Seminar on ‘Shipping, Ship-ownership and Shipbuilding in India: Policies, Praxis and Prospects’
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A seminar was organised on the above topic on May 16, 2019 at the Vivekananda International Foundation, New Delhi. It was a sequel to ongoing discussions on the need for greater impetus on the shipping, ship-ownership and shipbuilding sector of India.

Concept Note

Almost 80 per cent of world trade by volume and 70 per cent by value is shipped through the high seas. Thus, the importance of maritime transport in development and trade cannot be overemphasised. In 2017 alone, the commercial value of the world’s shipping fleet amounted to $829 billion. The top five ship owners in terms of cargo carrying capacity (dwt) are Greece, Japan, China, Germany and Singapore with a total market share of 49.5 per cent of dwt. The five largest flag registries are Panama, Liberia, the Marshall Islands, Hong Kong (China) and Singapore accounting for a market share of 57.8 per cent. Just three countries – the Republic of Korea, China and Japan – have constructed 91.8 per cent of world gross tonnage in 2016. In contrast, India has been lagging behind and ranks 18th in terms of dwt and 25th by value with an ownership of 986 vessels.

In terms of ships registered India ranks 15th with 1674 ships, which accounts for a share of only 0.93 per cent of the world shipping in terms of dwt. By value, India ranks further low at 25th position. The Shipping Corporation of India (SCI) ranks 44th amongst shipping companies with a market share of just 0.1 per cent and five ships (2017). The number of ships with the SCI has been declining from 2015 at the rate of one per year. In comparison, Maersk has 621 ships. When these figures are compared with the growth of India’s EXIM trade (6.7 per cent export and 7.3 per cent import) the number of ships owned, registered or being built by India are declining. Shipping provides immense commercial and employment potentials in multitude areas of building, owning, flagging and trade and needs to be tapped by India for both economic and strategic reasons. For strategic and financial reasons, it would be prudent to invest in shipbuilding, ship ownership and ship repair; in addition to enhancing ease of doing business in this sector.

China is already the largest shipbuilder in the world and 24 per cent of her maritime trade is shipped to the hinterland through inland waterways. In other words, China has already realised most of the elements of maritime power and is now on its way to create a strong navy to protect her maritime interests. India, on the other hand, is a naval power of sorts but lags behind in all other disciplines of maritime enterprise. Thus, in the long run, China’s naval power would be sustainable and that of India would become unviable. An analogy of this can be seen in Mahan’s comparison of the French and British Navies during the reign of Louise XIV in the 17th century.

A diplomat and a historian, KM Panikkar had once exhorted that a naval power however well-organised cannot count for much unless it is supplemented by a great national mercantile marine. He had lamented that complete lack of attention to sea by authorities in Shimla and Delhi in the 19th century had led to the monopoly of merchantable marine by foreign interests. Alfred Thayer Mahan too has made similar arguments about the import of mercantile marine in his seminal work The Influence of Sea Power upon History. He had famously written that the profound influence of sea commerce upon wealth and strength of countries was clearly seen before the true principles which governed its growth and prosperity were detected.

In a short span of just over four years, significant strides have been made by the present government to shake-off the old vestiges of sea blindness. India’s maritime rise has started to take roots in all its manifestations such as the ports, inland waterways, fisheries, shipping, tourism, naval power and related services. Prime Minister, Narendra Modi has exemplified the Blue Chakra in India`s national flag, as a metaphor for ‘Blue Revolution’, emphasising the centrality of maritime economy in the government’s policies. The maritime resurgence of India is steadily becoming palpable through an array of policies unveiled by this Government under the overarching rubrics of Sagamala, Neel Kranti and SAGAR.

The maritime transport sector comprising mega enterprises like ports, shipping and shipbuilding can play a major role not only in creating mass jobs but also in enhancing the technical thresholds of the labour force. Government initiatives are already underway on additional avenues that need to be explored for transforming India’s economy through maritime transport. This sector can become the bellwether for the manufacturing industry in the country and diffuse the present stress in the job market. It has the potential to create a domino effect in the society by subsuming all levels of unskilled, semi-skilled and highly skilled workforce.

