Veeresh Malik
Why Indian Shipping is Barely Afloat

With one of the longest coastlines in the world, India has less than 950 Indian flag merchant navy cargo ships, as against about 55,000 worldwide. That's less than a 2% global share of merchant navy ships, by number, and it becomes even worse when you factor in smaller coastal as well as inland waterway vessels. Take this further by using figures for deadweight tonnage, then India’s share trickles down to close to 1.2% of existing world tonnage—and it’s dropping—with just about 15 million DWT against a global 1,200 million DWT.

 

However, here’s another bunch of statistics. Approximately 20% of the world's merchant navy personnel worldwide are of Indian nationality and origin, and to all perceptions as well as unspoken truths, over half the world's tonnage is managed by Indians located all over the world. Traditional seafaring countries like England, Japan, Italy, Norway and similar nations now have ships flying their flags with Indians not just sailing on them in junior positions but also in command. Some of these countries are now actively looking for Indians who also speak their local languages to work on their coastal ships, since their own nationals do not wish to work on ships anymore, and the fishing fleets with their factory ships have to go out further, thus requiring "foreign-going" qualifications. Around 4,500 merchant navy ships flying foreign flags are managed out of India, mainly from Mumbai, but the number is growing rapidly, and in other parts of the country too. This does not include the number of foreign flag ships managed from other parts of the world, but also employing Indians, on which there are not even ballpark estimates, so high is the number.

 

The Certificate of Competency (CoC) earned by seafarers after multiple exams and training, issued by the Indian Government, is granted equivalency by other countries, including the developed countries, because it is recognised as one of the toughest regimes existing to acquire the privilege of sailing on board ships, worldwide. A side effect of this is that almost 75% of all candidates studying for the CoC in England are from India, because that is perceived to be an easier "system", and it also gives easier access to EU job markets. By some accounts, there are over 1.7 lakh seafarers from India, just about 25,000 of whom work for Indian companies, the rest work in foreign jobs because quite simply the tax regime is easier on them—amongst other things. And this number is rising—the demand for Indian seafarers continues unabated, even as there is a severe shortage worldwide. The average age of a seafarer in England or Japan is now over 50 years, young people there are not taking to seafaring as a profession, and in a decade or less, they will not have too many of their own people to man their own ships.

 

So what ails Indian flag shipping, why don't the numbers add up, why is Indian surface transport by water so neglected and behind times? Why can't we have more Indian flagships, so that along with seafarers, it is also our ships that sail across the seas, dominating like our Indian seafarers do?

 

The answer, as always, lies in the petty and short-sighted way governance treats all forms of transport as short-term revenue generating tools, and not long-term nation building efforts. The attitude down the line with the variety of entities which control shipping in India is the same as the attitude one sees in transport offices, the place where you and I go for our driving licences which are issued—or better still, not issued—unless motivated.

 

That sea cargo is without doubt the most efficient way to transport goods is another given and simultaneously in India a reason for its neglect—once the ports are built and the ships are bought, there is no need to build roads or railway lines, acquire land or operate toll stations and marshalling yards. All you need to do is get the ships out and on to the seas, freedom of transit on which is guaranteed by historical conventions and modern day laws, and get a move on. On a per tonne per kilometre basis, it is cheaper to send anything over a truck or wagon load by sea from Gujarat to the east coast of India, and at a four-five day transit time, probably as fast too—and that is a fact already being recognised wherever possible. But the obstacles faced by coastal shipping are so immense, that even the best and strongest of contenders have often backed out, giving way to the entrenched road lobbies.

 

Putting everything else aside, that is also the single biggest reason why water-borne cargo and passenger movements by inland waterways have been put on the back-burner in post-1947 India, except in selective areas like Kerala and West Bengal. Governance and those in authority cannot make money by holding up vessels and cargo or passengers once on the rivers, as easily as they can do on roads, so it simply does not work for those who have made a fine art out of this method of generating incomes, without caring about consequences, and Bihar is a fine example of how a State self-destructs after river-borne trade is destroyed.

 

This is the true reason why surface transport by water, inland or coastal, has been such a flop in post-Independence India. Putting it bluntly, at the risk of repetition, there is no way any ‘hafta’ can be collected once a ship has sailed out, so coastal or inland waterway shipping is the last on anybody's priorities. A few thousand tonnes sent by road or river or even by air will keep multiple centre-state-city-group-individual interests happy and well-fed for generations, such are the transaction benefits en route, as can be seen at any state border. A few thousand tonnes sent by sea will deprive them their seven generations’ worth of bread, butter and jam.

