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5 months ago

Vol- 8 issue-08

6 TMWS 16 th - 30 th

6 TMWS 16 th - 30 th April 2018 Nautical News www.tmwsmagazine.com Indian shipping industry may hit foreign shores to fight slump Caught in deep waters, the Indian shipping industry may be contemplating converting their ships to foreign registration, potentially causing a loss in taxes of about Rs 8,000 crore to the central exchequer. Anil Devli, CEO, Indian National Shipowners’ Association (INSA), said, Indian shipowners could switch to a foreign flag if the government refrains from offering cargo support to the domestic industry in order to compete with foreign shipping lines. Devli said, “While India does not practice cabotage, there is a provision under the chartering guidelines offering the domestic industry the right of first refusal (RoFR) in case a foreign company emerges as a lowest bidder for any cargo contract. In the absence of RoFR, there is no incentive to remain flagged in India.” According to estimates, already, around 35% of the total fleet owned and controlled by Indian interests is flagged overseas because of lack of cargo support and high taxes. Cabotage laws apply to ships in most countries so as to protect the domestic shipping industry from foreign competition. However, in India, shipping companies only get RoFR, or the right to match the lowest price offered by a foreign ship. If the Indian ship does not accept the rate quoted by the foreign flag, then the foreign flag is given the licence by INSA within 24 hours to execute the contract. In the current scenario, although Indian shippers are able to match or offer better rates than foreign shipping lines, their market share is less than 10% of the total cargo movement. Foreign vessels carry over 90% of Indian cargo. According to latest data from INSA, in FY15-16, the share of Indian ships in the carriage of EXIM cargo was a miniscule 7.86%. An Indian vessel is less competitive because of multiple taxes, the higher cost of bunker fuel and a levy of 5% as integrated goods and services tax (IGST) on the purchase value of new ships. Moreover, Indian shippers are compulsorily required to employ more numbers of seamen on their vessels compared to foreign ships. This not only results in a higher wage outgo but companies also have to bear the income tax burden of 30% for each employee, in order to remain competitive with the wages offered on foreign ships. Devli said, in comparison, a foreign vessel pays only a tonnage tax. He explained, “Worldwide, there is no goods and services tax (GST), value added tax (VAT) or any sort of direct tax other than tonnage tax that is applied on the shipping industry. Even the tonnage tax lower in other countries.” For instance, for a vessel of 800 tonne, the tonnage tax in Singapore, converted into Indian currency, at `7,784 is lower by 87% while in the UK, it is lower by 51%. For a vessel of 28,000 tonne capacity, the tonnage tax in Singapore, at `2,72,440, is lower by 80% when compared to India. In UK, it is 57% lower while in Japan, it is 4% lower. With respect to GST, a shipping company in India pays tax on all input services availed by it, such as cargo handling, clearing and forwarding, port services, repair and maintenance, storage and warehousing, manpower recruitment, hiring of vessels, etc. In the European Union (EU), China, Australia, the UK and Singapore, there is either no GST or it is zero rated. In a zero-rate regime, the shipping company is not taxed but can still avail input tax credit for goods and services used. Second, the cost of wages forms about 40% of the total cost of operations of a ship. However, this is higher for Indian ships as they also need to factor in the tax rate of 30% on the wages paid to their employees. Third, bunker fuel, that ships use, is also costlier in India. Fourth, Indian shipping companies need to pay 5% IGST on the purchase of new ships. Ranjit Singh, ED & CEO, Essar Shipping, said, for a tanker that costs a minimum of $40 million, an Indian company would have to pay $2 million upfront as IGST. He said, “No bank will fund me for tax so I have to arrange these funds on my own. The government is offering input credit over the life-cycle of the ship but this is not the ideal solution. What is worse is a foreign company can make the same purchase without having to pay the 5% IGST.” According to data from INSA, over the last 25 years, the planned expenditure on the shipping industry was just 1.78% of the expenditure on railways and 2.3% of the roads sector. With almost zero budgetary support to Indian shippers over the last 25 years and policies that put them at a disadvantage compared to foreign shipping lines, the amount remitted out of India as freight is about $52 billion. www.seafarersjobs.com

