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Monday, November 12, 2001

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Lobbying to get their due -- Time shipowners got savvy

N. K. Kurup

LOBBYING is an art that domestic shipowners are finding hard to master. Their voice is still not heard in the corridors of power, though they have been making noises (about many things) for years. As the Finance Ministry is getting ready to start the Budget-making exercise, shipping lines are trying to make up for this weakness.

The Indian National Shipowners Association, which represents around 90 per cent of the domestic fleet, is working out a multi-pronged strategy. Not wasting time, the Shipping Corporation of India chairman, Mr C. P. Srivastava, who is taking over as President of INSA on November 22, already held a brain-storming session with his colleagues in the industry in Mumbai on Saturday.

``Our goal is to boost the industry's image and make its voice audible,'' says a shipowner. But the immediate issues are `tonnage tax' and tax relief for seafarers. Shipowners are finding it difficult to convince the Rakesh Mohan Committee, which is studying the feasibility of tonnage tax, as to why fiscal relief is crucial for domestic shipping industry. At the second meeting of the Committee last week in Mumbai, they tried to project the need for attracting investors to shipping, as a long-term strategy.

The issue is simple. While domestic companies bear an effective rate of 22 per cent corporate tax, many flag-of-convenience operators (FOC) competing with them hardly pay three per cent tax. Besides, the operational costs of Indian companies are higher than those of foreign lines.

Being a capital intensive industry, shipping requires to raise low-cost capital. This is possible only if the returns on investment are attractive. Shipping companies thinks a tax based on the tonnage (as prevails in countries such as the UK) is more rational and fair than the tax on income.

Besides the Rakesh Mohan Committee, shipping companies are

also pinning their hopes on the new Shipping Minister, Mr Vedprakash Goyal, who has been spending a lot of time in Mumbai understanding the industry's problems ever since he took over on September 1. Being an entrepreneur himself, Mr Goyal can understands the issues better.

But a section of shipowners say the Shipping Ministry's views seldom reach the Finance Ministry. This is why, says a prominent shipowner, shipping is still at the bottom of the government's priority list for infrastructure development. ``The Prime Minister talks about Railways, highways and airways, but not about shipping,'' he says.

But the problem with shipowners, it appears, is that they still believe politicians and bureaucrats can be convinced of an issue just by highlighting its economic implications. For years, shipowners have been repeating the same slogan: Shipping is crucial as its saves foreign exchange; shipping is important as India is a maritime nation. But the public perception of the industry has still not changed.

When Dr Manmohan Singh was Finance Minister, he had told a shipowners delegation when pointed out that shipping saves foreign exchange: ``Why only shipping, even the Punjab farmers save foreign exchange.''(Wheat has to be imported if they don't produce enough.)

Like in any other industry, there will be investors in shipping if the returns are good. It is for those who run the businesses to manage them well to ensure optimum returns even if it requires seeking government support. Lobbying is not a sin, it's a globally accepted as a business strategy.

 
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