Wednesday, October 21, 2009: 06:58:49 PM

Shipping Guest Column

Challenges and opportunities for India’s shipping industry

The Indian shipping sector is undergoing a major transition from its traditional form in order to grab lucrative business opportunities

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The shipping sector plays an important role in India’s economy. Almost 90% of the country’s trade by volume is conducted via sea and the country boasts of having the largest merchant shipping fleet among the developing nations. The Indian shipping industry not only transports national and international cargoes, but also provides various other facilities such as ship building, ship repairing, lighthouse facilities, freight forwarding etc.   


With globalisation and liberalisation, the Indian shipping industry is all set to acquire new dimensions in terms of demand and infrastructural development. In order to resist stiff competition posed by foreign companies, the Indian shipping companies are striving to bring about rapid transformation. The way cargo traffic was handled has changed over the years. Earlier it was under a protected environment where a tonnage committee decided as to what type and size of ships the companies should opt for. Cargo was assured for those vessels which were acquired through government subsidy


Crude petroleum products constitute a major chunk of India’s sea-borne cargo. Deregulation in the oil sector has been welcome news for the shipping companies as crude oil carriers do not have to deal with fixed freight rates irrespective of the market condition. However, there is another problem which has to be dealt with. Imports have decreased over the years because of higher production by the domestic refineries, which has reduced transportation. The government plans to introduce pipeline networks will seriously affect coastal transportation.


New avenues to be explored by the shipping industry


Meanwhile, there are opportunities that need to be grabbed by the shipping companies. Liquefied natural gas (LNG) is to be imported to harness India’s power and fertiliser projects. This plan involves huge volume of business for the shipping industry amounting to several billion dollars. However, this process is expensive because it costs US$200 million for one ship to carry LNG. Therefore, it is important for the Indian shipping companies to build strategic tie-ups with their foreign counterparts so that they do not miss out this business opportunity.


The state-owned Shipping Corporation of India (SCI) has joined hands with Mitusi Osaka Shosen Kaisha (OSK), a consortium in Japan, to build LNG vessel to serve India’s needs. Even the private companies have shown interest in LNG transportation. Although the Indian shipping companies are interested in LNG transportation, lack of adequate experience and the huge amount of money required for LNG carriers act as major hindrances.


However, certain core problems must be dealt with before the Indian shipping industry can scale new heights. Port congestion and lack of depth in channels are some of the problems plaguing the shipping industry. Recently, these two problems have plagued the Kolkata Port Trust’s Haldia dock, resulting in huge loss of business.  


The Indian Shipping Summit 2009 that will be held in Mumbai, from October 20-22, 2009 will focus on certain core issues related to shipping industry such as the manner in which the shipping industry in India has handled the financial crisis, the present state of Indian ship building and whether India has the capability to become the leading ship building nation in the world.


Suresh Vaswaney, Managing Director, APS Maritime Services, a mid-sized shipping company at Lokhandwala Complex, Andheri West, Mumbai

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