16 th - 30 th April 2018 TMWS 7 Nautical News www.tmwsmagazine.com Pirate attacks worsen in Gulf of Guinea A surge in armed attacks against ships around West Africa is pushing up global levels of piracy and armed robbery at sea, warns the International Chamber of Commerce’s International Maritime Bureau (IMB). IMB’s Piracy Reporting Centre recorded 66 incidents in the first quarter of 2018, up from 43 for the same period in 2017, and 37 in Q1 2016. Worldwide in the first three months of 2018, 100 crew were taken hostage and 14 kidnapped from their vessels. A total of 39 vessels were boarded, 11 fired upon and four vessels hijacked. IMB received a further 12 reports of attempted attacks. The Gulf of Guinea accounts for 29 incidents in 2018 Q1, more than forty percent of the global total. Of the 114 seafarers captured worldwide, all but one were in this region. All four vessels hijackings were in the Gulf of Guinea, where no hijackings were reported in 2017. Two product tankers were hijacked from Cotonou anchorage in mid-January and early February, prompting the IMB PRC to issue a warning to ships. Towards the end of March, two fishing vessels were hijacked 30nm off Nigeria and 27nm off Ghana. “The hijacking of product tankers from anchorages in the Gulf of Guinea is a cause of concern. In these cases, the intent of the perpetrators is to steal the oil cargo and kidnap crew. The prompt detection and response to any unauthorised movements of an anchored vessel could help in the effective response to such attacks,” commented an IMB spokesperson. Nigeria piracy hotspot Nigeria alone recorded 22 incidents. Of the 11 vessels fired upon worldwide, eight were off Nigeria – including a 300,000 MT deadweight VLCC tanker more than 40nm off Brass. “Attacks in the Gulf of Guinea are against all vessels. Crews have been taken hostage and kidnapped from fishing and refrigerated cargo vessels as well as product tankers. In some cases, the attacks have been avoided by the early detection of an approaching skiff, evasive action taken by the vessel and the effective use of citadels. The IMB is working with national and regional authorities in the Gulf of Guinea to support ships and coordinate counter piracy actions. The authorities from Benin, Nigeria and Togo have sent out boats in response to several incidents,” said an IMB spokesperson. Somali risk remains One incident was reported off Somalia, where a product tanker was fired upon and chased by two skiffs around 160nm SE of Hobyo. At the end of March, a 160,000 DWT tanker reported being fired upon in the Gulf of Aden, while transiting within the Maritime Security Transit Corridor. The distance from land, sighting of ladders and firing upon ships continues to illustrate that the Somali pirates retain the capability and intent to attack merchant shipping in the wider Indian Ocean. Indonesia Indonesia recorded nine low level attacks against anchored vessels. Five bulk carriers reported actual or attempted attacks at Muara Berau anchorage in Samarinda, while waiting to load coal cargoes. IMB Piracy Reporting Centre Since 1991 the IMB PRC’s 24-hour manned centre has provided the maritime industry, governments and response agencies with timely and transparent data on piracy and armed robbery incidents – received directly from the Master of the vessel or its owners. The IMB PRC’s prompt forwarding of reports and liaison with response agencies, its broadcasts to shipping via Inmarsat Safety Net Services and email alerts to CSOs, all provided free of cost, has helped the response against piracy and armed robbery and the security of seafarers, globally. IMB strongly urges all shipmasters and owners to report all actual, attempted and suspected piracy and armed robbery incidents to the IMB PRC. This first step in the response chain is vital to ensuring that adequate resources are allocated by authorities to tackle piracy. Transparent statistics from an independent, non-political, international organization can act as a catalyst to achieve this goal. www.seafarersjobs.com

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