Sucheta Dalal :Why Indian Shipping is Barely Afloat
Sucheta Dalal

Click here for FREE MEMBERSHIP to Moneylife Foundation which entitles you to:
• Access to information on investment issues

• Invitations to attend free workshops on financial literacy
• Grievance redressal


You are here: Home » What's New » Why Indian Shipping is Barely Afloat
                       Previous           Next

Why Indian Shipping is Barely Afloat  

December 23, 2009

With one of the longest coastlines in the world, India has less than 950 Indian flag merchant navy cargo ships, as against about 55,000 worldwide. That's less than a 2% global share of merchant navy ships, by number, and it becomes even worse when you factor in smaller coastal as well as inland waterway vessels. Take this further by using figures for deadweight tonnage, then India’s share trickles down to close to 1.2% of existing world tonnage—and it’s dropping—with just about 15 million DWT against a global 1,200 million DWT.

However, here’s another bunch of statistics. Approximately 20% of the world's merchant navy personnel worldwide are of Indian nationality and origin, and to all perceptions as well as unspoken truths, over half the world's tonnage is managed by Indians located all over the world. Traditional seafaring countries like England, Japan, Italy, Norway and similar nations now have ships flying their flags with Indians not just sailing on them in junior positions but also in command. Some of these countries are now actively looking for Indians who also speak their local languages to work on their coastal ships, since their own nationals do not wish to work on ships anymore, and the fishing fleets with their factory ships have to go out further, thus requiring "foreign-going" qualifications. Around 4,500 merchant navy ships flying foreign flags are managed out of India, mainly from Mumbai, but the number is growing rapidly, and in other parts of the country too. This does not include the number of foreign flag ships managed from other parts of the world, but also employing Indians, on which there are not even ballpark estimates, so high is the number.

The Certificate of Competency (CoC) earned by seafarers after multiple exams and training, issued by the Indian Government, is granted equivalency by other countries, including the developed countries, because it is recognised as one of the toughest regimes existing to acquire the privilege of sailing on board ships, worldwide. A side effect of this is that almost 75% of all candidates studying for the CoC in England are from India, because that is perceived to be an easier "system", and it also gives easier access to EU job markets. By some accounts, there are over 1.7 lakh seafarers from India, just about 25,000 of whom work for Indian companies, the rest work in foreign jobs because quite simply the tax regime is easier on them—amongst other things. And this number is rising—the demand for Indian seafarers continues unabated, even as there is a severe shortage worldwide. The average age of a seafarer in England or Japan is now over 50 years, young people there are not taking to seafaring as a profession, and in a decade or less, they will not have too many of their own people to man their own ships.

So what ails Indian flag shipping, why don't the numbers add up, why is Indian surface transport by water so neglected and behind times? Why can't we have more Indian flagships, so that along with seafarers, it is also our ships that sail across the seas, dominating like our Indian seafarers do?

The answer, as always, lies in the petty and short-sighted way governance treats all forms of transport as short-term revenue generating tools, and not long-term nation building efforts. The attitude down the line with the variety of entities which control shipping in India is the same as the attitude one sees in transport offices, the place where you and I go for our driving licences which are issued—or better still, not issued—unless motivated.

That sea cargo is without doubt the most efficient way to transport goods is another given and simultaneously in India a reason for its neglect—once the ports are built and the ships are bought, there is no need to build roads or railway lines, acquire land or operate toll stations and marshalling yards. All you need to do is get the ships out and on to the seas, freedom of transit on which is guaranteed by historical conventions and modern day laws, and get a move on. On a per tonne per kilometre basis, it is cheaper to send anything over a truck or wagon load by sea from Gujarat to the east coast of India, and at a four-five day transit time, probably as fast too—and that is a fact already being recognised wherever possible. But the obstacles faced by coastal shipping are so immense, that even the best and strongest of contenders have often backed out, giving way to the entrenched road lobbies.

Putting everything else aside, that is also the single biggest reason why water-borne cargo and passenger movements by inland waterways have been put on the back-burner in post-1947 India, except in selective areas like Kerala and West Bengal. Governance and those in authority cannot make money by holding up vessels and cargo or passengers once on the rivers, as easily as they can do on roads, so it simply does not work for those who have made a fine art out of this method of generating incomes, without caring about consequences, and Bihar is a fine example of how a State self-destructs after river-borne trade is destroyed.

This is the true reason why surface transport by water, inland or coastal, has been such a flop in post-Independence India. Putting it bluntly, at the risk of repetition, there is no way any ‘hafta’ can be collected once a ship has sailed out, so coastal or inland waterway shipping is the last on anybody's priorities. A few thousand tonnes sent by road or river or even by air will keep multiple centre-state-city-group-individual interests happy and well-fed for generations, such are the transaction benefits en route, as can be seen at any state border. A few thousand tonnes sent by sea will deprive them their seven generations’ worth of bread, butter and jam.

But that's a fact of life. Undivided pre-Independence India had more coastal shipping, both passenger and cargo, than we have now. Karachi-Saurashtra - Bombay-Konkan, and thence to Ceylon via the Malabar coasts, for example, is a route that’s simply extinct now. Look at a map of India, and wonder why we do not have more ferries crossing the Gulf of Khambhat, or sailing from Mumbai (south) to Goa or north to Gujarat.

The manpower is there, the need is there, tonnage and ships have never been cheaper worldwide, and the reasons are all there. But who wants it? An Indian friend who owns and operates a leading foreign flag shipping company from one of the oldest and finest maritime nations in the world found out, when for reasons of patriotism, he tried to re-flag some of his ships to the Indian flag. Amongst other things, powerful entities in India who were capable of investing "hot money" in millions of dollars, made it very clear that it would be beneficial to all concerned if he continued running foreign flag ships, with ownership hidden in places like the Isle of Man, British Virgin Islands, Delaware, Luxembourg and similar places—instead of under the Indian flag, because the source of money would be easily traced.

In addition, and this is the really troublesome part—the whole concept and execution of owning and operating a ship under the Indian flag to work on the Indian coast is stacked against any such effort. More on this aspect soon.
— Veeresh Malik

-- Sucheta Dalal