 

But that's a fact of life. Undivided pre-Independence India had more coastal shipping, both passenger and cargo, than we have now. Karachi-Saurashtra - Bombay-Konkan, and thence to Ceylon via the Malabar coasts, for example, is a route that’s simply extinct now. Look at a map of India, and wonder why we do not have more ferries crossing the Gulf of Khambhat, or sailing from Mumbai (south) to Goa or north to Gujarat.

 

The manpower is there, the need is there, tonnage and ships have never been cheaper worldwide, and the reasons are all there. But who wants it? An Indian friend who owns and operates a leading foreign flag shipping company from one of the oldest and finest maritime nations in the world found out, when for reasons of patriotism, he tried to re-flag some of his ships to the Indian flag. Amongst other things, powerful entities in India who were capable of investing "hot money" in millions of dollars, made it very clear that it would be beneficial to all concerned if he continued running foreign flag ships, with ownership hidden in places like the Isle of Man, British Virgin Islands, Delaware, Luxembourg and similar places—instead of under the Indian flag, because the source of money would be easily traced.

 

In addition, and this is the really troublesome part—the whole concept and execution of owning and operating a ship under the Indian flag to work on the Indian coast is stacked against any such effort. More on this aspect soon.

 

User

COMMENTS

Deepak

7 years ago

A convincing explanation on why shipping is neglected

Suneel

7 years ago

From a die-hard Indian seafarer : The extinction of Indian Shipping started with the takeover of Jayanti Shipping by SCI, the mis-management and fall of Scindia Steam Navigation to name a few. Now all that's left is in the hands of SCI (the slipshod corruption of India)... nothing much in the private sector to talk about. We need a mindset change in the ways our Ministery of Shipping and Transport thinks....

shubho sengupta

7 years ago

For a non-shippie, this article was an eye-opener.

AMFI asks for a new vote on trail commission issue by email

The day after Moneylife exposed how the Association of Mutual Funds in India (AMFI) was dilly-dallying for over five months on whether trail commission would continue to be paid to the old distributor even after a customer has walked away, the fund lobby has decided to ask for a new vote on the issue. All chiefs of asset management companies got an email on Tuesday afternoon asking them to vote on three questions—whether the trail commission of a departing customer: a. should be paid to the old distributor; b. should be paid to the new distributor; c: should not be paid at all. Funds are supposed to vote a simple yes/no to each of the three questions.

It may be recalled that yesterday we had reported on the fact that there is continuing confusion about who gets the trail commission in a mutual fund transaction, where a client has moved away from one distributor to another. The confusion persists to this day, due to the inability of the fund lobby, AMFI, to implement the decision, by vote of hand, of its own members not to pay trail commission to the old distributor.

About five months ago, AMFI formed a committee with representatives from ICICI Prudential and Birla Sun Life to decide on who should be getting the trail commission. The committee argued that that the original trail should be there for life even if the client has shifted. There were major objections to this idea. In principle, trail commission is paid for maintenance of an account, not for acquisition. For acquisition of clients, fund companies were paying upfront commissions. If a distributor was not maintaining the account, there was no reason for him to get paid anymore.

The decision was debated and put to a hand of vote. It appeared that 11 funds voted in favour of the committee’s flawed decision while 17 were against. However, till date, this has not been implemented. Later, there was a lot of pressure on CEOs who voted for trail commission termination, to take back their vote.

Today’s email asks the funds to vote again on the idea. When Moneylife asked one of the CEOs why should AMFI ask its members to vote again on something that was roundly defeated, one of the CEOs replied, “It’s all a farce. I am not sure what AMFI wants to achieve and whether it will be implemented this time.” What is also a mystery is why are some funds so keen to keep paying commissions to the old distributor, which not only seems illogical but patently anti-investor. It is the investors’ money that is being paid out and it’s unjust to pay his money to a distributor he has decided to walk away from. However, this is precisely what some large funds are supporting

