Budget to boost ports, shipping sector
The maiden Budget of Finance Minister Mr Arun Jaitley is set to give a significant impetus to the port and shipping sector also.
The Finance Minister announced that the Government would come out with measures to expand Indian shipping tonnage, port capacity, and also to promote domestic shipyards.
In a significant development, short-term shipping contracts (less than 30 days) has been exempted from the purview of Service Tax and the tax incidence to coastal shipping has been slashed. For recession-weary shipping firms, this is good news, as they can now expect to improve margins.
Customs duty on ships imported for breaking was lowered to 2.5 per cent from 5 per cent. The Minister also announced fresh plans to develop Inland waterways, beginning with the Rs.4,200 crore Ganga Jal Marg Vikas project.
“These along with the measures announced in the Railway Budget will be a big positive for the shipping and port sector,” an analyst with consulting Ernst and Young said.
In the port sector, besides the plan to award 16 new projects, the Budget proposes to revive SEZ-linked development. SEZs will be developed at Kandla and Jawaharlal Nehru Port Trust. The SEZ proposal of JNPT has been waiting for five years.
The Government will also develop the outer harbour at Tuticorin port at a cost of
Rs.11, 635 crore. Domestic shipyards hit by lack of orders have been seeking renewal of subsidy and tax relief.
“This is the first time in many years the Budget has something for this key infrastructure segment,” a shipping analyst said.
The Minister said “a policy for encouraging growth of Indian controlled tonnage will be formulated to ensure increase in employment of Indian seafarers.
Indian shipping companies have been seeking a scheme to have “Indian controlled tonnage,” by allowing domestic shipping firms to operate foreign flag vessels. Currently, Indian shipping lines mainly operate services abroad through foreign subsidiaries. This is because Indian flag vessels are not allowed to employ foreign crew, while some countries insist on employment of crew from their countries as a condition to operate services on their waters. But the subsidiaries cannot repatriate their entire profit.
If Indian lines are allowed to operate foreign flag vessels, their earnings will come directly to India. These vessels will be part of Indian tonnage (though not eligible for coastal cargo). “This will also help Indian shipowners to raise funds overseas at lower rates,” said a shipping company official.