The maritime sector is a crucial pillar of the Indian economy. Given its dependence upon trade, commerce, development and growth for its expansion the COVID19 pandemic has posed unprecedented challenges to this vital sector. But within these challenges there is also great opportunity.
We have attempted to identify several opportunities in this challenge. These are briefly mentioned below.
Rapid Augmentation of Indian Shipping Fleet. With the current downturn in shipping activities a large number of new build and pre owned vessels may be available for sale at rock bottom prices. This is a big opportunity for India to expand it’s merchant marine to meet its EXIM and coastal cargo transportation requirements to prepare for the US$5 Trillion economy. We propose that the user ‘companies’ such as Indian Oil, Gas Authority of India, Steel Authority of India, Container Corporation of India, Coal India and NTPC and the Food Corporation of India unlock their reserves and surpluses and avail cheap debt from Indian banks to buy up new build and modern Tankers/LPG ships, LNG carriers, Container carriers, Bulk carriers etc. With a total investment of about INR 20,000 crores, split into debt and equity, a fleet of about 150 ships can be rapidly added. Import duties may be waived off. These ships would be leased out, against a contract of affreightment, to the Shipping Corporation of India, for its operational management.
Dredging. Port led development is the governments major maritime initiative. All Ports require periodic maintenance dredging. The Dredging Corporation of India (DCI) has about INR1532 Crores as reserves and surplus. 50% of this amount with an equivalent amount of low interest debt should be utilised to buy European Built Trailing Suction Hopper dredgers. Custom duties may be waived off. This would expand DCI capabilities and reduce dependence on foreign companies in dredging Indian ports. No government expenditure need to be incurred.
Shipyards. No new builds are possible in the present situation. With lack of orders Indian shipyards may become NPAs. But, refits and repairs to meet the International Maritime Organisation (IMO) regulations on marine pollution for at least 50,000 ships is a huge opportunity since these repairs are moving out of China. Indian shipyards with large dry dock and engineering facilities such as Cochin, Visakhapatnam, Kattapuli, Dahej and Pipavav, can cater to ships of any size and capacity. Embassies abroad should sensitise shipping companies to shift business to India. This may require nationalisation of ailing private sector shipyards which could be merged with Government owned shipyards. Further provision of special low interest working capital loans upto 90% of the contract amount for the first 20 orders obtained by any Indian shipyard, waiver of customs duties on spares and equipment would need to be waived and GST brought down to 5% for ship repairs and refits. No government expenditure is required.
Cabotage and Short sea shipping. By some estimates, coastal shipping share by 2025 could be of the order of about 300-400 MMT. Only 7% of this cargo is being carried by Indian owned ships. This must improve dramatically to 100% in a few years. Therefore, cabotage must be abolished on 31 Dec 2025. This time would be adequate notice for all coastal ship operators to either build ships in India or procure them or flag in India thus generating jobs and revenues presently accruing to foreign shipping companies. Major incentives and structuring would be necessary. Some government expenditure may be required and a revolving budget of about INR 2000 crores can be transformative.
Port led development and other Capital Works. Sagarmala presents a real and present opportunity for re-starting the economy. Capital works directly raise demand for steel, cement, heavy machinery, transporters, tugs and yard craft. Since Port infrastructure has to be expanded to service a projected a US$ 5 trillion economy, this is a good time to invest into Ports so that infra is built on the one hand but also through consequential demand generation jobs and industry are revived. These could be all privately funded as per various available business models.
POL Strategic Reserves. Going by ground reports from ports there is large influx of VLCCs arriving at various SBMs. Since POL demand is muted at present these shipments are possibly adding to the national strategic reserve. As crude prices remain subdued there is an opportunity for India to consider ‘tanking’ crude in friendly locations and on board ULCCs which are presently idle. Possibly, new tanks using rapid fabrication technologies should also be considered.
Piracy and security. ReCAAP ISC reports that there were 29 incidents of armed robbery against ships in Asia during the first quarter of 2020. This is 19 more than the same time last year. As the global economy continues to face head winds economic compulsions may raise incidents of piracy, shipjacking, hostages and maritime terrorism. We need to have a sound plan for the safe escorting of Indian cargo along the SLOCs and more importantly protection off Indian harbours.
Geo-Politics. Geo-politics and maritime affairs are closely linked since time immemorial. With the current global situation India’s maritime diplomacy may require to be revisited to study the new opportunities that are emerging. A snap shot analysis is placed at Appendix B.
Fishing and Aquatic farming. Fish is a rich source of food for a large segment of the population. It is also a multi billion dollar industry directly employing 14 million people in India. Given the present situation the marine fisheries have a huge potential for export provided the appropriate technologies of Deep Sea Fishing Vessels with on board processing facilities are inducted. This sector must be actively encouraged to fill the global void in this market. Further, air transportation of fishery products using the national aircraft fleet should be started so that the industry is sustained and livelihoods are not hazarded. Seaweed cultivation also offers prospects and this sunrise industry in India should be massively encouraged as agri income for coastal populations is highly favourable. This may require government expenditure to build the Deep Sea Fishing Fleet in Indian shipyards and support seaweed farmers.
Inland Transportation. It is a well-established fact that IWT is not only the cheapest mode of transportation compared with rail and road but also from a COVID-19 point of view safest. This sector should be urgently ramped up with a large private sector participation supported with assured freights and contracts from the user ministries such as Ministries of Food and Civil Supplies, Fertilisers, Mining, Steel, Agriculture and Farmer Welfare etc. An initial budgetary support of about INR 5-8000 crores would pay rich dividends to India.
Organisational Structuring. In conclusion, towards comprehensive evaluation of the proposals enumerated above and to direct the development of the maritime activities of the Country, in an integrated coordinated and harmonious fashion in the POST COVID scenario, APEX level political guidance is absolutely necessary. This guidance should be provided by domain experts to the APEX Political Leadership at both center and state who would in turn release the appropriate directions to the stakeholders for compliance. The directions could be then implemented though a National Maritime Commission so that this great opportunity in this challenge is not missed but fully leveraged to promote the national maritime sector.