User

COMMENTS

Bansal NC

6 years ago

keep paying commissions to the old distributor

RUPESH

7 years ago

DEAR VIEWERS,
MUTUAL FUND BUSINESS HAS BECOME A HORSE TRADING BUSINESS JUST LIKE OUR PARLIAMENTARIANS R BEING SOLD IN BHED BAZAR OUTSIDE OF PARLIAMENT HOUSE-NOW IT IS ISSUE OF TRAIL COMMISSION-PLEASE NOTE-GIVING TRAIL COMMISSION OT NEW DISTRIBUTOR WILL JUST BENIFIT THOSE DISTRIBUTORS WHO CAN OFFER CASH INCENTIVES TO INVESTORS-IT IS JUST STARTING A NEW BRIBE SYSTEM-TO EARN FROM AUM-IS SEBI AWARE OF ALL THESE GROUND REALITIES? I GUESS SEBI OFFICIALS ARE TOO MUCH IDLE THESE DAYS-THATS Y THEY R MAKING NEW ''FATWAS'' EVERY DAY REGARDING MUTUAL FUND INDSUTRY-AS IF MUTUAL FUND INDUSTRY IS THE ONLY MATTER OF GREAT GREAT GREAT IMPORTANCE-WHY SEBI CANNOT ASK IRDA TO ACT ON FULL REMOVAL OF COMMISSION FROM INSURANCE?WHY SEBI CANT ASK REMOVAL OF COMMISSION PAID ON POST OFFICE SAVINGS? IT IS JUST DIRTY MINDS SITTING IN SEBI WHO ARE ONCY TRYING TO HARRASS POOR IFA'S WHO ARE NOT UNITED TO MAKE A SINGLE VOICE AGAINST ALL THSES ''FATWAS'' IT SEEMS IF IFA'S DONT UNITE-THEY WILL DIE ALONG WITH THEIR KIDS IN HUNGER-

raj

7 years ago

Dont expect any constructive action from AMFI in any matter . The association itself is farce. Look at what they did when SEBI took decision to abolish entry load. where was AMFI that time.Pleas e note there is no representative from MF Industry. you have to stay with what SEBI does. AMFI doesnt have guts to fight for industry. or else look at the brokers. how they are fighting against increase in timing

Bharatkumar J Patel,ahmedabad

7 years ago

I have strong objection to paying trial commission to new agent, one of the leading mutual fund distributor of guajrat got signed asset transfer letter under the disguise of changing bankdetails.when i contacted investr, he told me that he has not signed such paper for change of broker.lot of malpractice going on and it will make smaller agent vanish from the business if this continues.

S.K.Bagaria

7 years ago

I fail to understand the requirement of debate even on this issue. It need not be made an issue. Trail does not relates to the sale/deployment of fund but is revenue for servicing and maintaining the fund. Once the new advisor has entered , the responsibility of servicing and maintaining lies on him. he only need to be rewarded for that. Where the question of debate even?

v venkat

7 years ago

Idea of paying trail fees to new broker may be good but big mutual fund brokers like Prudent corporate advisory of surat,gujarat are pouching our big investor by offering inducement of trail,

Uday Dhoot

7 years ago

Totally agree with the view of the author here. Insurance companies started this wrong payment structure of trail to advisor, although most of the time the advisor vanishes after selling the insurance policy. Now mutual funds also want to go that way.

No doubt bigger guys just want to remain bigger even without doing any value add. I think not only in MF but in insurance also there should be a option to change the advisor.

Sensex gains 91 points, closes at 16,692

The Sensex closed at 16,692 as it gained 91 points from the previous day’s close, while the Nifty closed at 4,986, up 33 points on the back of strong global markets.

 

Reliance Industries Ltd (RIL) said today that it had made a gas discovery in one of its exploration blocks in the Krishna-Godavari basin off the country's eastern coast. RIL holds a 90% interest in the block, which covers an area of 3,288 sq km, and Hardy Exploration and Production (India) holds the rest. The stock remained flat.

 

Mahindra & Mahindra Financial Services jumped 2%, after the company said that Franklin Templeton Mutual Fund had hiked its stake in the company.

 

Sun TV Network rose 1%, after the company said that it will restructure its distribution business.

 

Golden Tobacco remained flat after the company’s board approved developing its property at Vile Parle, a Mumbai suburb.

 

Valiant Communications Ltd has formed a 100% wholly-owned subsidiary, Valiant Communications FZE, in the United Arab Emirates, to promote, market and provide pre- and post-sales support to customers of Valiant at the international level. The stock shot up 4%.

