Shipping Overview: Initiatives across segments for holistic future growth

Initiatives across segments for holistic future growth

The performance of the Indian shipping industry has been below par in the past year. A number of shipping companies are grappling with plunging profits and ever-increasing losses. The fate of shipyards is rather bleak, with a few like ABG Shipyards and Bharati Defence being debt-ridden and on their way to liquidation. The government, however, has undertaken a slew of reforms to maintain and sustain the sector. The entire industry ecosystem – shipbuilding, cruise shipping, ship repair and shipbreaking, inland water transport (IWT) and coastal shipping – has attracted greater government attention in the past year.

Size and growth

  • As of May 2018, India’s shipping tonnage comprised 1,385 vessels of 12.69 million gross tonnage (GT). Of these, 451 vessels of 11.21 million GT were engaged in overseas trade, while the remaining 934 vessels of 1.48 million GT were involved in coastal trade.
  • During 2011-18, the total number of vessels in the country grew at a compound annual growth rate of 3.68 per cent. In absolute terms, 308 vessels of 2.13 million GT were added during this period.
  • As of December 31, 2017, while about 16 per cent of the vessels range from 0 to 5 years of age, a large part of the fleet (around 40 per cent) is over 20 years old.
  • In terms of fleet composition, dry cargo dominated with around 792 vessels followed by oil tankers (165) as of December 31, 2017.
  • With respect to IWT, the combined traffic for the three operational national waterways (NWs) in 2017-18 (till January 2018) was 3.35 million tonnes (mt), of which around 74 per cent of the traffic was on NW-1. Besides NWs, traffic during the same period on the two state waterways in Goa and Maharashtra was 6.3 mt and 21.16 mt, respectively.

Policy developments

  • To promote shipbuilding, the Ministry of Shipping (MoS) released revamped software and updated guidelines to facilitate the implementation of the Shipbuilding Financial Assistance Policy for Indian shipyards in October 2017.
  • Meanwhile, a number of agreements and contracts were signed in the sector. In early 2018, Cochin Shipyard Limited (CSL) signed an MoU with Russia’s Joint Stock Company United Shipbuilding Corporation. Besides, CSL also signed a tripartite contract with the Tamil Nadu government and the Central Institute of Fisheries Technology for the construction of 16 tuna long lining and gillnetting fishing vessels to be deployed in the Palk Strait between India and Sri Lanka.
  • In a bid to consolidate India’s share in the global ship recycling industry, India signed a $76 million loan deal with the Japan International Cooperation Agency (JICA) to upgrade the environment management plan for the Alang-Sosiya ship recycling yards in Gujarat in September 2017. The total cost of the project will be $111 million, of which $76 million will be provided by JICA as a soft loan.
  • To promote bilateral shipping arrangements, the cabinet, in June 2017, gave ex-post facto approval to the merchant shipping agreement between India and Cyprus. In April 2018, the government signed an MoU with the Republic of Korea for mutual recognition of certificates of competency of seafarers.
  • Cruise tourism is another emerging segment that has attracted attention. The Ministry of Home Affairs has exempted cruise tourists arriving with e-visas from the requirement of biometric enrolment for a period of three years, till December 31, 2020. Meanwhile, the facility of foreign flag passenger vessels to call at Indian ports without obtaining a licence from the Directorate General of Shipping has been extended from February 2019 to February 2024. A uniform tariff rate at all major ports has been fixed at $0.35 per gross registered tonnage to attract cruise vessels.
  • With respect to IWT, recently, in May 2018, the government finalised standards for vessels to ply on waterbodies. This is expected to open the doors for international maritime players to tap the domestic market. Earlier, in October 2017, the foundation stone for the commencement of development work for Phase I of NW-4 from Muktiyala to Vijayawada was laid.
  • On the financing front, in May 2018, Garden Reach Shipbuilders and Engineers Limited received approval from the Securities and Exchange Board of India for its initial public offering (IPO). Earlier, in August 2017, CSL issued its IPO which was oversubscribed by 76 times, raising over Rs 14.68 billion through its share sale offer.
  • According to reports, the Directorate General of Shipping initiated discussions on implementing the indigenous navigation system GAGAN for the maritime sector, as per government recommendations.

The way forward

With a number of policy reforms under way, the government is determined to tap the sector’s potential. Given the country’s location along key trade routes coupled with a long coastline and vast network of inland waterways, the shipping sector has immense potential. The timely and effective implementation of policy initiatives could ensure that this potential comes to fruition. With the recent upturn in the global economy, the future of the domestic shipping industry seems bright as it is expected to grow in tandem with the global industry.