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Subsidy could help shipbuilders increase share in global market: Shipping Secretary

• In many countries, the shipping sector is considered strategic and given sops accordingly. Now, when shipping companies are going through a difficult phase globally, Mr K. Mohandas, Secretary, Shipping Ministry, has supported the cause of providing Indian ship owners with cargo protection. He is also fairly optimistic about port-bidding and thinks a significant capacity could be awarded in the current fiscal.

Edited excerpts from an interview he gave to Business Line:

• Bidding in port sector does not have good results, if you are looking at number of awards. What is hampering them?
• In the current year, we had a target to award 23 public-private partnership (PPP) projects with a total investment of about Rs 16,000 crore, targeted to create a capacity of 231 million tonnes. There has been some delay in award of projects. Many of the projects are now at very advanced stage of action and ready for award. An assessment made a couple of week ago gives us the impression that we will be able to award 15 projects by the end of this fiscal. But these 15 are some of the bigger projects with the result that 88 per cent of the targeted capacity will be created and involves 85 per cent of total investment.
• There are of course many ifs and buts as several approvals and clearances are yet to be issued. The factors that have caused delay are several … include security-related, environment-related objections and even the procedures for approval.
• However, as far as procedures and security clearance are concerned, there have been top-level interventions by the Government. Things have speeded up. It is expected that the pace of award of projects will increase with the announcement of new land policy, the draft of which is ready to go to the Cabinet. Till this land policy is approved, every PPP project irrespective of its magnitude has to go to the Cabinet.
• Could you share some details on the land policy?
• We had a land policy which was issued in 2010. The present draft has marginal improvements providing for more definite transparent procedures. Even earlier, the procedures were transparent, but the systems have been further systematised.
• What is the Ministry's view on what areas should be regulated in port sector?
• What is regulated now is tariff in the major ports. In other ports, they are not regulated, nor are other matters related to service or contract. A need is felt for a level playing field for all ports. Increasingly, ports are ceasing to be natural monopolies and market forces are becoming more relevant. So, there is a need for freedom to major ports to fix their tariffs. At the same time, major ports being public entities need to have transparent procedures and credible decision-making.
• We had drafted a Bill proposing a two-tier regulatory authority system — one for Central Government ports and one for the State Government ports. However, because of the reservation on part of the States and private operators, we are having a re-look at the same. A definite view on the extent of regulation on matters other than tariff is also to be discussed and arrived at.
• What does the Ministry think about port users' complaint that the tariffs are high?
• When the user has a problem, it has to be looked at. But port users are mostly commercial business entities. So, it is a business-to-business relationship. The type of regulation there needs to be carefully decided.
• On tariffs, there is a perception that tariffs are high. But then the reason given by ports is that they have to spend heavily on dredging. And in many countries the shipping channels and harbours are treated as national properties and the deepening and maintenance of channels are taken by States — either national or local Governments. We also have been supporting capital dredging to a limited extent. So we are looking at the feasibility of providing more support to capital dredging. Support to dredging can definitely bring down port users' charges.
• Overall in the shipping sector, what are the areas where there is a case for Government support?
• In shipping and shipbuilding, our performance has not been great. In shipbuilding, at peak Indian shipyards accounted for 1 per cent of global shipbuilding, which is not a great thing, Indian tonnage is also just above 1 per cent of global tonnage — nothing great again.
• So, if we are to have more tonnage and capacity to build more ships, Government's direct intervention and support will be required. The support to shipping sector can be in the form of some cargo assurance, where not the public sector, but even private sector will have to commit cargo.
• Indian ships were carrying 30 per cent of Indian cargo, 30 years back. Now it is only 8 per cent. The Indian shipping companies have been seeking cargo support and Shipping Ministry has been examining it. But, now, when shipping is at its lowest ebb, it is probably a right time to provide some support. We are examining how the support could be provided. With such support from Indian tonnage, the sector should see good growth. The sector is open for foreign direct investment and anybody is free to bring ships here for flagging in India. Shipbuilding also needs a package of incentives. The Ministry has proposed a subsidy and few other support measures that can help us find a 5 per cent share of world shipbuilding by 2020.
• On protection, what are your views on the Cabotage issue, with Indian ship owners unwilling to let go of their rights to carry cargo on Indian coast?
• Cabotage is a limited element. Coastal shipping carries only about 6 per cent of country's total domestic cargo. So that way, it is something which has to grow. Cabotage is considered by many countries as sacrosanct. We would also like to give protection to India ships on the coast except in case of ex-im (export-import) containers. In that case, what we need is transhipment must happen at Indian ports and the cost of import and export of containers must come down. And, the present system of transhipment in ports in other countries must change.

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