Shipping is a high-volume, cash-heavy business dealing almost exclusively in foreign exchange where margin percentages are often low but can be surprisingly high too sometimes. India’s top regulators, policymakers and tax authorities have not shown a real appreciation of its nuances.
India has a glorious history of shipbuilding and owning that the British destroyed even as they took control of the country. They then squelched efforts to rebuild the native shipping industry into the 20th century. More than 100 years after the British stamped out V O Chidambaram Pillai’s swadeshi shipping initiative, India still does not have a robust shipowning, shipbuilding ecosystem.
Some in the past in India did see shipping as a crucial component of reinforcing national sovereignty and there were some stellar efforts. But, today, shipping in India continues to be a consequence of global shipping trends and governed largely by decisions made outside India.
In the last ten years, the total tonnage of India has only gone down. Practically no merchant ship is built today in India. China has become the world’s No 1 shipbuilder while we have the biggest scrapyards.
Among the positives are the emergence of many Indian ship management companies that are, however, mostly registered and operating outside India, and Indian seafarers who bring in vital foreign exchange.
Budget 2024-25 did contain several measures to support Indian shipping. The Economic Survey spoke about ship leasing structures in Gift City in Gujarat and how that is a model. That shipping is being talked about is a welcome sign and an indicator that decision-makers in the government are indeed interested in its development.
Among the details in the budget was removing customs duty on imported ship spares which is highly welcome. The previous set of laws led to arbitrary demands at customs and many shipping companies suffered severely as a result. And those laws were themselves indicative of how successive governments had little interest in shipping.
In the past, policies often supported a government-owned national company, the Shipping Corporation of India, but little else. There were several large private shipowners but almost all are extinct now – some done in by zealous tax authorities left wide-eyed by the millions of dollars in transactions that bank accounts of shipping companies were seeing every day. Today, ship stocks are not traded much in the Bombay Stock Exchange, and shipping companies have little visibility in India’s corporate sector.
Even as the government pushes for trade linkages with countries based on container movement such as the India Middle East Europe Economic Corridor, it needs to come up with policies to support the manufacture of containers within India. India is lacking in container manufacture and it is a key trade bottleneck.
The current BJP government has been making the right noises over the years but has less to show in terms of concrete results. Its major port project was the Vadhavan project in Maharashtra, announced in 2016. In 2021, some ₹51,000 crore was allocated out of the ₹1 lakh crore budget allocation for shipping. In 2024, ₹76,000 crore was announced. The government is yet to give a status report on the project and as yet has not indicated a timeline for its completion.
Gift City is being talked about when the horses have, for the most part, bolted. Attracted by the availability of liquidity, a fair and transparent arbitration system, as well as a welcoming regulatory regime, many Indians have blossomed as shipowners in Dubai. Luring them back will require much effort and attractive policies.
In 2022, a new Merchant Shipping Act was promised but did not make its appearance in Parliament. One hopes we will see it at least this year. The new leasing, ownership, flagging policy has also been promised before but has not been seen yet.
Even in the case of ships managed and manned by Indians that has seen tremendous growth, the government’s disallowing of Indian private security contractors has made those ships vulnerable to drone attacks and unmanned boats. Other countries have gone ahead with this and reaped the benefits of ensuring the security of their ships.
The three lakh Indian seafarers sailing in ships all over the world are among the least cared for by their parent nation among all the nationalities. They often endure gross human rights violations abroad and their government sees them largely as a tax opportunity.
The government may well consider making one of India’s islands function with an open registry of ships that would allow foreign entities to register ships on that island. The island could allow free anchorage and bunkering so it becomes an attractive destination. Hong Kong’s emergence as a major international finance and commerce center was due in-part to its shipping-friendly policies and it could be a model.
Bold and big-ticket initiatives are needed to truly leverage the potential of India’s shipping to make the nation prosperous. Shipping awaits its dream budget.
This author, Sanjay Prashar, is a shipping industry professional and a former member of the National Shipping Board who contributed in formulating the Maritime Vision 2030.
