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Shipping ministry to ask for removal of customs duty on marine fuels for vessels carrying cargo for transshipment
September, 04th 2014

The shipping ministry plans to ask the finance ministry to remove customs duty on marine fuel for vessels carrying cargo for transshipment. According to the shipping ministry, the benefit to the economy from such a step would be manifold compared with the revenue loss for the government.

India levies 25-30% customs duty on bunker, or marine fuel. Removing the tax, the ministry and shipping experts feel, would draw big container ships to Indian coasts.

Currently such mainline carriers often berth at Colombo and use smaller feeder vessels to carry cargo from and to India. According to rough estimates, the government will have to forego revenue of around Rs 56 crore a year but the expected increase in export-import cargo handling operations will accrue direct and indirect benefits of more than Rs 700 crore, said a senior government official.

And, if tax relaxation works, transshipment would get a boost even without changing the cabotage (coastal move ment) rules that restrict the movement of foreign vessels on coastal routes, the official said.

"We realised that the tax norms do not provide us with a level playing field for the movement of EXIM cargo on the coast. In the long-term we want to relax cabotage for all such cargo, this is a short-term measure."

The Prime Minister's Office had asked the shipping ministry to suggest ways to increase transshipment cargo movement in the country and reduce instances of containers offloading in Colombo. Container trade globally has grown 7% to 165 million TEUs (20-footequivalent units) in 2013.

There are just 15 feeder vessels involved in coastal trade. Foreign vessels, if given the tax exemption, might find it lucrative to make more stops on the Indian coastline to load and offload cargo.

The government had in 2012 relaxed the cabotage rules for the international transshipment container terminal operated by Dubai Port World at Vallarpadam in Kochi. The goal was to boost export-import trade and reduce transit time.

However, the move didn't reap much benefits as the bulk of transshipment cargo continues to be handled out of ports like Colombo. The relaxation was opposed by Indian ship owners since it eased the movement of foreign vessels on the Indian coast.

According to Section 407 of the Merchant Shipping Act, 1958, only Indian vessels or ships chartered by Indians can engage in coastal trade, though the regulator can issue licences to foreign ones for certain durations.

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