25-10-2016

The Prolonged Unbelievably Low Freight Market Is A Big Concern: Mr. Rethina Kumar, Managing Director, Lilly Maritime Pvt. Ltd

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India Ship Management Summit 2016 was organized by The Shipping Tribune on 6th October 2016 at Mumbai. The Summit saw the participation of all segments of the shipping industry from various maritime hubs in the world.  Mr. Rethina Kumar, Managing Director, Lilly Maritime Pvt. Ltd. addressed the subject “Challenges faced by ship owners and the ease of doing business in India”

 The first topic he dealt in his session was the advantage of operating ship management in India.  “People in the Indian IT industry play a vital role. Telecommunicating has made it easy to operate even from home. There is no difference in service they provide to their customers, the ship owners.  On one hand we find ship owners, managers, insurance agents to discuss the challenges whereas there is no representation from crew. The crew plays a vital role. The crew has to make a smarter, convincing and interconnected role not in isolation. We have a large pool of offshore vessels that requires a lot of maintenance and most of the work is being outsourced to ship managers. There are many ports which have come up with new infrastructure development hoping that will cope with the target that they got for export of goods. Almost all ports have taken to outsourcing due to competitiveness and economy.”

He acknowledged the contribution of various forums of the shipping which address specific problems and can communicate to the government to our advantage and grow.

 He spoke about the steps taken by the Indian government to improve and increase the domestic coastal movement along the large coastline of our country. He lauded the efforts of the D.G. Shipping to go 100% paperless saying that it is a big commitment which will help the shipping industry with the ease of doing business and saving time.  He also thanked the government and various entities of the shipping industry for the efforts taken to redraft the MS Act which has already taken care of everyone’s views, problems and found solutions to meet the modern day requirements.  

 Commenting on the taxation models he said, “Government looks at revenue through taxes. However it has not been industry specific.  That is why there has been a commotion between    the companies and the tax authorities.  The service tax applicable on ship management companies in particular.  The additional 3%-7% charged to the ship owners in an already depressed market is a big burden. The quantum of money for applying the service tax rule is vague.  The implications of GST have to be looked into. The dispute regarding income of seafarers has not yet been solved. We should look at the volume of money coming into India which will indirectly add to the GDP growth of our country.”

  The challenges faced by the ship managers were one of the issues which found a mention in Mr. Kumar’s session. “ Maintaining operational budget, short contracts and turnarounds of crew, payment delays by ship owners, tough matrix requirements, various approvals and acceptability by some charterers all add up to  bringing woes to a ship manager.”

 With regards to opportunities for ship managers in today’s world he said, “Anybody with skills, knowhow and ability to convince the owner about running ships at optimal costs can today enter the business. There are low barriers for entry.   There is no necessity for capital or investment.  We can employ more people by getting more business. As the ships prices have become very cheap, many people are entering into owning ships instead of chartering them thinking about capital appreciation when the market picks up.”

  Placing emphasis on ship owners’ challenges, Mr. Kumar said, “Without the ship owners, there will be no business at all. The prolonged unbelievably low freight market is a big concern. So is overcapacity, asset value depreciation, rising operating costs, and the need for capital to implement new regulations. The owners can be helped by bringing down operation costs which consists of two main components, technical and wages.   The wage cost is nearly 70% of the operating costs. We have to take a conscious view about crew wages and how we can take advantage and provide more crew members into the pool. India is a young nation . We should think about mentoring, training and promoting young talent to maintain our market share and business. Crew wages have to come down if we have to survive and sustain in future.”

He ended the session with words of hope. “Let us make a bright future by taking the crew and ship owners into confidence.”

Source: TST Newsdesk

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