DGS COMMENTARY ON THE TCS REPORT
(1) Setting up of Special Cell for Coastal Shipping: (Recommendation No. 1 at Page 6 of Executive Summary & Recommendations):
An important pre-requisite is the setting up of an institutional mechanism to guide and monitor the progress of this industry and effectively coordinate its activities with external agencies. In the interest of integrated development of Coastal Shipping along with other modes particularly national shipping, it is important to keep these two segments under one umbrella. The Directorate General of Shipping is the obvious choice in our view; the proposed special cell may be constituted under this Directorate.
1. Act as nodal agency to co-ordinate and monitor the implementation of the recommendations within the time frame suggested.
2. Coordinate with Centre and States through the Empowered Committee (Refer recommendation 2) and provide assistance for implementation of the decision of the Empowered Committee for development of Coastal Shipping and minor ports.
3. Monitoring of projects and review of financial progress decided by the Empowered Committee.
4. Maintain up to date database on Coastal Shipping tonnage cargo origin and destination movement and assist the cargo owners in identifying vessels for movement (Directives to Coastal Shipping agencies and ports may be issued to send the data on a monthly basis).
5. Participate in the committee meetings responsible for distribution of various bulk commodities like coal, POL, steel etc. and promote diversion to Coastal Shipping wherever it is economical.
6. Guide and monitor the progress of the Coastal Shipping industry.
Existing cell can be dovetailed to meet these requirements providing suitable additional manpower to perform above roles.
(Time frame one month, including approval, Terms of Reference and the first meeting). This cell can be formed immediately. Since no statutory ramifications are involved, just a notification is adequate. However, in future, this Cell can have some statutory powers, if so delegated by the Ministry of Shipping (MOS). This Cell can meet once a month and make policy level recommendations.)
(3) Entry of Coastal vessels – without escort : (Recommendation No.7 at Page 8 of Executive Summary & Recommendations)
Coastal vessels calling at port may be allowed entry without escort by pilot, if the master of the vessel has a pilot’s license. Directorate General of Shipping (DGS) may co-ordinate this matter through Ship Port interface.
(Time frame including coordination with the Ship – Port Interface –Three months). This can be commenced on an experimental basis in ports with predominantly coasting vessels, such as Vishakapatnam, Jamnagar, Goa, Tuticorin, etc., and implemented in other ports with heterogeneous traffic, in a phased manner.
(4) Proposal for diversion of cargo : (Recommendation No.6 at Page 8 of Executive Summary & Recommendations) :
DGS may submit the proposals to the Empowered Committee for diversion of Government’s own cargo as well as that of its agencies and PSUs such as coal, POL, food grains etc. (Refer case studies of Annexure A-4) to Coastal Shipping wherever it is economically viable. The Empowered Committee to forward the recommendations to respective Ministries for implementation. –
(Time frame – Three months) for forwarding the proposal to MOS : This involves conducting of extended meetings with PSU’s such as BHEL, SAIL, Defence Production units and other heavy industries to start with.
1. Proposal to Tariff Authority for Major Ports (TAMP) for reduction of tariff for Coastal cargo : (Recommendation No.8 at Page 8 of Executive Summary & Recommendations) :
Since TAMP is an independent body, by proper interaction, it can be asked to launch a two-phased program for reduction of tariff. In the first phase, for reduction of tariff to the extent TAMP has got the authority within its own delegation. In the second phase, TAMP may take up further reduction of tariff with the MOS.
2. Proposal for sufficient draft at Neendakara :- (Recommendation No.11 at Page 9 of Executive Summary & Recommendations) :
A proposal is sought to be sent from DGS in consultation with Inland Waterways Authority of India (IWAI)I.
3. Coastal Vessel operators can be encouraged to introduce liner services : (Page 3 of Executive Summary & Recommendations)
Coastal Vessel operators may be encouraged to introduce liner services between select ports to the interest of speedy movement of general cargo and development of coastal industry as a whole. Voyages with multiple ports of call and availability of liner services would enhance Coastal Shipping development and also ensure its uninterrupted growth in future years.
