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Boosting maritime transportation

The government has announced a series of measures to boost India's maritime transportation capabilities in this Budget. Here we analyse each of those measures along with their potential beneficiaries.

Boosting maritime transportation

Maritime transportation forms the bedrock of economic development. Around 95 per cent of India's trading by volume and 70 per cent by the value is done through maritime transport. As per the economic survey 2021, the shipping turnaround time at ports has almost halved from 4.67 days in 2010-11 to 2.62 days in 2019-20. However, Indian ports need to further improve their efficiency so as to catch up with the country's growing trade.

To give an impetus to this cause, the government has made the following announcements in this Budget:
a. Management of major ports by private players
b. Subsidy support worth Rs 1624 crore over five years to promote flagging of merchant ships in India
c. Enhancing ship recycling capacity

Let's have a look at each of these announcements one by one and the companies that can potentially benefit from them:

  • India has a vast coastline spanning over 7,517 Km having more than 200 ports. Of these 200, there are 12 major ports which include the likes of Kandla (recently renamed to Deendayal), Mumbai, JNPT, and others that are owned and mostly run by the government. This Budget envisages seven projects worth over Rs 2,000 crore to be shifted to the PPP mode in FY 2021-22, wherein the operations of the port will move to private players.
  • To be fair, it isn't like the operations at India's major ports are currently solely run by the government. JNPT, one of India's busiest ports has two terminals operated by Dubai-based private operator DP World and one terminal each operated by private operators PSA International of Singapore and APM terminals. However, this announcement gives further impetus to privatisation of ports which will lead to operational efficiencies, and hence, will further reduce logistics costs. From the listed space, the following companies could stand to benefit from this announcement:
  • To promote flagging of merchant ships in India, the government announced a subsidy support of Rs 1624 crore over five years. Flagging of ships is a business practice wherein the ship owners register their merchant ship in the ship register of a country other than that of their own. The government, through this subsidy support, aims to enthuse international shipping firms to register themselves in India, enhance Indian companies' share in global shipping, and also enable greater employment opportunities since Indian flagged ships by law are required to hire only Indian nationals as crew.
  • Though India has allowed 100 per cent FDI in shipping since early 2000, none of the foreign fleet owners has set up shop in India due to unfavourable tax and operating reasons. The government is now aiming to reverse this trend. Though the details of the announcement are still awaited, these listed shipping companies in India can be the prospective beneficiaries of this scheme:
  • In an attempt to increase its share in the global ship recycling business to 50 per cent from the current 30 per cent and establish certain international standards, the government had not only passed the Recycling of Ships Act in Dec'19, but had also acceded to the Hong Kong International Convention. However, countries like Japan, Europe and the US were not sending their ships for recycling to India earlier as there was no ratification of a global convention. Now, with the enactment of the above-mentioned act, the government aims to double India's recycling capacity by 2024 and create several job opportunities.