1. How do you see the major trends, during Covid-19 in your sector, pan out in 2021?
The shipping industry is one industry which has always been ahead in the use of IT-based systems for conduct of business activities. The major trend in this sector during COVID -19 has been the greater focus and dependence on technology in various sectors including administration of activity itself. We are happy to see this growing and this growth is there to stay. The other important trend is the ability of the shipping industry to be almost 'Covid-19 proof' and this was on display during the pandemic – Indian ships continued to operate and carry cargo on the coast and internationally with ZERO down time.
2. Where do you see the sector going forward in 2021?
Shipping is an essential service so in a sense business is perennial. That said, shipping worldwide continues to face several challenges. The primary mid-term challenges for world shipping are decarbonisation, deadlines, and the path to digitalization. These are the issues for strategic planning for 2021 and for many years to come.
The challenges for Indian shipping are finding a resolution to the policies which impair the competitiveness of Indian shipping domestically. Indian shipping sector continues to grapple with structural issues that make import of shipping services costlier than providing shipping services as an Indian company from India. Indian shipping sector needs investments, but these will remain sluggish unless the structural issues are addressed.
- Dry bulk commodity demand growth is expected at around 4-5% in 2021, against estimated fleet growth of 2%. This provides optimism that rates will rise after the downturn that started in 2016.
- China was the key driver of dry bulk trade in 2020, largely due to its mass infrastructure spending, and is the only major economy expected to record GDP growth this year. However, with the expectation that other economies will return to growth in 2021, there is hope that latent demand will ping back.
- The tankers sector is largely hoping for mass rollout of the Covid-19 vaccines to stimulate demand for oil and refined products.
- The incredible highs and lows of 2020 translated to record tanker rates and record profits, quickly followed by poor earnings — some touching 11-year lows.
- Container shipping is also expected to do well in 2021.
3. What potential do you see in the sector for job creation in the coming period?
Shipping being an essential service and given the fact that India is an import-dependent nation, it would not be erroneous to surmise that the potential for job creation is immense.
Further, as Indian ships have to mandatorily employ Indian seafarers, even if all government imports are directed to Indian flagged ships, the consequent growth in the sector would boost employment in the sector. That is just direct employment. In addition to actual seafaring, a ship and its activity generates huge investment ashore beginning from stevedoring, cargo handling, banking, surveyors, insurance, ship repair, ship management, crewing services, etc., among others.
4. What would be your strategy to boost aggregate demand in the sector going into 2021?
Shipping is a B2B business, so to speak. So if the Indian economy does well, shipping does well.
That said, the challenge is ensure that the existing demand which, thanks to policy problems, is funneled to foreign ships is captured by the Indian shipping industry. If we can do that, one can easily see growth in multiples. For this, the Indian shipping industry has to be made competitive by rationalizing taxes and providing an effective funding mechanism. While Indian shipping is subject to Indian laws, its operating environment is global which is where the mismatch is.
5. Do you think your sector in India would be lucrative for foreign investors around the world given the current global scenario?
India’s freight bill is approximately $52 bn per year. We have a huge volume of cargo that is imported and exported. Coastal shipping is nascent and thus, has an immense opportunity to grow and then of course, are the inland waterways. All of these have potential. There is no dearth of opportunities. So, there can be no doubt that the shipping industry remains a lucrative sector for foreigners.
However, two policy changes are mandatory. Conversion to Indian flag should be mandatory to carry for Indian cargo (as is done by several developed nations) – automatically FDI will come into India in this sector.
Further, Indian shipping industry also has to be made competitive by rationalizing taxes and competitive funding.
6. Going ahead, what are the 3 most important things that you would want in Budget 2021 for your sector?
- Creation of the Maritime Development Fund.
- Tax free import and export freight (currently tax free only till September 30, 2021) on par with the competing foreign shipping companies.
- Tax free salaries for all Indian seafarers working on Indian ships on the Indian coast on par with the Indian seafarers working on foreign ships on the Indian coast.
* The views and opinions expressed above are solely of the interviewee. The content does not reflect Invest India's position or opinion and Invest India bears no responsibility for the same.