Imported vessels get duty relief

Also, time limit for the use of imported goods by ship repair units raised

In a bid to help the Indian shipbuilding sector, Finance Minister P Chidambaram on Thursday exempted ships and vessels from excise duty. He also announced removal of countervailing duty (CVD) on imported ships.

"As owners, we are happy. This will make a huge cost difference. It will be beneficial if the benefit of the removal of this duty is passed on to shipowners," said Sunil Thapar, director, bulk and tanker division, Shipping Corporation of India.

Until now, six per cent CVD was to be paid on imported vessels. "This used to add to the transport cost. Now, it will also bring down the cost of coastal shipping," said Anil Devli, chief executive officer, Indian National Shipowners Association.

From March 17, 2012, CVD was payable on conversion of foreign ships for coastal voyages. Devli said it was a big administrative problem, as a lot of time was lost in converting a ship. "It would add at least $800-900 a day for a medium-sized vessel," Thapar added.

The Budget also increased the time limit for consumption of imported goods by ship repair units from three months to a year. This will help shipping companies keep "critical spares" not available at short notice in stock for at least a year, after which an import duty will have to paid. "Sometimes, there are spare parts which can stop a ship. This is a good move, as it gives us more cushion to keep ourselves prepared," said Devli.

While Budget 2013 doled out these relaxations according to the wishes of the shipping ministry, some of its proposals did not find place in the FM's announcements. For instance, exemption from seafarer tax imposed on personnel working on Indian flagged vessels. The shipping ministry had made a case for the removal of this tax on the ground that it affected the competitiveness of Indian shipping lines.

"We have to deduct this tax at source. Indian seafarers do not pay this tax if they are on a foreign-flagged vessel. This is a deterrent in providing us a level playing field," said Devli.

The sector has also been pushing for infrastructure status. Indian companies have argued that shipping is a more environment-friendly and cheaper source of transport in comparison to rail and road.

Shipping Minister G K Vasan expressed particular pleasure at the Budget mention of a go-ahead to the outer harbour development project at Tuticorin port in the state he hails from, Tamil Nadu. The final project report from the consultancy hired for this is expected within five months.