioned facilities, where it is pending for minor paper work.

The marine and logistics operators are also seeking waiver on payment of revenue share/royalty, land lease payments to major port trusts and minimum guaranteed throughput (MGT) obligations in their PPP contracts for a period of 180 days till August.

Port concessions, they argue, should be extended by years ― to 32 years from 30 years.

Cargo terminal operators have also urged major port trusts to hike the discount in vessel-related charges (VRC) by an extra 20 per cent over the prevailing levels.

Major port trusts should allocate suitable land adjacent to the existing terminals for storage of empty containers, free of cost, for 90 days. “There is a huge imbalance in the availability of empty containers and enough empty inventories are required to support exports,” the IPPTA spokesman said.

Funding to ports and logistics sectors should be treated as priority sector lending by Indian banks, and interest rates for setting up new port projects / completion of on-going port projects be cut by 200 basis points, besides reducing the rate of interest on term loans by 100 basis points.

The government should reduce GST rates for ports and logistics sectors to 12 per cent, the lobby group said, adding that GST input credit be allowed on constructions of immovable port and logistics infrastructure projects.

Given the uncertainty in export-import trade, increased focus should be lent to movement of cargo by the coastal route. “It requires a national policy on coastal container movement in a time-bound manner,” IPPTA added.