Noting that about 90% of India's USD 16.3 billion seaborne freight bill went to foreign ships, accounting watchdog CAG has slammed the government for failing to increase Indian tonnage despite increased global competitiveness.
The shipping industry's fortunes are driven by the growth of seaborne trade but failure to increase tonnage and provide level-playing field in the matter of taxation impacted the competitiveness of the domestic industry, the Comptroller and Auditor General (CAG) said in its report.
"The need to strengthen the Indian shipping industry assumes great significance in view of various recommendations...Overall Indian freight bill was USD 16.3 billion (Rs 73,300 crore) and out of this, over 14.2 billion (Rs 63,900) was paid to foreign flags as the mercantile fleet under the Indian flag was only 1.17%," the CAG said.
Suggesting that the government should strengthen its core shipping fleet, it said the government should ensure a level-playing field for Indian shipping companies as they were exposed to a variety of various direct/indirect taxes, higher than their international counterparts.
CAG pointed out the pending issues hurting the sector's growth, including grant of infrastructure status to shipping industry, lack of access to cheaper funding etc.
"The government did not act promptly to resolve these vital issues which impacted adversely the growth of the industry...there is need to expedite action on the above concerns to provide Indian shipping players a level playing
field to facilitate them to compete effectively with the global players," it said.
About 65 per cent of the total Indian fleet of 9.61 million gross tonnage is owned by five big companies, including 33% by state-owned Navratna Shipping Corporation of India and 17% by Great Eastern Shipping Company.
The performance of the segment assumes significance as the shipping industry contributes about 3% of the GDP.
About 95% of India's international trade by volume and 70% by value is seaborne. However, the share of Indian ships in the country's overseas trade has declined to 8% from 14% during 2005-09, though the country's trade had increased by 34%, the CAG said.
"None availability of required tonnage was one of the reasons for decline in share of Indian trade," it added.
In reply, Shipping Ministry said, "the government was aware of the urgent need of enhancement of national tonnage and with the positive steps including ... permitting 100% FDI in the sector, the Indian tonnage for the first time crossed 10 million gross tonnage mark and stood at 10.38 million GT on February 28, 2011.
Date: 09 Sept 2011 Source: moneycontrol.com