Indian maritime sector seeks tax breaks, subsidy

Enlarge Photo A worker stands in front of a ship at the port in Mumbai in this...

Thu, Feb 21 01:23 PM

India's maritime sector has sought tax breaks and changes in laws in the upcoming federal budget, besides faster disbursement of subsidies and implementation of port projects to help the industry.

The Indian National Shipowners' Association (INSA) has highlighted several issues such as taxes on profit from sale of vessels, on interest income from compulsory reserve, on input services and seafarer's income.

"These are the major issues that need to be addressed on a priority basis," S.S. Kulkarni, secretary general, INSA, said.

Over 80 percent of the world's shipping fleet operates from countries with no taxes, INSA said in a note to the federal government, highlighting its problems.

The local shipowners' body listed 12 taxes paid by them that foreign shipping firms are either exempted from or pay no taxes.

Indian shipping firms also need about $20 billion to replace and expand their ageing fleet. State-run Shipping Corp of India, Mercator Lines and Varun Shipping have announced expansion plans.

SHIPBUILDING, PORTS

Indian shipbuilders get a 30 percent subsidy on the total value of vessels to offset cost disadvantages they face from Korean and Chinese yards.

The government is yet to extend a five-year subsidy which India's 32 shipyards availed of till August 2007. Some industry officials expect an extension to be announced in the budget.

In a report last year, consultants KPMG said it assumed the subsidy would continue, which will help to attract investments in shipbuilding and ancillary industries.

"I think the best policy is to continue with supporting it in that form," Chief Executive Officer Ray Stewart of Pipavav Shipyard said, adding the process has to be speeded up.

ABG Shipyard, Bharati Shipyard and others such as Larsen & Toubro and Shipping Corp plan to invest about 185 billion rupees over seven years to expand capacity to meet demand, the KPMG report said.

The Indian government has drawn up a $12.4-billion investment plan to upgrade infrastructure and capacities at major ports to keep up with the growth in trade volumes.

However, there are doubts as to whether the country's 199 large and small ports would be able to more than double capacity to handle about 1.5 billion tonnes of cargo by 2011/12.

"They need to increase the pace ... The plans are good, but they need to implement it," said Prakash Tulsiani, chief operating officer of Gateway Terminals, which operates a terminal at India's biggest container port, Jawaharlal Nehru Port.

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