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Parity with aviation sector: Indian shipowners want declared goods status for bunker fuel

Monday, 20 February 2012 | 00:00
After airlines, it is now the turn of ship-owners to demand declared goods status on the fuel they consume.
Their logic
Aviation turbine fuel or jet fuel used by scheduled airlines for aircraft with a maximum take off weight of less than 40,000 kg already enjoys the status of “declared goods”.
“Bunker fuel used by the Indian flag vessels for coastal transportation should be given declared goods status, similar to status presently granted to jet fuel sold to aircraft operated by scheduled airlines,” Mr Anil Devli, Chief Executive Officer, Indian National Shipowners Association (INSA), said.
Coastal shipping
They want a similar treatment for bunker fuel as it will support coastal shipping. Higher bunker fuel costs are one of the major stumbling blocks in the development of coastal shipping.
While INSA is seeking lower tax rates for bunker fuel specifically for coastal shipping, other stakeholders (oil companies) have been demanding relaxation of tax for bunker fuel for foreign ships.
DECLARED GOODS STATUS
They say that this will help India emerge as a major bunkering destination, addition to India's port traffic.
A “declared goods” status will ensure a uniform tax rate across States, with the maximum tax rate not crossing four-five per cent.
Currently, the tax rate on bunker fuel varies from 5 to 14 per cent in most of the States.
Bunker fuel forms a major component of the cost of operating vessel.
FOREIGN SHIPS
The total Indian bunker market is at two million tonnes a year (mtpa), which is much lower compared to nearer destinations such as Singapore and Fujairah.
“Singapore sells 43 mtpa of bunker annually, Fujairah sells about 12 mtpa, and Rotterdam about 15 mtpa.
“India can aim for 10 per cent share of the total market of 200-210 mtpa,” Mr Basheer Ahmed Sayeed, Chief Executive Officer, Chemoil Adani (Singapore), said recently.
India exports fuel to Singapore and Singapore sells bunker fuel cheaper than India.
“About 50 per cent share of operating cost of ships is accounted for by bunker fuel,” Mr Chandan Samaiyar, Chief Executive, Gulf Petrochem (I), said.
Out of the 2 mtpa bunker sales in India, Indian Oil Corporation accounts of 50 per cent of the bunker fuel sold in India.
Source: The Hindu Business Line
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