BackChennai firm to start cruise liner, plans $400 million investment
Newport Maritime operate under the brand name Royal Asian, use Mumbai as home port
Premium(Globally, cruise tourism has been growing at about 12% a year and generating more than $14 billion a year in revenue from more than 10 million passengers.)
Bangalore: Chennai-based Newport Maritime Pvt. Ltd is looking to start a cruise liner service next year, using Mumbai as a home port, to tap the Indian market where one global cruise line found it tough to do business and pulled out just 40 days after launching operations in December 2010.
Newport Maritime, founded by Sivakumar Elayathamby Sinnarajah, a person of Sri Lankan origin and a US citizen, plans to invest $400 million over five years to run the service with two used luxury cruise ships, according to a proposal filed by the firm with the shipping ministry seeking concessions and incentives for the operations and for launching the service.
The shipping ministry is evaluating the proposal but a decision on granting incentives to the cruise ship operator rests with other government departments, a ministry spokesperson said.
Newport Maritime plans to operate under the brand name Royal Asian Cruise Line, offering tourists a seven-night itinerary on the Mumbai-Goa-Maldives-Colombo-Mumbai route between October and April and an 11-night itinerary to Dubai from May to September.
The service will deploy MV Gemini (to be re-named MV Asian Pride) and MV Crown Majesty (to be re-named MV Asian Song), both built in 1992 with a capacity to carry 400 and 750 passengers, respectively.
Sinnarajah is also chairman of Dani Aviation Pvt. Ltd, which runs ground-handling services at Chennai international airport.
Cruise tourism in India is in its infancy and has just started generating interest. Currently, there are no international cruise lines using an Indian port as a so-called home port, from where services begin and end. As such, Indian tourists have to fly abroad to be able to go on a cruise.
Louis Cruise Lines had been the only luxury liner to run cruises from India after the Union government eased taxes as part of a policy to encourage the industry. But on 17 January 2010, just weeks into its operations, the world’s fifth largest cruise line operator decided to stop using Cochin as its home port, citing the high charges levied by the harbour for ship calls.
Louis Cruise Lines, a subsidiary of Cyprus-based Louis Plc., had planned to run the service between December and April every year, offering Cochin-Maldives-Cochin and Cochin-Colombo-Cochin routes.
A major impediment to cruise ships in India is how taxes are levied on some on-board activities. A cruise ship has to sail some 200 nautical miles from the coast to not be taxed for serving liquor or operating casinos, according to an executive with a global cruise line who declined to be named. Earlier, ships had to sail just 12 nautical miles away to escape the taxes, he said.
Globally, cruise tourism has been growing at about 12% a year and generating more than $14 billion a year in revenue from more than 10 million passengers. With a growing middle-class and rising disposable incomes, “India could take to cruise shipping in a big way", a shipping ministry official said.
As no Indian firm owns a luxury cruise line yet, the Union government has been encouraging foreign cruise liners to undertake coastal runs. In July 2008, the cabinet approved a cruise shipping policy, exempting operators from income tax, excise duty, customs duty, corporate tax and service tax. But the policy was never implemented, the shipping ministry official said, attributing it to a lack of co-ordination between the various government departments.
In March 2009, the government eased laws that had barred foreign registered ships from carrying passengers between Indian ports without a licence from the director general of shipping, India’s maritime regulator. The relaxation is valid for 10 years. But because of the high port charges, this has not helped cruise tourism either.
Newport Maritime is seeking concessions on corporate tax, customs duty, excise duty, sales tax, port charges and liquor licence, and a slew of other incentives to begin operations.
Sinnarajah could not be reached for comment.
“The world cruise market is saturating," said K.P. Boopathy, a director at Newport Maritime. “Indian cruise market has a very good scope to take off," he said by phone from Chennai. Boopathy said the service will be launched sometime in 2014, but declined to give details saying the firm “didn’t want the market to get a buzz about it".
Newport Maritime, a firm registered in The Bahamas, holds a 95% stake in the proposed venture, while its Indian arm has the balance stake. Sinnarajah is the founder and chairman of both the entities.
Most of the world’s cruise ships are registered in The Bahamas, where income from operations are tax-free as are capital gains from sale of ships, making it an attractive destination for fleet owners to register ships. Offshore profits are also not taxed in The Bahamas. Asian Pride and Asian Song, the two cruise liners to be used in India, are registered in The Bahamas.
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