India: Shipping Firms Should Consider Loan Restructuring

Aiswarya Lakshmi January 9, 2015

Indian minister for shipping, Nitin Gadkari, says that was a dire need for restructuring of shipping companies’ debt and suggested the finance ministry to talk to banks for more flexibility towards the maritime sector.

Nitin Gadkari, the minister for shipping, has requested the finance ministry to consider restructuring of loans for the debt ridden shipping companies and show more flexibility in bank lending towards the shipping and ports sectors.

Nitin Gadkari also said that his ministry has recommended to the government to provide various tax incentives to the sector to make the industry more profitable. There should be more tax exemption for the sector to beef up companies' earnings. He pointed out that the registration of ships overseas is tax-free while in India it is taxed. So the shipping companies prefer getting ships registered outside India.

“I have suggested that there should be a five- year moratorium period for loans on existing as well as new projects followed by a three-year grace period and then a 25-year debt repayment tenure. We are looking at providing a financial package to the distressed industries,” Gadkari said.

The minister is of the opinion that shipping companies earning in dollars should be offered loans in the same currency as it can lower the interest rate burden to two or three per cent. Currently, shipping companies are paying about 10 per cent interest over the rupee loans they have taken.

Many Indian shipping companies are under stress, including Varun Shipping Co. Ltd and state-run Shipping Corp. of India Ltd, with the collapse of freight rates. Domestic shipping companies need around $16.7 billion to replace their ageing fleet.

Indian shipping ministry is planning to establish dry ports in Maharashtra, Haryana and Punjab, which will enhance connectivity even via road and rail. Gadkari also put forth the idea of state governments working with the Centre to develop new ports along the 7,000-km coastal line.

Nitin highlighted the need for developing the inland waterways, which will help reduce over dependence on the road sector. He also said states and the Centre (Federal) should work together to build ports like the Sagar port project in which the West Bengal government has 26% equity stake.