'Tonnage tax will help industry'

Coastal shipping has an inherent advantage over other modes of surface transport. It is environment friendly, energy efficient, and protects environment pollution. It is also far cheaper "" almost 20 per cent of the cost of carriage via road and 42 per cent of the cost of carriage by rail.

The Transport Corporation of India (TCI) is best known as a truck operator. There is, however, another little-known aspect to the group "" shipping. TCI, through its arm TCI Seaways, caters to the coastal cargo movement and owns five ships. Vineeet Agarwal, managing director of TCI Seaways, in an interview with Business Standard, spells out the measures required to give this industry, whose potential remains largely untapped, a boost.

What are the company's expansion plans (in terms of number of ships and the type of vessels to be acquired)? What is the investment earmarked and how will it be funded?

We plan to go in for a 5,000 to 10,000 tonnage capacity multi purpose project cargo vessel with a price tag of $3 million. The funds will be partly raised from banks and partly through accruals.

The company is a prime player in the coastal shipping segment. What measures can be taken by the government to give a fillip to this sector?

The central government can waive the 30-35 per cent levy of duty (import/ excise) on bunkers supplied to coastal ships. Further, coastal shipowners should be permitted to import spares and stores directly without duty as is done in the case of foreign going ships. The present method of importing to the listed ship repairers costs coastal shipowners an additional service charge of 10-15 per cent.

Income-tax exemption for coastal ship crew should be at par with the ship crew of foreign going vessels. This will help the industry to avail the services of young, energetic and skilled Indian crew. Alternatively, Indian ship crew should be given additional tax-free allowances.

The exemption from service tax, withholding tax on charter, hire and sales tax on charter hire payments will benefit the industry.

How will tonnage tax benefit the shipping industry in general, and coastal shipping in particular?

Tonnage tax offers a new, simple, fixed rate and a low-tax regime for the shipping industry. This will also reverse the decline in merchant freight and allow the shipping industry to achieve its full economic potential. Further, this will help the Indian shipping industry to gain a major share in the international shipping trade and compete with multinationals.

The government plans to introduce a 5 per cent import duty on ships. How will this effect the shipping industry?

The Union government's plan to introduce a 5 per cent import duty on ships will impact the growth of Indian shipping companies. Further, it will drive shipowners to get their ships registered with foreign flag. If the plan of the government is to levy import duty then every entry of the foreign ship into Indian waters would have to be treated as an import and be subject to import duty.

Where do you see the freight rates headed?

Since 2003 & 2004, the Baltic freight index shown a steady growth. We foresee continuation of this trend for another three years.