Indian Domestic Shipping Industry Needs an Overhaul

Why there is an urgent need to overhaul the Indian Shipping Industry?

Earlier this month the association of Indian ship-owners asked the government to establish a national fleet so that it controls transportation of critical cargo.

This is important because other maritime powered nations have done the same thing to ensure they control everything. 95% of the volume of total cargo transported in India is handled by the shipping industry, but domestic companies are struggling to compete with foreign competitors.

A Serious Problem

Arun Singh, the Chief Economist at Dun & Bradstreet India said that 90% of all cargo is carried by foreign shipping lines which is dangerous. An economic survey was done in 2016 which showed that 42% of all Indian vessels were over 20 years old. The government has recognized the need to overhaul the sector and decided to pour in money to modernize the industry and set up new ports.

Anil Devil, CEO of the Indian National Shipowners Association (INSA) said in an interview with the Hindu, “If foreign shipping lines control over 90% of India’s sea cargo, why should they not be asked to flag some of their vessels in India and pay taxes like us.”

Indian ship owners have long complained about paying a lot of taxes and tonnage to the government, pushing up their costs and leaving them unable to match prices with foreign competitors. These competitors often register their vessels in tax havens such as Panama.

What is Absolute Cabotage?

Cabotage is the transport of goods or passengers between two places in the same country by a transport operator from another country. Cabotage rights are the right of a company from one country to trade in another country. Countries like Japan, China, Malaysia, the US and various European nations follow absolute cabotage.

Cabotage restricts operation in the sea, air and other transportation services for domestic companies. China makes sure that at least 600 million tonnes of cargo are carried by Chinese companies. 

No Clear Policy

India does not have any such policy to help and promote its domestic shipping lines. India needs a competitive shipping policy to increase its contribution to employment and revenue.

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