India in urgent need to increase shipping fleet: Economic Survey

New Delhi: India's troubled shipping sector is in a dire need to change its fleet, which has as many as 42 per cent of the vessels that have crossed 20 years of age.

In addition, 12 per cent of the fleet is in the 15-19 years bracket, while the ship-breaking sector continues to be in turmoil, the Economic Survey for 2015-16, tabled in Parliament by Finance Minister Arun Jaitley, said on Friday.

"The shipping sector has been passing through tumultuous waters in recent years... There is urgent need to increase India's shipping fleet. With asset prices currently being serendipitously low, the time is right to acquire new generation ships to replace ageing ones," it said.

Expressing concern over the condition of India's fleet, it said it is aging and "42.42 per cent of the fleet is over 20 years old and 12.43 per cent in the 15-19 age group."

There is a "need for cheaper finance and longer tenure for funds in light of the fact that Indian ships are ageing and need to be replaced and asset prices are serendipitously low," it said.

There has been a sharp decline in the share of Indian ships in the carriage of India's overseas trade from about 40 per cent in the late 1980s to 7.45 per cent in 2014-15, it cautioned.

The significance of the sector can be understood from the fact that about 95 per cent of India's trade by volume and 68 per cent in terms of value is transported by sea.

As on 30 November 2015, India had a fleet strength of 1,246 ships with dead weight tonnage (DWT) of 15.37 million.

Despite having one of the largest merchant shipping fleets among developing countries, India's share in total world DWT is only 0.9 per cent as on 1 July 2015.

"The shipping sector has been passing through stormy waters... The Baltic Dry Index, a freight index and a good proxy for the robustness of trade as well as an indicator of demand for shipping services had fallen from a peak of 11,793 on 20 May 2008 to a low of 663...and is now in the red at 290 as on 10 February 2016," it said.

This, coupled with the fact that world and Indian services and merchandise trade growth was in negative territory in 2015 as in 2009, is a clear signal of the fragile international trade and shipping situation, it said.

The survey said import of cheap Chinese steel billets into the major ship-breaking locations is resulting in falling demand for scrap ships.

Recognising the need to encourage the growth of Indian tonnage and for higher participation of Indian ships in Indian EXIM trade, the government has taken several key steps including making fuel tax free for all Indian flag coastal vessels and removing other obstacles, it said.

The government has also come out with a blueprint for increasing the share of the coastal/inland waterways transport mode from 7 per cent to 10 per cent by 2019-20, the Survey said.

It added that the Inland Waterways Transport (IWT) sector remained dormant for a long time and lost its relevance and importance in the overall transport sector but considering its potential, steps are being taken to develop it.

"A significant step in creation of IWT infrastructure is implementation of the Jal Marg Vikas Project with World Bank assistance of Rs. 4,200 crore," it said.

After commissioning of NTPC's Haldia -Farakka coal transportation project by a private sector company, the Inland Waterways Authority of India (IWAI) is working on a project for transportation of 3 MTPA imported coal from the Bay of Bengal to the Barh power plant of NTPC.

To provide a thrust to the IWT sector, on the legislative front, it has been decided that in addition to the existing 5 national waterways, 106 more waterways across 24 states would be declared as National Waterways and a bill was passed to this effect by the Lok Sabha in the winter session of Parliament.