Insa Seeks Sops In Budget
Enhancement of the depreciation rate to 40 per cent, relaxation in norms for external commercial borrowings (ECBs), tax benefits to seafarers and restoration of Section 33 AC of the IT Act in its original form are among the demands of the shipping industry.
The apex body of domestic shipping lines, Indian National Shipowners Association (Insa) has voiced these demands in its pre-Budget memorandum. The memorandum has pointed out that currently, road vehicles, aircraft and railways can claim a depreciation of 40 per cent using the written down value method. However, the shipping industry is permitted only 20 per cent and Insa has pointed out that this is inequitable. It says that shipping is a highly capital-intensive and cyclical industry. An enhanced depreciation rate will enable companies to recover capital costs at an accelerated rate. The memorandum has also sought that Section 33 AC of the IT Act be restored in its original form. This will allow 100 per cent deduction of profits to be carried over to a special reserve to be utilised only for acquisition over the next eight years. It has also sought that the amount credited to this reserve should be exempted from minimum alternate tax (MAT).
The industry has also sought that an amount should be earmarked under the overall ECB cap for shipping lines. It has also pointed out that the existing guidelines for ECBs are difficult to satisfy.
Currently, loans up to $15 million have an average maturity period of three years which translates into a repayment period of six years.
Loans over $15 million have an average maturity period of five years. Till recently, this was seven years. Consequently, such loans have to be rapid in about 10 years. Insa has agreed that even this reduced norm is not sufficient, given the balance life of ships. "Lenders, generally look to have ship acquisition loans repaid in full within 75 per cent of the balance economic life of the ship or eight years, whichever is shorter, "the memorandum states.
Consequently, it has agreed that the maturity period of all ship financing irrespective of the quantum of the loan be lowered to three years. This will translate into a repayment period of six years.
Indian seafarers have to spend a minimum of 183 days in international waters in order to qualify for NRI status and avail of various tax benefits. Seafarers employed on foreign ships have no problem in satisfying this criterion. However, those in the employment of domestic lines face a problem as Indian ships call at various ports in the country even when they are deployed on overseas run.
This has resulted in Indian lines losing out to foreign ones in the matter of trained and quality manpower. Insa has sought that any period spent on any Indian ship irrespective of area of operations should be treated as time spent overseas.
Practically all the demands have been voiced by the shipping industry in its pre-Budget memorandum earlier, too. Insa is, however, optimistic this year because of the swadeshi tilt of the BJP-led government.