Budget 2014: Better or Bitter Pill for Maritime Industry?
- Sailesh Bhatia, President, Association of Multimodal Transport Operators of India

Indian shipping industry plays a crucial role to the country’s economy. Since few years, the industry has been going through rough weather due to the global economy slowdown with merchandise trade of all major economies witnessing a declining trend. Developing the core sector is the need of the hour otherwise its inadequacy may create bottlenecks in the economic growth of the country. The industry with emergence of globalisation and liberalisation needs to bring rapid transformation in terms of demand and infrastructural development. The article analyses pros and cons of the 2014 Union Budget towards the entire Maritime Industry.

The much awaited 2014 union budget has been announced by Finance Minister Arun Jaitley at a time while the country’s economy is on doldrums position and the key sectors are not in shape to lead the country’s gross domestic product (GDP), which is currently below 5 per cent.

The Union Budget projected the fiscal deficit at 3.6 per cent of the GDP in 2015/16, accepting the fiscal deficit target of 4.1 per cent in the current fiscal. Finance minster said that the budget would lead the nation’s GDP of 5-6 per cent for the FY 2015-16 and there is an aim for sustained growth of 7-8 per cent in the next 3-4 years.

Sailesh Bhatia, President, Association of Multimodal Transport Operators of India (AMTOI), opines “The much awaited change in government has finally taken place. All the citizens of India and the world at large are now analysing the recently declared budget of the Union Govt of India. Whilst many have felt disappointed others have been very happy with the recently declared budget.”

He added that the budget apparently appears to be a carry forward of the last government, but if one delves deeply one realises that there are differences. The recent budget is a mix between giving a policy direction and a statement of expected income and expenditure.

Shipping Industry Gets from Budget 2014
Finance Minister announced several measures to prop up the country’s maritime sector in the Union budget, such as the most significant of which was permission for local ship owners to register their ships in tax-friendly overseas jurisdictions without opening subsidiaries there, in a bid to increase the national tonnage.

This will allow local shipping companies the flexibility to directly register their ships overseas sitting in India without opening subsidiaries abroad to create a new fleet category known as Indian-controlled tonnage. The plan is also aimed at reversing a trend of local fleet owners opening subsidiaries abroad to register and operate their ships, thereby resulting in a flight of ships which would otherwise have been registered under the Indian flag.

The budget also freed Indian shipowners from the requirement of paying service tax when their ships are rented out to foreign entities for less than 30 days. So far, service tax was levied for such transactions because it was based on the location of the service provider.

The budget has emphasised much more on the development of inland waterways to improve the capacity of goods through waterways. A project on the river Ganga called ‘Jal Marg Vikas’ (National Waterways-I) will be developed between Allahabad and Haldia to cover a distance of 1,620 km, which will enable commercial navigation of at least 1,500 tonne-capacity vessels. The project will be completed over a period of six years at an estimated cost of Rs 4,200 crore. Similarly, to encourage growth in the transport of goods through coastal vessels, the tax incidence is being reduced.

Jaitley also announced that the government will unveil a comprehensive policy to promote Indian shipbuilding industry this fiscal year.

Giving a major boost to the development of ports for trading, Finance Minister announced that 16 new port projects are proposed to be awarded this year with a focus on port connectivity, adding the government will provide Rs 11,635 crore for the first phase development of an outer harbour project at Union government-owned V.O. Chidambaranar port in Tamil Nadu.

“For our shipping community it is one of the first times that a budget has given so much importance to this much neglected sector. An amount of Rs 11,635 crores have been allocated for development of ports. SEZs will also be developed in Kandla and JN port. The project on river Ganga called ‘Jal Marg Vikas’ (National Waterways-1) covering a distance of 1620 kms will boost Inland Waterways Transport. The river linking project will also help boost IWT,” says Bhatia.

Another attempt by Finance Minister to give 24x7 Extension Customs Clearance Facility to 13 new ports in respect of all export goods and 14 more sea ports both for imports and exports coupled with implementation of single window concept for export import trade with Customs as the hub would significantly reduce the transaction time and cost.

The budget highlighted the government plans to increase warehousing capacity for increasing the shelf life of agriculture produce in keeping mind to the earning capacity of the farmers. In order to the urgent need for availability of scientific warehousing infrastructure in the country, the budget has proposed an allocation of Rs 5,000 crore for the fund for the year 2014-15.

Getaway that might be Affected the Industry
The budget was unarguably one of the most eagerly awaited one for most of the industries, but there has been a demand from Indian Shipping industry to relook at the Tonnage Tax, Seafarers’ taxation, Exempting shipping services from custom and excise duty, duty on bunkers for consumption on Indian coastal trade etc. None of these core issues have been addressed in the Budget 2014.

Although details on the role of a so-called 3P India is yet to be finalised, a positive impact on the port sector is expected from the proposed body. It could address some of the obstacles faced by port developers operating through the PPP route, especially if it could support the developers in obtaining regulatory approvals and speedy resolution of pending issues.

As the shipping industry is labour intensive, the budget didn’t mention on the long demand by the industry to giving infrastructure status to the Indian Shipping Industry and cabotage relaxation to major ports.

“The Government is also considering further relaxation of Cabotage laws which will help reduce the cost of transportation of empty containers between ports. This will also improve the availability of containers in times of shortage of empty boxes,” says Bhatia.

Overall the budget will iron out some of the stress faced by the Indian Shipping sector from several years due to the global economy slowdown with merchandise trade of all major economies witnessing a declining trend.

“This government is serious that in addition to the development of infrastructure they will also on top priority address the policy issues which are hampering development of this sector,” says Bhatia.

- Rakesh Roy