India: New Opportunities Unveiled in Shipping Sector

 

The key initiatives includes  Sagarmala Project, Special Purpose Vehicle to provide efficient last mile rail connectivity to Major Ports, Incentive for Shipbuilding and ship-repair Industry,  Jal Marg Vikas Project, Customs and Excise Duty Exempted on the Use of Bunker Fuels for coastal transportation of EXIM and empty container and for domestic containers transported alongwith EXIM and empty containers, Cabotage Relaxed for Special Vessels and Developing 78 lighthouses as tourism centers.

 

These initiatives can be summarized under the following heads:

1.  Sagarmala Project: ‘Sagarmala- Concept and Implementation’ was approved by the Union  Cabinet on 25.03.2015.   The Project Development Consultants were appointed on 15.05.2015 to develop a National Perspective Plan (NPP) for the Sagarmala Programme. NPP is currently under preparation and would be finalized by 31.01.2016. As part of the NPP development-

 

a)  The draft report on Origin-Destination (OD) Study, for POL & LNG, Iron Ore & Steel, Coal, Container, Food Grains and Fertilizer is under review and the final report is being prepared based on the inputs received from the relevant stakeholders. On the Coal OD front, the Ministry of Shipping is currently monitoring key railway connectivity projects from Talcher-Paradip and discussing with Ministry of Railways to fast track the same.

 

b) The draft Master Plan for Ennore has been submitted in November, 2015. The draft Master Plans for Paradip, JNPT, Kolkata, Vizag, Kandla, Haldia and Ennore will be submitted by 31.12.15. Draft Master Plan is currently under preparation for Tuticorin, Mumbai, Kochi, Mormugao and Mangalore.

 

c)  Finalized Techno Economic Feasibility Report (TEFR) for Sagar Port and the draft TEFR for Vadhavan Port submitted on 30.11.2015. TEFR for Paradip Outer Harbour is under preparation.

 

d) Coastal Economic Zone (CEZ) Perspective Plans are also under development: While the NPP is under development, 12 projects have been considered for part funding by Sagarmala Development Company (SDC) for implementation, DPR is under preparation for 10 projects, 55 road projects and 28 rail projects have been shared with MoRTH and Ministry of Railways respectively for their consideration.   The institutional mechanism to implement the initiative includes the National Sagarmala Apex Committee (NSAC), Sagarmala Coordination & Steering Committee (SCSC), State Sagarmala Committees (SSC) and the Project SPVs. The SCSC and NSAC have been constituted and their first meetings were held on 01.10.2015 and 05.10.2015 respectively. West Bengal, Odisha and Puducherry have constituted their SSCs and other Maritime States have been requested to do the same. The Ministry of Shipping has also taken up development of 31 island lighthouses.

 

2.Special Purpose Vehicle to provide efficient last mile rail connectivity to Major Ports: Based on the Cabinet decision dated 25.03.2015, an SPV, to provide efficient last mile rail connectivity to Major Ports, with equity from 11 Major Ports and Rail Vikas Nigam Ltd.  was incorporated under the Companies Act. This SPV ‘The Indian Port Rail Corporation Limited’ started functioning from July 2015 and since then has taken up 23 projects which are critical for last mile rail connectivity to the Major Ports. The registered office of the company is at New Delhi and corporate office is at Mumbai. The SPV would undertake the following Projects:- 

 

Last mile connectivity to Major Ports;  Modernization of evacuation infrastructure in Ports; To operate and manage internal Port Railway system; To raise financial resources for funding Port related Railway Projects 

 

3. Incentive for Shipbuilding and ship-repair Industry: Government has recently approved incentives to promote domestic shipbuilding industry.  These include (i) financial assistance to domestic shipyards for any vessel built by them subsequent to its delivery and (ii) relaxation of eligibility criteria for procurements or repair of vessels done by Government departments or agencies including PSUs for government purpose or for their own purpose to grant Right of First Refusal to domestic shipyards. 

 

The Government has addressed the problem of inverted duty structure in ship manufacturing.  Inputs used in ship manufacturing and repair have been exempted from Customs and Central Excise Duties with effect from the 24th of November, 2015. Prior to this exemption, while ships could be imported at almost negligible rates of Basic Customs Duty (BCD) and nil rates of Countervailing Duty (CVD), the inputs used in ship manufacturing and repair attracted normal rates of BCD and CVD. This put the Indian shipyards, who build ships for the domestic market, at a cost disadvantage. Correction of this inverted duty structure was therefore necessary. 

 

4.  Jal Marg Vikas Project: In the Budget Speech for 2014-15, it was announced that a project on the river Ganga called ‘Jal Marg Vikas’ (National Waterways-I) would be developed between Allahabad and Haldia to cover a distance of 1,620 kms, which would enable commercial navigation of at least 1,500 tonne vessels and that the project would be completed over a period of six years at an estimated cost of Rs.4,200 crore. The Project’s objective is to provide an environment friendly, fuel efficient and cost-effective alternative mode of transportation, especially for bulk goods, hazardous goods, captive cargo and over dimensional cargo. 

 

Government has commissioned three expert studies to assess the interventions required to achieve greater clarity on the entire project and its impacts. These studies are (i) Detailed Feasibility Study on NW-1 and Detailed Engineering for its Ancillary Works; (ii) Environmental and Social Impact Assessment (ESIA), Environmental Mitigation Plan (EMP) and Resettlement Action Plan (RAP); and (iii) IWT Sector Development Strategy and Market Development Study. In addition, Inland Waterways Authority of India, which is the implementing agency of the project, has conducted comprehensive stakeholder meetings at Kolkata, Varanasi, Patna, Delhi and Farakka, wherein valuable feedback of environmentalists, industry, academics and the wider society was obtained. The projects include construction of terminals, jetties, river training and conservancy works, modern automated information system, navigation aids, etc. The construction of the projects is expected to commence from March, 2016 and the last projects to be taken up may extend up to five years. 

 

5.  Customs and Excise Duty Exempted on the Use of Bunker Fuels for coastal transportation of EXIM and empty container and for domestic containers transported alongwith EXIM and empty containers.

 

This tax incentive for transportation along the coast will go a long way in enhancing Indian tonnage as well as in promoting development of transportation hubs in India.  

 

6. Cabotage Relaxed for Special Vessels 

The Government has relaxed cabotage for special vessels such as Roll-On Roll-Off (Ro-Ro), Hybrid Roll-On Roll-Off (Hybrid Ro-Ro), Roll-On Roll-Off cum Passenger (Ro-Pax), Pure Car Carriers, Pure Car and Truck Carriers, LNG vessels and Over-Dimensional cargo or Project Cargo Carriers for a period of five years w.e.f 02-09-2015. With this relaxation, vessel operators will be allowed to bring foreign flagged vessels of this category to ply on the coastal routes. Such special vessels are in short supply in the country but since they cater to specific class of cargo, their availability will make it possible to shift cargo movement for these commodities from road and rail to coastal shipping. 

 

7. Developing 78 lighthouses as tourism centers         

The Ministry of Shipping, along with the Directorate General of Lighthouses and Lightships (DGLL) has drawn up an ambitious programme to develop 78 lighthouses in the country as centres of tourism in the first phase under Public Private Partnership (PPP). The identified lighthouses are in Gujarat, Maharashtra, Goa, Karnataka, Kerala, Lakshadweep, Tamil Nadu, Puducherry, Andhra Pradesh, Odisha, West Bengal and Andaman and Nicobar Islands.