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The direction and pace at which the government was moving to transform India’s shipping industry would increase buoyancy and investment opportunities, experts said, although the initiatives were yet to make a noticeable contribution to the country’s gross domestic product.
“To stimulate growth in any industry, it is important to put a policy in place, and we can see the government making efforts in this direction. Cutting unnecessary procedures is one of the important steps the government has taken,” a senior executive with Mercator told Business Standard.
In July, the shipping ministry came up with a lifetime licensing model for Indian ships whereby shipping companies no longer need to renew vessel licences every year.
“It has been our experience at the Directorate General of Shipping recently that we now go to two-three officials for a particular clearance rather than the six-seven officials earlier. Such practices can fast-track clearances,” he added. Bureaucratic hurdles have been an issue hounding the shipping industry for quite some time now.
“Another important change we are seeing is that ministries are not working in silos anymore. For instance, the shipping ministry is in touch with the commerce ministry and other related ministries,” said Vikram Gupta, chief financial officer of Essar Shipping. “Due to this kind of coordination between ministries, things can move faster,” he added.
The country’s shipping industry was, however, beleaguered and the government’s efforts would take a while to bring about a material change in the earnings of shipping firms, industry executives said.
In the quarter ended June, some shipping companies put up a good showing but analysts were of the view that company-specific factors were the drivers for positive performance rather than policy changes.
State-owned Shipping Corporation of India reported a net profit of Rs 50 crore in the quarter under review against a loss of Rs 99 crore in the same period last year. Mercator, standalone numbers of which largely comprise the pure shipping business of crude oil tankers and gas carriers, clocked a profit after tax of Rs 4.78 crore against a loss of Rs 12.17 crore last year.
“In case of Shipping Corporation, a change in the business model and a better liner division business were responsible for better earnings in the first quarter,“ Bharat Chhoda, senior analyst with ICICI Securities, said.
“Shipping being global, overseas factors govern the trend in the business. It is early for government’s initiatives to have far-reaching impact on shipping companies’ business,” an executive with Shipping Corporation said.
“The government seems to be in the process of understanding the industry’s issues,” said Gupta of Essar Shipping. “A noticeable change in performance of shipping companies, therefore, will take some time. Maybe by next budget we can begin to see some change,” Anoop Kumar Sharma, also from Essar Shipping, said.
While the shipping industry looks to the government for a favourable policy environment, it is also preparing itself for the next deep dive. “We are looking at expansion, and discussions are on whether it will be the dredging business, tankers or bulk,” said the Mercator executive.
A friendly policy environment, strong business potential and low asset prices are nudging shipping companies towards capacity expansion. “Though we are still still exploring, low asset prices and a bullish business outlook point towards capacity expansion,” the Mercator executive added.
Only 9.1 per cent of India’s merchandise trade is carried on Indian vessels, according to the Indian National Shipowners’ Association (INSA). “The trade numbers show the scope of business Indian vessels are losing to foreign companies,” said Umesh Grover, chief executive officer of INSA.
Cargo support for Indian vessels was something the government could look at, said Yudhishthir Khatau, chairman and managing director of Varun Shipping. “This one step can help Indian shipping companies get a bigger share in total trade. It will also help the government make a noticeable change in shipping firms’ business,” he added.
Apart from investment plans by the big players in India’s shipping industry, younger companies are also looking to invest in the sector. Mumbai-based Doehle Danautic, which offers chartering, crew management, technical management and shipbroking to third-party clients worldwide, is planning to come up with an initial public offering. “We definitely see potential in the shipping business, which is why we are planning an IPO. However, I cannot reveal more about it at this juncture,” a senior Doehle Danautic executive said.
Overall, Indian shipping firms seem to be at a juncture where positive policy moves from the government can smoothen their stay in the business while prepare them to take the next leap.
