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Shipping sector woes deepen - Views on News from Equitymaster
 
 
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  • Nov 30, 1999

    Shipping sector woes deepen

    The Indian shipping industry is likely to miss the ninth plan target of nine gross million registered tonne (grt). The Chairman, Indian National Shipowners Association (Insa) has stated this while highlighting the woes of the industry.

    The Indian shipping industry has witnessed a sharp decline in profitability over the past three years mainly due to the slowing down of the Indian and Southeast Asian economies. This led to suppressed trade and exerted a downward pressure on freight rates. As a result, the liners were left with large unutilised shipping capacities. Added to this were the low freight rates. The signs of pessimism are apparent by the slow capacity build up in the industry.

    The Indian shipping companies suffer from three main drawbacks vis a vis their international competitors:

    • They have to pay corporate taxes while most international shipping companies are exempt.
    • Cost of capital (interest rates) in Indian is higher
    • Due to anomalies in the tax structure, there is a constant drift of manpower to foreign shipping lines

    With the Indian economy gaining momentum, infrastructure to handle the rising trade traffic must be in place to sustain the growth. However, with the shipping industry likely to miss the target, bottlenecks could develop. The foreign carriers meanwhile would continue to provide the buffer in case capacity constraints were to develop.

     

     

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