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Exporters ask Nirmala Sitharaman for a shipping line

The finance minister had a pre-budget discussion with them

Shipping containers Representational image | AP

In addition to the usual suspects like tax relief, fiscal support and even something like a “double tax deduction scheme” (on overseas marketing expenses), Indian exporters had one other curious submission to finance minister Nirmala Sitharaman in their pre-budget discussion on Friday afternoon. That India should launch its own shipping line of global repute.

Blame it on the worldwide supply chain crisis unfolding over the past several months for this, but the exporters have a point. The breakdown in global logistics following Covid-19 and its impact have seen freight rates going up manifold, as a global shortage of containers and ships saw raw materials and finished products piling up at the wrong points for weeks and months on end for much of 2021.

The 'Ever Given' blocking of the Suez Canal back in summer, through which about 12 per cent of the world's cargo passes through, only added to the misery. And Indian exporters now feel it is time India did something about it.

“Export sector is facing an acute shortage of containers as we are dependent on [them] though coastal shipping is gradually gaining traction in the country,” pointed out A. Sakthivel, president of the Federation of Indian Export Organisations (FIEO) in its memorandum.

The finance minister had started with her pre-budget consultations on Thursday by meeting with representatives of the agro-processing sector. Day two's highlight was exporters and their post-pandemic brainwave.

Cargo rates had shot up by four times or more for many months recently, as a shortage of containers and ships saw global trade going for a toss, and commodity prices shooting up to a new high. For example, Indian exporters estimate the outgo on transportation costs due to the container shortage could be around $100 billion this year—up from $65 billion last year.

And that's not all. “When we are looking at increasing our international trade to $2 trillion in an economy of $5 trillion, the outgo on transport services will increase to $200 billion!” Shaktivel told Sitharaman.

The solution, according to the exporters, is for India to develop its own global shipping company, something all the more pertinent as the Shipping Corporation of India is set to go under the hammer soon.

“Such shipping lines, even if it gets 25 per cent of the total business, can save $30-40 billion annually and reduce our dependence on foreign shipping lines and their dictates,” said FIEO.

The exporters also called on the government to relook the tax rates on shipping, as the tax advantage in many other countries is primarily one of the reasons why even companies of Indian ownership and run by Indian personnel are registered in those countries rather than in India.

FIEO also called on the government to provide fiscal benefits to container manufacturing in India. Presently, 80 per cent of the world's containers are manufactured in China.

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