Page 5 - Annual Review 2021 full

Annual Review 2021

commercial impact of this cannot be completely The government needs to act quickly given India’s
overlooked. However, in the next 2-3 years, India green commitments and for strategic reasons too.
needs Rs. 90,000 crore to just replace the existing While it is considered prudent that atleast 50% of
fleet. Furthermore, the need to expand the fleet national cargoes are carried by the national fleet,
remains ever critical. the share of Indian ships in India’s EXIM trade
has steadily decreased from 40.7% in 1987-88 to
As it is Indian shipping faces several constraints in just 6.53% in 2019-20. This leads to an estimated
finding finance to buy new and secondhand ships. foreign exchange outgo of USD 53bn annually on
As foreign shipping companies compete directly account of import of shipping services. While the
with Indian ships for India’s EXIM and coastal number of ships under Indian flag has grown over
cargoes, funding for Indian ships has to be on the years, the share of Indian fleet as a percentage
internationally competitive terms. While loans are of global fleet remains close to only 1% compared
procured by Indian shipping companies from Indian to China (5.0%) and Singapore (6.5%).
banks, they face two constraints: one that the cost
of funds is much higher than the rate available to If a country does not control the transportation of
foreign shipping companies and two that the tenor its domestic and EXIM trade, in the longer run it
of loans is far shorter than the commercial life of the leads to freight subjugation, resulting in its exports
ship. These two factors affect the ability of Indian becoming non competitive and this makes it difficult
ships to be competitive as the per day costs of just for the manufacturing sector to participate in supply
servicing the loan taken to purchase the said asset chains due to cost and time over runs.
is much higher compared with foreign ships.
The current container crises has already seen
Earlier, we were of the view that a dedicated fund or freights sky rocket with the Indian trade at the
an interest subvention scheme would be adequate mercy of the foreign container shipping lines.
for acquisition of new ships to expand the Indian
fleet. However, the green shipping goals and targets In 2004, the government of India introduced a
have exacerbated the need for funding along with tonnage tax scheme for Indian ships. This led to a
its scope and scale. spurt in investments under the Indian flag. Almost 11
years later, another important policy step taken by
The other option to replacing the fleet is to retrofit the Ministry of PS&W is the Scheme for Promotion
the engines. However, the average age of the entire of Flagging of Merchant Ships in India by providing
Indian fleet is 20.82 years and only a ship with subsidy support to Indian shipping companies in
balance life of more than 10 years justifies retrofits. global tenders floated by Ministries and CPSEs.
Therefore, there is no turning away from the need to The outlay for the scheme is Rs.1,624 crore over
replacing the entire Indian fleet in 2-3 years. This is five years. This has come as a very welcome boost
not an easy proposition given that the current cost to the shipping industry.
of a 5 year old 37,000 dwt tanker is $ 25 million,
a 37,000 dwt bulker is $25.5 million and a 2,750 Before finishing, I must state INSA’s unequivocal
TEU container ship is $ 44 million dollar. Therefore, thanks to the Director General of Shipping and each
a small shipping company cannot change all its and every member of his office. We believe they
ships without any help. have gone beyond the call of duty to keep Indian
shipping afloat, the Indian seafarer comfortable
and the Indian trade sailing.

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