These are exciting times for the shipping industry. Freight rates are at record levels and this is clearly reflected in the stock markets.
The government, which by and large turns a deaf ear to the pleas of the industry, too has sent a clear signal that it is keen on introducing tonnage tax. What will be the role of the regulatory body, the directorate general of shipping, in such a scenario?
Going a little further, how has the role of the directorate general changed in a liberalised environment? The director general of shipping G S Sahni takes time off to answer this and other questions in an interview with S Ravindran.
What is the level of compliance of the Indian shipping industry and port sector as far as the International Ship and Port Safety Facility Code is concerned?
India is fully geared up to comply with the ISPS requirement. In fact, on February 10, 2004, the Union minister for shipping Shatrughan Sinha has awarded the compliance certificates to two Indian shipping companies -- Essar and Great Eastern -- and two ports -- New Mangalore Port and the Reliance Jamnagar Terminal.
We have identified about 200 Indian foreign-going ships, 12 major ports, 31 non-major ports and two shipyards which are required to comply with the code.
We have already approved the plan for all major ports and a majority of non-major ports. We expect that by April 30, all will be ready and so we can beat the deadline of 1 July much in advance.
How has the role of the directorate general changed post-liberalisation?
In a liberalised environment, the thrust is on giving freedom to various constituents of the shipping industry. The role of the directorate general has changed from a regulator to that of a facilitator.
What will be the role of the directorate general now that tonnage tax appears to be a certainty? Is the directorate general likely to be consulted while formulating the draft legislation?
As envisaged during the discussions on the subject so far, tonnage tax will be based on the net registered tonnage. All ships are registered with the directorate general of shipping. Consequently, we would have an important role in this mechanism.
Further, the directorate general of shipping's representative was a member of the panel that has suggested the draft legislation for the tonnage tax which includes the training requirements. The draft legislation is ready with us.
Is the demand for a tonnage tax justified when industries like power, ports and roads do not have this sop?
There is a very strong justification for tonnage tax. Globally, in around 85 per cent of maritime nations, the shipping industry pays tax based on this regime or an alternate very low tax regime.
The grant of such a tax will give the Indian shipowners a level-playing field.
Liberalisation cannot be one way where only foreign companies benefit. Even the domestic companies must benefit.
Further, a study by the Tata Energy Research Institute has revealed that shipping has a strong multiplier effect on the economy. This further strengthens the argument for a tonnage tax regime.
How long do you expect the buoyancy in the freight markets to last?
Right now what is driving the buoyancy in the freight markets is China which is a huge importer and exporter. This is expected to last for some time.
Later, once the infrastructure projects in India like Sagarmala and golden quadrilateral reach the take-off stage, India could be a key driver. I feel that the buoyancy is here to stay.
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