Monday, 12 September 2011

CAG slams Indian government for indifferent attitude to shipping

The Indian Comptroller & Auditor General’s office (CAG) has forwarded a report to the country's Parliament strongly criticising the government for its failure to promote the growth of the shipping industry. The CAG is constitutionally mandated watchdog set up to promote accountability, transparency and good governance and to independently audit to determine that public funds are being used efficiently as intended. Its latest report on shipping blames government policies for the fact that the share of overseas trade conducted by Indian companies has nosedived in the last six years, falling to just 8% in 2011. This, the CAG says, is despite the fact that overall Indian trade has increased by 34%.

The timing of the report could not have been worse. The government has to deal with the fallout of its proposal to relax Indian Cabotage laws after the Vallarpadam crisis reported earlier. The CAG says now that the main reason for the present state of affairs is that adequate domestic tonnage remains unavailable because of a lack of both access to low-cost financing and infrastructure constraints. It says that foreign ships carry the vast majority of Indian trade, just ten percent of which is carried on Indian bottoms.

“The government did not act promptly to resolve these vital issues, which impacted adversely the growth of the industry,” says the report, which went on to criticise the government for dilly-dallying over representations made by INSA, the Indian National Shipowners’ Association’s, some many years ago, asking for Indian flag vessels to be given preferential treatment. Industry players have long been demanding a level playing field, infrastructure status for shipping and a simpler taxation regime that would reduce the impact of what Indian shipowners see as double taxation, thanks to direct and indirect taxes.

The CAG has been critical of the speed of policymaking by the GOI, saying that the very competitiveness of the domestic maritime industry has been impacted by New Delhi's indecisiveness. "The need to strengthen the Indian shipping industry assumes great significance in view of various recommendations. Overall, the Indian freight bill was USD 16.3 billion (Rs 73,300 crore) and out of this, over 14.2 billion (Rs 63,900) was paid to foreign flags as the mercantile fleet under the Indian flag was only 1.17%," the CAG said. "There is need to expedite action on the above concerns to provide Indian shipping players a level playing field to facilitate them to compete effectively with the global players."

Almost two thirds of the Indian fleet is owned by just five companies, with SCI alone owning a third of Indian tonnage; Great Eastern owns about 17%.  Shipping contributes about 3% to the Indian GDP; roughly 95% of India's trade by volume and 70% by value is carried by sea. However, the Indian share of the freight market remains abysmally low. The CAG says, "No availability of required tonnage was one of the reasons for decline in (Indian) share of Indian trade."

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