Shipping Ministry For 40% Depreciation Rate For Vessels

The ministry of shipping has renewed its demand for a higher rate of depreciation of 40 per cent for ocean-going vessels, in the run-up to Budget 2002-03. The long-standing demand of the shipping industry for treatment of vessels at the 40 per cent rate of depreciation applicable for other transport utilities met with limited success in last year's Budget, with rates being increased from the prevailing 20 per cent then to 25 per cent.

According to a senior official in the ministry of shipping, the increase in the depreciation rates and ushering in of a facilitating tax environment including tonnage tax for the shipping industry will be the thrust areas for the ministry in the run-up to this year's Budget.

The ministry has also set up a committee under the economic advisor to the finance minister, Rakesh Mohan, for exploring the possibility of implementing a tonnage-based tax regime for shipping companies as against the present corporate tax/MAT regime. The committee is expected to submit its report in a weeks' time.

The finance ministry has traditionally been opposed to implementing the tonnage-based tax system in view of the possible revenue losses and consequently it did not figure in last year's budget announcements. The committee was subsequently set up to look at the ensuring parity for the Indian shipping companies vis-a-vis the other maritime nations, where shipping companies operate in a near zero tax regime.

If implemented, the shipping companies would pay a flat rate per tonnage handled instead of a tax on the companies' income. The tonnage tax-based system is based on the assumption that shipping companies would increase their tonnage by acquiring more vessels resulting in better bottomlines.

In line with the declining trend in the Indian shipping scene, the country is likely to end the current fiscal with a fleet strength of just around 7 million gross registered tonnage (GRT), way below the Ninth Plan target of 9 million GRT to be achieved by March 2002.

The need for reviving the sagging fortunes of the country's shipping sector is amply evident. Despite the growth of the Indian fleet through the 1960s and the 1970s, a stagnation in the country's maritime scene has set in over the last three decades.