 

Aban Offshore Ltd’s wholly-owned subsidiary, Sinvest AS, has redeemed bonds having a principal amount aggregating to Norwegian kroner 1 billion (equivalent to Rs800 crore) along with accrued interest, on the due date of 22 December 2009. The stock was up 4%.

 

As per reports, corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in the corporate sector in the third quarter (October-December) of the current fiscal, pointing to a firm broad-based economic recovery. Corporate advance tax payments for the quarter were up 44% to Rs48,300 crore against a 3.7% decline in the April-June quarter and a 14.7% increase in the July-September quarter.

 

During the day, the deputy head of the planning commission Montek Singh Ahluwalia said that the sharp surge in food prices reflects the impact of the drought and inefficient distribution, which could not be addressed by monetary policy. He said that while the increase in food prices was to some extent expected, it remained a concern. Food prices rose an annual 20% in early December—but they should decline in January 2010 as the stock situation is relatively stable. He further added that problems such as this cannot be tackled by blunt instruments like monetary policy.

 

“Price increase at the retail level is much more than the increase at the wholesale level which is because of dysfunctionality in the distribution system and the ministry is looking into it. But whenever required, we should import,” Mr Singh said.

 

Finance secretary Ashok Chawla announced that the government is likely to offer cash instead of bonds to State-run oil firms for compensating them for selling fuel at lower than market prices, as per media reports. However, no decision has been taken on the compensation amount.

 

During the day, Asia’s key benchmark indices in Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan rose by between 0.69%-1.91%. But China’s index fell 2.32% on concerns that more initial public offering subscriptions by the year-end could impact market liquidity.

 

On Monday, 21 December 2009, the Dow Jones Industrial Average was up 85 points while the S&P 500 and the Nasdaq Composite were up 12 points and 26 points respectively after a Bill to overhaul the US healthcare system, which is perceived as less damaging to industry profits than expected, passed a crucial test in the US Senate.

 

Meanwhile, rating agency Moody’s cut Greece’s debt to ‘A2’ from ‘A1’ over soaring deficits, becoming the third major rating agency to downgrade the highly-indebted country’s rating this month. Moody’s has kept Greece on a negative outlook. Its rating is still two notches above that of Fitch and S&P, which earlier this month cut their rating on the indebted country to ‘BBB+’, the euro area’s lowest level.

 

The UK economy shrank less than previously estimated in the third quarter as a jump in construction and fixed investments brought the longest recession on record closer to its end. According to the Office for National Statistics, UK’s gross domestic product (GDP) fell 0.2% from the second quarter, compared with a previous measurement of a 0.3% drop. The recession has now shaved 6% off GDP, the statistics office said.

 

The Confederation of British Industry raised its 2010 economic growth forecast and said that the Bank of England may pause its bond-purchase plan in February 2010. Meanwhile, policy-makers have pledged to print £200 billion of new money to stoke spending and shake off Britain’s longest recession on record.

 

In premarket trading, the Dow was trading 43 points higher.

 

User

COMMENTS

manish

6 years ago

The Global Markets gives out mixed cues this morning. U.S. stocks fell; erasing the previous session’s advance, after a smaller-than forecast gain in personal incomes added to concern the economic rebound may slow further. European stocks closed little changed after three weeks of declines for the Stoxx Europe 600 Index as a resurgence of takeover activity offset a retreat in auto industry shares. This morning Asian stocks fell, poised for a third decline in four months, as slower-than estimated growth in personal incomes in the U.S. heightened concern the economic recovery may slow and the yen strengthened. In commodities, Oil declined for a second day as slower-than-forecast growth in U.S. personal incomes added to concern that the pace of economic recovery in the world’s largest crude user may falter. Gold is set for the biggest monthly advance since April as signs that the global economic recovery may be faltering prompt investors to boost their holdings to try to preserve their wealth. Copper climbed to the highest price in four months on speculation that demand will rise as governments worldwide pledged to boost growth. The Indian markets trade on negative note this morning. Most of the sectoral indices trade in red this morning. FMCG and Healthcare indices trade flat in green. The main draggers are Oil & Gas, Realty and Metal indices declining more than one percentage points. Market breadth is negative with 754 advances against 1,833 declines. The Sensex trades in red at 17,908.90 declining 123.21 points or 0.68 percentage points. Nifty trades at 5379.05 declining by 36.40 points or 0.69 percentage points.

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