Finance Minister Nirmala Sitharaman in her Union Budget for 2024-25 proposed a simpler tax regime for foreign shipping companies operating domestic cruises in the country to help cruise tourism gather steam.
“There is tremendous potential for cruise tourism in India. To give a fillip to this employment generating industry, I am proposing a simpler tax regime for foreign shipping companies operating domestic cruises in the country,” the finance minister said in her Budget speech on July 23.
She also reduced corporate tax on foreign companies from 40 to 35 percent. She added that ownership, leasing and flagging reforms will be implemented to improve the share of the Indian shipping industry and create more jobs.
The Bharatiya Janata Party (BJP) has promised to encourage the growth of the Indian maritime sector through legislative changes, according to its election manifesto for the 2024 Lok Sabha Elections.
“We will revamp the legal framework to enable faster growth of our shipping industry to become globally competitive,” the party said in its manifesto.
The government is also expected to amend the old Merchant Shipping Act.
An amendment to the Act was tabled in Parliament last year and was subsequently referred to the parliamentary standing committee.
The Draft Merchant Shipping (Amendment) Bill, 2022, which seeks to amend the Merchant Shipping Act, 1958, has provisions to decriminalise or provide leniency for some offences. It proposes to do away with imprisonment for multiple offences and allows non-resident Indians and overseas citizens of India to own Indian ships.
At the Global Maritime India Summit 2023, held in Mumbai last October, the finance minister said that India should have a full-fledged protection and indemnity entity in order to reduce the country’s vulnerability to international sanctions and pressures.
She said such an entity would provide greater strategic flexibility to India’s shipping operations. “It would also provide a foothold into the specialised segments of protection and indemnity (P&I) business, currently dominated by very few global players.”
Having an India-owned and India-based entity would also provide protection against liabilities to ships operating in coastal waters as well as inland waters during their operation, Sitharaman had said.
Shipowners buy P&I insurance to cover themselves from huge costs of any accident that could harm cargo, lives of people, and the environment. This cover is usually bought through not-for-profit clubs of like-minded shipowners.
The International Group, or IG, comprises 13 P&I clubs. This group provides marine liability cover to 90-95 percent of all global sea tonnage.
In the past, oil supply from Russia following its invasion on Ukraine was impacted as ships carrying the commodity struggled to get insurance due to the sanctions imposed by the European Union. The EU insurers were prohibited from providing cover to tankers carrying Russian oil.
Sitharaman said Indian P&I services could also help encourage maritime arbitrations in the country to redress disputes.
“Most often, India’s problems, which are unique to its jurisprudence, or the way in which Indian systems work, are put forward less for their (other international arbitration centres) consideration in arbitration courts,” the finance minister said.
On the need to improve financing to the maritime sector, she admitted that despite having a strong balance sheet, banks were not very enthused about funding this sector, largely due to higher risks associated with it.
Sitharaman said banks needed to work together with the government to understand the needs of the shipping sector in terms of financing issues without waiting for the categorisation of the sector as infrastructure or industry.
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