Mumbai: The Indian government must put in place protectionist rules that will prevent foreign firms from “dumping services” here and help the domestic shipping industry, said the chairman and managing director of state-run Shipping Corp. of India Ltd (SCI), the country’s largest shipping firm in terms of tonnage.
In an interview, S. Hajara said: “In today’s context when the world is looking inward, and every government talks about protectionist measures for their indigenous industry, we must do the same in India.”
“Every industry has got a trade barrier. We are saying that the Indian coast should be completely reserved for the Indian flag carriers,” he added.
For the industry: SCI’s chairman and managing director S. Hajara. Ashesh Shah / Mint
In calling for such measures, Hajara pointed to the experience of private sector Varun Shipping Co. Ltd, India’s largest liquefied petroleum gas (LPG) carrier, in Indonesia, where the government reserved all LPG shipments on domestic routes for ships under the Indonesian flag, and majority owned by its citizens. Until June 2009, Varun Shipping moved at least half of Indonesia’s LPG.
What happened there is happening elsewhere, too, he said. “The same concept of bhoomi putra (son of the soil) is there in Malaysia, in (the) Middle East where you have to have a local partner, but also hold a majority stake,” Hajara pointed out, adding that the “utopian concept of laissez faire” is not being followed anywhere else, and that the Indian shipping industry stands to be marginalized if it does not get support from the Union government.
“Right now, there are foreign vessels that operate 365 days of the year on Indian waters. They are not on time charter they are on voyage charter, but somehow the shipowner manages to keep them in business. My LR-1 (long reach) tankers are idling,” he said, adding that many foreign tankers are ferrying domestic cargo.
Not surprisingly, Hajara’s views are echoed by others in the Indian shipping industry.
“Every country has got restrictions on domestic cargo movement. For instance, China has made (it) mandatory that only Chinese companies can move coastal cargo. So has Indonesia,” said Yudhishthir D. Khatau vice-chairman and managing director of Varun Shipping. “Those foreign carriers that are plying vessels on the Indian coast are not allowed to use the same vessels in their own countries (because of the age of the vessels). And those countries will not allow Indian companies to ferry their domestic cargo,” he claimed.
Hajara says the value of India’s export and import trade is pegged at at least $400 billion (Rs19.5 trillion), while the transportation component is as much as $40 billion. However, only $3 billion of the transportation goes to Indian shippers, Hajara said, since a large chunk is controlled by foreign shipping companies.
Foreign shipping firms, however, don’t quite agree. “In shipping, there is nothing like dumping rates,” said a Mumbai-based representative of a Japanese dry bulk shipping company. “Foreign shipowners are properly competing with Indian shipowners and offering competitive freight rates to customers.” He declined to be named because of company policy on speaking to the media.
D.T. Joseph, former adviser and secretary to the ministry of shipping, also said that from a consumer standpoint, allowing open competition would result in better quality of services and reduced freight rates in the long term.
“Indian shipowners may be benefited in (the) short term by curbing international shipping companies to transport cargo. It will also result in increasing Indian tonnage. But opening up of the sector has seen good results, for example automobiles,” he said.