This can be done by proper coordination with the Port Authorities through MSDC – Stakeholders meet, Licensing, Surveys etc., may all take upto one year for implementation.
C. Long term (Beyond one year)
Encourage transshipment traffic : (Page 3 of Executive Summary & Recommendations).
The hub and spoke Concept may be promoted quickly to attract transshipment traffic back into the country and thus save the national economy from a recurring loss of around Rs. 600 crores annually on cargo handling alone.
This depends on the success of steps (1) and (2) above.
Omni-bus shipping services with multiple ports of call can be encouraged for coastal vessels. Gradually other ships including Foreign Vessels can be allowed for transshipments along the Coast. Since the government is already envisaging relaxation of the cabotage laws, Foreign Flag Vessels can also be encouraged for transshipment in a limited way, if not, at par with the coasting vessels.
AT THE MINISTRY LEVEL
A. Immediate (within three months)
Constitution of Empowered Committee :- (Recommendation No. 2 at Page 6 of Executive Summary & Recommendations).
An Empowered Committee be constituted under the Ministry of Shipping consisting of Secretary – Finance for financial decisions and representatives from Ministry of Railways, Ministry of Road Transport and Highway, Ministry of Coal, Ministry of Petroleum and Natural Gas, Ministry of Agriculture, Ministry of Commerce and Industry and maritime states to guide and monitor the development of Coastal Shipping in India.
Secretary Finance or Addl. Secretary, Department Of Expenditure (MOF) needs to be inducted as Member (Finance) – This would enable three levels of Financial Administration.
(1) One-MOS with the financial concurrence of the AS (FA) can continue with the present delegation of powers.
(2) Secondly – MOS, by induction of an officer at the level of Joint Secretary, from the Ministry of Finance, as Representative of the Member Finance, can exercise additional financial powers, by suitably getting the Delegation Orders modified.
(3) Empowered Committee with Secretary Shipping –as the Chairman and the Addl. Secretary as the Member (Finance), can have sanctioning powers upto Rs. 100.00 crores for projects and full powers for re-appropriation. A member of the Planning Commission and one from DOE (MF) may also be inducted.
(4) The Empowered Committee, can have a still higher Executive Body, by some name like National Maritime Board or Commission, with Secretary (Finance) which can function as Government in itself. Wherever powers are not specifically vested in or delegated to (1) – (3) above, subject to overall administrative control of the Cabinet and availability of Budget provisions, the Minister for Shipping can take full-fledged decisions, as would befit a Government.
B. Short term (within one year)
1. Sanction of grants for State Governments on receipt of Detailed Project Report of the Selected minor Ports (DPRs) from State Governments - MOU between the MOS and State Governments : (Recommendation No. 4 at Page 7 of Executive Summary & Recommendations).
The respective State Governments shall prepare the Detailed Project Report of the selected minor Ports from their own resources to seek the grant from Centre for development of basic infrastructure (capital dredging, breakwater, berths, back up areas and wharves) and submit the proposal within suggested time frame (Refer Action Plan). The project proposals received from the State Government would be considered by the Empowered Committee. The recommendations of the Empowered Committee would be submitted to the Minister of Shipping for clearance. Thereafter, an MOU between MOS and respective State Ministries concerned with the development of minor ports should be signed for transferring the funds to an Escrow Account created in any public sector bank or institution based bank nominated by an autonomous body created at the State level. This autonomous body should ensure that the funds are used for the development of minor ports only. The funds upto 25 percent of the value cleared by the MOS may be released as first installment and the release of remaining installments would be subject to utilization of 60 percent of the total available funds as well as completion of at least 80 percent of the work.
Either an Escrow account or Letter of Credit may be opened. Monitoring of the physical progress can be done through independent inspection agencies approved by the DGS. The State Governments should defray their own funds, for the related infrastructure such as approach roads, cold storage, facilities for the support industry and so on, for which in deserving cases, loans as envisaged under Chapter XI Of General Financial Rules, read with Rule 20 of DFPR can be sanctioned on soft terms.
