CHENNAI: Indian flag vessels need a level-playing field in terms of the taxation structure, particularly one granting exemption from payment of certain levies, to compete effectively against ships registered in "zero-tax areas," according to Indian National Shipowners' Association (INSA).

Apart from helping them compete, such concessions would result in expansion of the Indian (ocean-going) fleet, the Association president Yudhishtir Khatau told its board meeting here on Thursday.

Accretion to the Indian tonnage, according to him, is required as "70 per cent of the turnover [of the shipping companies] is effectively value-added benefit for India." The companies spend around 30 per cent abroad, towards fuel and repair, while the rest gets accumulated in the country "in forms of asset build-up and the fostering of a maritime nation with maritime knowledge."

Noting that Indian flag vessels compete against foreign ships that need not pay any tax, Mr. Khatau, who is the managing director of Varun Shipping Limited, indicated that the benefits of the tonnage tax were eroded by other "innovative" taxes.

Manpower shortage

A release issued at the meeting said: "While on one hand, the industry got a globally competitive tonnage tax scheme, on the other hand, it has been plagued with new taxes in the form of service tax, fringe benefit tax along with the existing taxes (all totalling up to 12)."

It also appealed for "novel and equitable taxation scheme for all Indian seafarers," a demand coming in the backdrop of an unprecedented shortage of quality officers to man Indian flag ships.

The tax-free salaries paid by foreign flag ships lured Indian officers, who get trained on Indian ships.

INSA vice-president and Chairman and Managing Director of Shipping Corporation of India S. Hajara said shipping industry was poised for good times.

The Indian tonnage had increased by about 15 per cent following introduction of the tonnage tax, but there were problems for the industry with regard to other taxation.

Second container terminal

Chennai Port Trust Chairman K. Suresh, who is also the Chairman and Managing Director of Ennore Port Limited, highlighted the performance and plans of the two ports, including the proposed second container terminal at Chennai.

Stating that the issues pertaining to the second terminal were likely to get resolved this month, he said the container traffic at the port's privatised terminal went up by almost 20 per cent last fiscal.

An impasse, however, was prevailing at the existing facility for the past 10 days due to labour unrest. But, indications of it getting resolved "hopefully today" were available.

Later responding to queries on the strike, Mr. Suresh said if a system mandating payment of compensation to the trade for the losses incurred during such strikes was introduced both the management and labour would be cautious in their approach.

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