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Run up to the Budget: Shipping sector
Background
- India is among the leading maritime nations
in the world with 6.8 mn Gross Registered Tonnage (GRT)
- Shipping Industry in India is highly regulated,
cyclical and capital intensive.
- After the four year long recession, shipping,
freight and charter rates have started rising in FY 2000-2001. This has resulted
in improved performance of shipping companies in this fiscal year.
- The government has proposed disinvestment of
40%, out of the 80% stake it holds in the Shipping Corporation of India, in
the year 2001-02.
Measures taken in the previous budget (FY 2000-01)
Shipping companies were allowed
to claim 100% deduction (earlier 50%) on the amount transferred to a special
reserve from their profits, which is to be utilised for acquisition of ships.
This measure gave the much-needed fillip to Indian shipping companies for acquisition
of new ships.
Pre-budget Industry Wish List
- The ministry of surface transport has proposed
that the shipping industry must be given an option to pay a tonnage tax in
lieu of corporation tax. Tonnage tax is a lumpsum tax on the ship's earning
capacity as calculated through globally accepted procedures on the basis of
Net Registered Tonnage of the vessels (NRT). The present regime of corporate
tax sans any major fiscal benefits makes the industry uncompetitve in international
operations as foreign companies pay only a minimal tax.
- The shipping industry has demanded that the
provision introduced in the latest Exim Policy, which places imports of both
second hand and new ships on par with other capital goods items, should be
removed. This provision prevents the industry from acquiring second hand ships
now available at attractive prices as they are required to surrender a special
import license which is five times the c.i.f. value of such capital goods.
- The industry has also asked that Government
should ensure implementation of all major recommendations of the Shipping
Policy.
Expectations from the budget
No significant policy measures expected in this
budget.
Key Players
Shipping Corporation of India, Great Eastern Shipping,
Essar Shipping Ltd, Chowgule Steamship Ltd, Varun Shipping Ltd.
Rediff-Dun & Bradstreet Budget Impact Analysis
Budget 2001
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