Can India learn from Australia's domestic shipping plans?

Partly driven by the country's dwindling tonnage, Australia has announced widespread reforms in domestic shipping. The ambitious programme, set to be implemented in less than a year from now- by July 2012- will see the introduction of major tax breaks for shipping companies and a new international register for shipping. A new licensing regime and measures to promote skills development are also included in the program.

The plans will mean that Australian companies with locally registered vessels will not pay company tax; qualifying income from shipping and royalty withholding tax will be exempted. In addition, to encourage renewals of an ageing fleet, the depreciation rate will be changed so assets can be written off in 10 years instead of 20. Tax offsets will also be offered to domestic companies that employ resident seafarers working internationally. To qualify for the tax breaks, vessels must be Australian flagged and have stayed in the regime for at least ten years, besides meeting other conditions.

The new International Shipping register will encourage companies to switch to the Australian flag, observers say, with plans to enhance the skills of resident seafarers and a new deal between employers and unions encouraging sea skills in the island nation.

These measures are a response to the fact that although the Australian shipping market is pegged at US$213 billion dollars- 10% of global trade and the world’s fourth largest by volume- only a negligible amount is carried in Australian flagged vessels. Australia has seen the numbers of its major ships drop by more than half since 1995, when 55 vessels were in service; today there are only 22. Just four of these operate internationally.

Infrastructure Minister Anthony Albanese explains why these steps are being taken. Besides issues to do with national security, the environment and the economy, he says, “If we do not act now the Australian shipping industry will be lost forever.”