2. Waiver of Import duties on bunkers :- (Recommendation No. 9 at Page 8 of Executive Summary & Recommendations).
Ø Import duty on bunkers be waived (Refer section 2.5 of Chapter 2 and section 5.5.2 of Chapter 5)
Ø No import duty levied on capital equipment and spares required for vessel (Refer section 2.5 of Chapter 2 and section 5.5.2 of Chapter 5)
The Empowered Committee may deliberate on this proposal and thereafter transmit the recommendation to the Ministry of Finance.
With Member for Finance in place, duty concession can be given by the Empowered Committee itself. There is no need for referring the proposal to the Parliament. However, this has to be in stages, subject to end-user certificates being received by the DGS and their verification on a selective basis, lest the concession should be mis-used. However, no duty relaxation may be allowed in respect of Foreign Flag Vessels and Foreign Going Vessels, in whose case, there can be upward revision of Duties for cross-subsidizing the coastal vessels.
3. Financing development of basic infrastructure for nine minor ports: - (Recommendation No. 3 at Page 7 of Executive Summary & Recommendations).
Provision be made for providing Central Government funds to the extent of Rs. 185 Crores (Refer Table 6.21 of Chapter 6) as estimated for building up of basic infrastructure (for rehabilitation/new construction) at minor ports illustrated below. The basic infrastructure will include capital dredging, breakwater, berths, back up areas and wharves. The ports eligible for assistances to begin with, have been identified with the help of a mathematical model (Refer section 6.4 and 6.5 of Chapter 6), which seeks to minimise the subjective elements in the selection. These ports are:
1) Gopalpur (Orissa)
2) Cuddalore (Tamil Nadu)
3) Vazhinjam (Kerala)
4) Azzhikal (Kerala)
5) Malpe
6) Karwar (Karnataka)
7) Ratnagiri (Maharashtra)
8) Dharamtar (Maharashtra)
9) Magdalla (Gujarat)
The matter needs to be taken up with the respective State Maritime Boards for further study. DPR should include Feasibility Study as well. Since it would be a New Service or a New Instrument of Service, this can be taken up at the BE Stage only. In the present political scenario, this step could be immediate or a year from now, during which the states can be asked to prepare the DPRs etc.
4. Proposal for IT Exemption of Cargo owners / shippers for moving cargo through Coastal Shipping: (Recommendation No. 10 at Page 8 of Executive Summary & Recommendations).
Empowered Committee shall deliberate on the subject of allowing demand side incentives like IT exemption to cargo owners/shippers for moving cargo through Coastal Shipping (Refer section 5.5.2 of Chapter 5). Registered multimodal operators be allowed a deduction from their taxable income based on traffic moved by Coastal Shipping. Calculated by multiplying the tonne Km so moved at a per tonne Km rate to be decided by the Government. Alternatively a surcharge may be imposed on other modes of transport having negative social and environmental impacts. (Refer section 1.0 of Chapter 1). These measures may also encourage road transporters to become multi-modal operators and to move cargo through Coastal Shipping.
This needs to go to the Parliament since no rebate in the IT is possible without the Finance Act being amended.
5. Integration of Coastal Shipping and Inland Waterway Transport (IWT): (Recommendation No. 11 at Page 9 of Executive Summary & Recommendations ).
Integration of Coastal Shipping and inland waterway transport may be promoted at Haldia and Kochi (Refer section 7.7 of Chapter 7) where basic infrastructure is available. Infrastructure to be created at Neendakara and TT Sheds at Kolkata for such integration (storage of goods, water supply, electricity, lifting equipment and bunkers). Sufficient draft to be provided in NW3 at Neendakara for berthing of coastal vessels of upto 3.5 m. DGS may take up the matter with MOS for directing IWAI for implementation of this recommendation.
Since this is an administrative decision to be taken up through the Empowered Committee, implementation is easier.
