Interview with G.K. Vasan: “There is no place for complacency in our effort to boost investor confidence”

Back in 2013, when the Indian maritime sector was struggling amidst the global economic slowdown, the shipping ministry took several critical steps to revive the sector and investor interest. In this interview from our archives, G.K. Vasan, then union minister of shipping, spoke about the key initiatives and the policy roadmap to steer the industry forward…

What are your biggest priorities for the maritime sector as union minister for shipping?

In 2011, the Ministry of Shipping (MoS) came out with a 10-year perspective plan for the maritime sector known as the Maritime Agenda, which identified the priority areas, set goals and laid out a plan of action.  Though many of the issues in the sector are dynamic in nature, we have been able to define and follow a broad road map with important milestones.

For the ports sector, the focus has mainly been on additional capacity building and augmentation, improving efficiency and productivity at par with comparable ports on the international stage and ensuring connectivity to the ports.

In the shipping sector, increase in Indian tonnage, promotion of coastal shipping and inland waterways, quality maritime education and training of quality seamen are some of the areas of major focus. 

What were the major developments in the maritime sector in the past one year? What changes can we expect from the ministry in the next one year?

Though the shipping sector has been reeling under the global downturn, it has been able to show very good performance in some areas during the last one year.

In the port sector, 32 port projects involving an investment of Rs 67,656.3 million were awarded. This is the highest ever number of projects awarded for a year in the major ports sector.  On completion of these projects, port capacity would increase by 136.75 million tonnes per annum (mtpa). Besides, the government also decided to set up two major ports – one each at Sagar in West Bengal and at Durgarajapatnam in Andhra Pradesh.

The shipping sector also witnessed major policy initiatives. The cabotage policy was relaxed to boost transshipment of EXIM containers at the International Container Transshipment Terminal (ICTT), Vallarpadam. As a measure to promote cruise shipping, foreign flag vessels carrying passengers have been allowed to call at more than one Indian port. It has also been made mandatory for all foreign flag ships of 300 gross tonnage (GT) or more to compulsorily hold insurance coverage and classification by members of IACS or a recognised organisation. This will prevent wreckage of old foreign ships on the Indian coast.

During the last four years, we have been able to chalk out the way forward and embark on a path of capacity expansion and efficiency. We will continue in the same vein and steer the Indian maritime sector in the direction of growth and efficiency. In 2013-14, 30 projects comprising 20 public-private partnership (PPP) projects, seven non-PPP projects and three captive projects for public sector undertakings (PSUs) are being taken up at an estimated investment of

Rs 264,455 million. In fact, four of these projects have already been awarded. Other major projects like the Outer Harbour Project at VO Chidambaranar (VOC) Port, Thoothukudi, Tamil Nadu, are also in the offing.

On the policy front, a new land policy, which will facilitate the growth of port-related industries around the ports, is in the pipeline. The next few months will also see further changes in the new tariff guidelines for the major ports, in the policy for prevention of private monopolies in the major ports and in the policy for development of captive facilities. The Shipping Corporation of India will also be opening a branch of the Maritime Training Institute in Thoothukudi in collaboration with VOC Port Trust as a part of its effort to train qualified sailors.

The shipping ministry has announced new policy and regulatory measures in the past one year (new tariff guidelines, enhanced delegation of financial powers to major ports, new security guidelines, etc.). How will these measures pace up development at the major ports?

Development of port infrastructure needs big investments and the government expects this to come primarily from the private sector. In a fiercely competitive scenario, an enabling environment is essential for attracting investments. Timely and prompt decisions on investment proposals coupled with fair and equitable returns on investments need to be provided. The basic purpose of the slew of measures that you mentioned is to ensure a level playing field for the major ports to operate and sustain themselves. These measures have already started yielding results and there has been good response to our projects, particularly the fourth container terminal at Jawaharlal Nehru Port.

Are you satisfied with the progress of private participation in the port sector? What is the way forward for the private sector?

Yes, the progress of private participation in the port sector has been very encouraging. PPP projects will continue to be the preferred mode for development of berth side infrastructure and other commercially viable activities in the major ports. This will allow the government to concentrate the limited public resources for ensuring availability of support structures like channel maintenance and other back-end facilities.

There is no place for complacency in our effort to boost investor confidence and to ensure continued flow of private investment into the sector. As I mentioned earlier, policy initiatives with respect to land, captive facilities and mechanisms for prevention of private monopolies, etc. have been identified as areas requiring a fresh look so that smooth inflow of private investments into port projects is not hampered.

Coastal shipping and inland water transport (IWT) remain largely unutilised. What steps are being taken by the ministry to promote the use of these two modes of transport?

We are fully aware of the untapped potential of coastal shipping and IWT as well as the socio-economic benefits of this environment-friendly mode of transport. My ministry is keen on promoting a modal shift of cargo from rail and road transport to waterways transport, and we are trying to bring out a well-rounded policy framework to achieve this.

Firstly, the sector has been given a boost in the Twelfth Five Year Plan with a substantial increase in fund allocation. Secondly, the government has exempted ships and vessels from excise duty and removed countervailing duty on imported ships and vessels. Besides, a committee is looking into the standards required for coastal and inland vessels as different from seagoing vessels and it would formulate an incentive scheme for a modal shift of cargo to inland waterways and coastal shipping.

Further, the Directorate General of Shipping has promulgated a simplified regulatory regime for facilitating the operation of vessels within Indian territorial waters through a significant reduction in the scales of manning and equipment for coastal ships without compromising safety.  By expanding the scope of river-sea vessels (RSV) and by increasing the size of certain types of vessels up to 10,000 GT that can be certified under the RSV notification, the government has sought to boost coastal shipping in India.

The Bill to declare the Lakhipur-Bhanga stretch of river Barak in Assam as National Waterway No. 6 has just been passed by the Rajya Sabha and it is expected to be considered in the Lok Sabha during the current monsoon session. This will give a boost to the IWT sector in the north-eastern region and benefit the states of Assam, Mizoram, Manipur and Tripura.

What are key issues and challenges facing the maritime sector?

The recessionary trends in the global economy have had an adverse effect on the ports also.  Further, a drastic reduction in cargo traffic in some ports due to regulatory measures like a ban on iron ore mining and restrictions on iron ore exports have forced these ports to explore avenues for alternative cargo to sustain themselves. Increased mechanisation of cargo handling and automation have rendered substantial manpower redundant, which is affecting operating costs in the ports.

Navigation safety and security of Indian maritime waters are also key issues that need continuous upgradation. The National Automatic Identification System by the Directorate of Lighthouses and Lightships and the establishment of a chain of Static Sensors by the Indian Coast Guard are measures taken in this direction.

The introduction of the tonnage tax regime in 2004 was a welcome move for the Indian shipping industry. However, there are areas in which further action needs to be pursued. For example, the fiscal regime needs to evolve further for the sector to offer a level playing field in international operations. These are being taken up with the concerned ministries.

The share of Indian bottoms in the carriage of Indian seaborne EXIM trade needs to grow rapidly, especially in fields where our strategic interests are involved. There are also other challenges in the Indian shipbuilding industry, promotion of cruise shipping and tourism, etc. I would like to assure that all these issues are being addressed simultaneously.

Though the maritime sector is currently experiencing a trough, I expect that the policy initiatives and projects currently under implementation, when complete, will place the sector in a stronger, more robust position in the future.