‘Exempt customs duty on bunker fuel for longer period’

If the Government wants to see fresh investments in the coastal shipping sector, it has to exempt customs duty on bunker fuel for a longer period and allow empty containers handled on Indian flag vessels to stay for more than six months, say experts.

Currently, containers entering the country have to leave within six months of getting an entry bill from the customs department to avoid duty.

Earlier this month, the Government had exempted customs duty on bunker fuel for exim (export-import) and empty containers handled till May 2015 on Indian ports.

“Bunker charges account for 40 per cent of the operating cost,” said a senior Shipping Corporation of India (SCI) official, adding that with customs duty of 25-30 per cent gone, net prices will come down by about 10 per cent.

“This has been a long-standing demand of Indian ship owners and operators seeking a level playing field with foreign flagged vessels, which do not have to pay customs duty on bunker fuel when they move export-import containers,” said SV Subhedar, President of Indian Coastal Conference Shipping Association (ICCSA).

ICCSA also wants the Government to increase the duty exemption period to encourage more investment and extend it to more categories of cargo handled by Indian ship owners, Subhedar said.

“The repositioning of empty containers will happen at 15-17 per cent lesser cost along the coast. This will lower the transaction cost, but it will take time for the benefits to trickle down to domestic trade,” he added.

Subhedar said the move will promote movement of empty containers along the coast and take containers off the road and rail network, encouraging an environment-friendly mode of transport.

“The move will particularly help feeder services to main line container services. However, it will achieve this objective to a limited extent.

“Any policy intervention to induce investment needs clarity on the continuation of such dispensation.

“The exemption is for a short period of six months and that is not long enough to attract fresh investment in this sector. I hope the Government will review this aspect,” said BK Mandal, Managing Partner, Beekay Business Consulting.