6. Registered Multimodal operators – Income tax deduction from taxable income : (Recommendation No. 10 at Page 8 of Executive Summary & Recommendations).
Empowered Committee shall deliberate on the subject of allowing demand side incentives like IT exemption to cargo owners / shippers for moving cargo through Coastal Shipping (Refer section 5.5.2 of Chapter 5). Registered multimodal operators be allowed a deduction from their taxable income based on traffic moved by Coastal Shipping. Calculated by multiplying the tonne Km so moved at a per tonne Km rate to be decided by the Government. Alternatively a surcharge may be imposed on other modes of transport having negative social and environmental impacts. (Refer section 1.0 of Chapter 1). These measures may also encourage road transporters to become multi-modal operators and to move cargo through Coastal Shipping.
This needs to be taken up with the Cabinet by the MOS, through the Empowered Committee and with the Parliament, since it cannot be implemented without amending the Finance Act.
7. Surcharge on Road transportation on social aspects: (Recommendation No. 10 at Page 8 of Executive Summary & Recommendations Booklet).
Empowered Committee shall deliberate on the subject of allowing demand side incentives like IT exemption to cargo owners / shippers for moving cargo through Coastal Shipping (Refer section 5.5.2 of Chapter 5). Registered multimodal operators be allowed a deduction from their taxable income based on traffic moved by Coastal Shipping. Calculated by multiplying the tonne Km so moved at a per tonne Km rate to be decided by the Government. Alternatively a surcharge may be imposed on other modes of transport having negative social and environmental impacts. (Refer section 1.0 of Chapter 1). These measures may also encourage road transporters to become multi-modal operators and to move cargo through Coastal Shipping.
This needs to be taken up with the Cabinet through the Empowered Committee. The surcharge so collected would be utilized to grant cross-subsidy to Coastal Shipping in whatever form as may be decided by the Empowered Committee from time to time, depending on the exigencies. However, since State Governments have to re-orient their policies towards discouraging road-traffic, a major share of the surcharges so collected should go back to the respective maritime states in one form or the other. This proposal is also mired with likely protests from the automobile industry and powerful and transporters’ lobbies. A proper Social Cost Benefit Analysis needs to be undertaken involving the State Maritime Boards under guidelines issued by the Planning Commission for appraisal of projects.
8. Possibility of developing Pamban Bridge :- (Recommendation No.12 at Page 9 of Executive Summary & Recommendations).
A study may be initiated promptly by the Central Government to examine the feasibility of developing the Pamban Canal (Refer section 2.5 of Chapter 2) in the context of development of Coastal Shipping after examining the environmental impact of this project. MOS may initiate the study.
The study needs to be undertaken in collaboration with Tamil Nadu Maritime Board. The Union Government had appointed the Tuticorin Port Trust as the nodal agency for the project and a detailed feasibility report was made in 2001. The techno- economic viability of the Sethusamudram ship canal linking the Palk Bay and Gulf of Mannar on the East Coast by creating a shipping canal through the Rameswaram Island was made to provide a continuous navigable sea route around the Peninsula, alongwith a detailed Environment Impact Assessment (EIA) study of the Sethusamudram ship canal. The Sethusamudram project involves widening and deepening of the Pamban channel to facilitate the movement of coastal ships of the size of 3,000 tonnes. This will avoid circumnavigation of ships around Sri Lanka, resulting in savings in fuel costs and standing charges associated with extra period of voyages. Ships from the east coast of India to Tuticorin have to go around Sri Lanka. This is because of a Sand Stone Reef, called Adam's bridge, at Pamban near Rameswaram between the Southern-Eastern Coast of India and Talaimannar of Sri Lanka. The depth of the sea in this portion is very shallow and is hardly about 11 feet only. Number of proposals were considered for cutting a Ship Canal called the Sethusamudram Ship Canal through Rameswaram island, to connect the Gulf of Mannar with Palk Bay.
Benefits:
1. Will avoid circumnavigation of ships around Sri Lanka, resulting in savings in fuel costs and standing charges associated with extra period of voyages.