Indian ship-owners and shipbuilders have stemmed the tides of domestic constrictions and international competition for decades and have created their own niche in the international market. But this has been possible by the dint of their personal courage and determination. For India to become a maritime power, small and medium industries also have to be able to build and own ships. The seminar pondered on the roadblocks in realising India’s full potential and policy guidance to the government in the form of a book.

Conduct of the Seminar

The opening address was delivered by the Director VIF, and the moderator of the Seminar was Vice Admiral Anup Singh (Retd). The topics presented by the participants were:-

  1. Government policy, industry trends and practices and policies adopted by other countries: Amb DP Srivastava, Distinguished Fellow, Vivekanand International Foundation.
  2. Growth in shipbuilding from a larger national perspective: Rear Adm. GK Harish, VSM, Director-General, Naval Design.
  3. Small and medium private sector shipyards: Shri Ashok Chowgule, Head, Chowgule Industries.
  4. Shipping, Ship-ownership and Shipbuilding in India (TBC): Shri Anil Devli, CEO, Indian National Ship-owners Association.
  5. Energising India's Shipbuilding Industry - Contours of a Strategy: Commodore Sujeet Samaddar (Retd.), Advisor (Aerospace and Defence) at FICCI.
  6. On shoring global shipping: concept, challenges and way forward: Shri Amit Oza, Astamar Shipping.
  7. International Political Economy of Shipping Industry: Commodore Somen Banerjee, Senior Fellow, Vivekanand International Foundation
Policy Guidelines

The discussants were of the view that that there is a need for a comprehensive Shipping development policy. The major highlights of the policy guidelines were:-

  • Growth of Indian flag fleet from the 18th in the world to 12th in the World by 2030.
  • Reduce India’s freight bill to foreign shipping companies of approximately USD 52 Billion by doubling the market share of Indian ships in India’s EXIM trade.
  • Cause at least modal shift of at least 20 per cent domestic cargo from road to coastal trade and inland waterways (for companies near the coast) by 2022.
The Strategy

In order to implement the above policy the following strategy was recommended:-

Target Action needed
Doubling of India’s EXIM trade share on Indian flagged vessels Continue to promote imports on Free on Board basis and exports on Cost Insurance and Freight basis. This will ensure transportation remains in India’s control.
Continue to support Right of First Refusal for Indian ships since it is proved by data that the presence of Indian fleet reduces freights without any corresponding cost to the charterer since Indian ships only match the rate – no price preference.
Link access to India’s EXIM cargo to ships flagged in India by providing preference to Indian flagged vessels.Create a Maritime Financing Development institution which will provide long tenure and cheaper debt in Rupee and Foreign exchange for acquisition of second hand ships and building of new vessels. EXIM Bank has already proposed a model for this fund.
Increase movement of domestic cargo by coastal shipping and inland waterways Ensure equal application of all taxation laws relating to Direct Tax, Indirect tax and IGST on Indian ships and foreign ships. Currently operating costs of an Indian ship in India is at least 25% more than the operating cost of a foreign ship on the Indian coast.
Either tax salaries earned by seafarers on foreign ships operating in India or exempt salaries earned by Indian seafarers on Indian ships operating in India.
Ensure that pre-tax price of Bunker fuel in India is same as prices internationally since foreign ships buy bunkers outside India at cheaper cost
Create a Maritime Financing Development institution that will provide long tenure and cheaper debt in Rupee and Foreign exchange for acquisition of secondhand ships and building of new vessels. EXIM Bank has already proposed a model for this fund.

All of the above will attract investment into the Indian flag and foreign ships carrying Indian cargo will flag their ships in India.

Benefits of increased Indian flag fleet are as under:-

  • Free Training to young boys and girls as Cadets.
  • Employment to 40 persons with annual salary.
  • Creation of jobs in ship repair, ship building, survey, insurance, classification services, legal services etc.
  • Increase in Ship repair and dry-docking services.
  • Payment of Insurance premium of approximately Rs. 2.5 crores each year for One Very Large Crude Carrier (VLCC).
Event Date 
May 16, 2019

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