18 March 2012

Shipping in shallow waters:

The shipping industry, which is already in choppy waters, may have to wait longer for the tide to turn in their favour. The budget was a disappointing one for the industry, which was expecting a modernization fund for easy access to low-cost borrowings, abolishing seafarer's tax to retain talent and exemption from service tax on several inputs.

The silver-lining was Pranab Mukherjee's proposal to do away with the 5% countervailing duty imposed on ships last year. Anil Devli, CEO, Indian National Shipowners Association (INSA), said, "Doing away with this levy will end lot of uncertainty among companies about bringing their ships to the Indian coast. But overall most of our demands have been given a go by."

The reduction of withholding tax on interest payments of external commercial borrowings is also expected to help port developers and shipbuilders to some extent.

"While reduction in withholding tax will help easy access to finance, the increase in service tax is a dampener," said Prakash Tulsiani, managing director, APM Terminals, Pipavav port. He added the reduction of import duty on coal will attract larger volumes of the commodity, which in turn will lead to growth in bulk cargo business.

Suren Vakil, managing director, BMT Consultants India, said, "It's an opportunity lost. There is nothing to promote coastal shipping, which could have had a huge potential for reducing traffic on roads and freight costs. Moreover, tax break on ECB will have a marginal impact as most funds are raised locally."

Essar Shipping's managing director A R Ramakrishnan said, "There is no announcement in terms of direct initiative for the shipping industry in the budget. There are positive opportunities that could arise for the industry from the various initiatives announced for the power, steel and ports sectors. These sectors being substantial users of shipping services, the support provided to them over the next two/three year period would have a positive impact for shipping firms."

The 2% increase in excise duty is expected to affect ship breakers in Alang. "We will have to bear an additional burden of Rs 150 crore with the hike," said Vipin Agrawal, vice president, Alang Ship Recycling Industry Association.

Source: Times of India. 17 March 2012

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