2. Big Commercial and Naval ships can pass through.
3. Tuticorin will regain its old commercial glory.
The matter needs to be taken up afresh by the Ministry as not much of headway was made in any of the earlier attempts.
9. The Consultants believe that the investment on new ports would serve to attract private sector i nterest in and investment on the development of other facilities and also for operating the ports on lease or as joint ventures. (Recommendation No. 3 & 4 at Page 7 of Executive Summary & Recommendations).
The consultants have scheduled this activity for 2005-06. This time frame is unrealistic. Some overlapping is needed here. Nothing stops the State Governments from calling for tenders for 30 years lease / BOT for these Ports. This sector can be opened up for FDI also, say with 50:50 equity ratio. Out of the 50% of Indian participation, FIIs and general public can also be allowed equity participation. This does not need any parliament approval though a regulatory mechanism is needed, under the approval of the cabinet.
10. Sections 406 & 407 of the Merchant Shipping Act, 1958 provide that a vessel is to be licensed by the DGS if it is to engage in coasting trade of India. In practice, foreign flag vessels are permitted to carry coastal cargo only if suitable Indian tonnage is not available. The present policy may be continued until the end of the 10th five year plan subject to review thereafter. There is no need for separate Act for Coastal Shipping. The underlying objectives can be achieved through suitable amendments in the Merchant Shipping Act itself as and when required (Refer Appendix 8.1). (Recommendation No.13 at Page 9 of Executive Summary & Recommendations).
The Consultants are right in their belief that a separate Coastal Shipping Act is not necessary. This stand is different from the Kakar Committee Report (1999), which outlines the Coastal Shipping Act as panacea for curing all the evils that pervade the Coastal Shipping.
However, contrary to what the Consultants recommend, manning scales need to be reduced. Shipping Companies would not be pleased to appease the seafarers’ union forever in this respect. Though it is a touchy issue, with more and more mechanization taking place, DGS needs to review Section 76 of the M.S. Act and after evolving consensus of all the parties concerned, manning scales may have to be drastically reduced for Coastal and NCVs. Chapter 6 of the Kakar Committee’s Report are very much relevant there. Similarly, protectionism of the Coastal Shipping in the form of Cabotage cannot be an open-ended proposition forever. Coastal Shipping needs to grow up in the liberalized economy, towards which purpose, cabotage laws are required to be reviewed from time to time. MOS has already initiated some action on these lines, which have to go further in the larger interest of macro economies of shipping.
11. An independent regulator for minor ports on the lines of TAMP, enforcing all regulatory measures including conservancy of ports, tariff fixation is required (Refer section 3.2. A of Annexure A1.0). DGS may co-ordinate with MOS on this matter. (Recommendation No. 14 at Page 9 of Executive Summary & Recommendations).
The proposed body may have an autonomous status with the powers of a Regulatory Authority like TRAI, subject to the directive and executive control of the Ministry of Shipping. However, this will not be statutory one nor will have any appellate jurisdiction.
12. Given the present state of this industry which by all accounts is in unenviable state it is important to come up with policy incentives on several important issues, integrated approach for transport development for one; in other words all sub-systems of transport including Coastal Shipping and IWT must work together in planning and execution of projects and remain guided by the collective will and vision of the policy making authorities. The task of making a holistic appraisal of transport requirements may be entrusted to a body of independent transport economists and experts in the operation of one or more sub-systems. Empowered Committee to deliberate and decide on this matter.
Integration of IWT and DGS can be at a functional level, where both the organizations will have mutual representation in the policy implementation cell. Because of the cultural differences between these organizations, no administrative framework can be laid down for functional integration lest the structure becomes unwieldy. However, subject to overall administrative and functional control of the MOS, both IWT and DGS could work together to give a fillip to development of integrated sub systems for water-transport management. However, the time schedule suggested under item 15 of the Action Plan is perfectly logical.
(PH KRISHNAN)
Dy. Director General of Shipping
