The Suez Canal crisis 2021 has brought global trade under strain because the route that is most crucial for global trade has been blocked due to the fact a ship the size of the Empire State building is stuck. The crew of the ship is almost entirely Indian. Dhurva Jaishankar, an acclaimed international affairs expert took this as an opportunity to explain the global nature of the shipping industry, and tweeted:
The international nature of the shipping industry is always so fascinating. The MV #EVERGIVEN is reportedly:
🇯🇵-owned
🇹🇼-operated
🇵🇦-registered
🇩🇪-managed
🇮🇳-staffedIt got stuck in #Suez 🇪🇬 en route from 🇲🇾 to 🇳🇱
— Dhruva Jaishankar · ध्रुव जयशंकर (@d_jaishankar) March 25, 2021
India has a very strong availability of human resources in the merchant navy. A large demand for professionals in the global shipping industry is catered by cheap and skilled labour from India, the shipping industry of the country is still very weak.
In fact, despite India being an undisputed superpower in the Indian Ocean region – the most important global shipping route – the country is dependent on foreign players to ship its cargo. The state’s monopoly in the shipping industry is through the Shipping Corporation of India which has kept the Indian shipping industry on the backburner despite the availability of the best human resources in the world.
Moreover, apart from the state monopoly of decades – which is being weakened by the Modi government – some other government policies have also been responsible for the fact that India is not AtmaNirbhar in the sector.
According to Rupali Ghanekar, who works as an Economic Advisor to Indian National Shipowner’s Association, “Indian shipping sector hasn’t been able to increase its market share using India’s own EXIM cargoes. The moot point here is how does the Indian government and the Indian shipping industry pull this off.
The lack of anti-dumping measures against foreign services imports even if they were being dumped in India at rates cheaper than its input costs in the country is a big impediment to the growth of India’s services sector. Indian law does not impose “tariffs” on services. At best, it asks foreign service providers to set shop in India.
Indian industry pays 50 billion dollars to foreign shipowners to transport their cargo. The foreign shipowners are fiercely protecting this 50 billion dollar industry by lobbying in the Ministries and making the bureaucrats believe that the foreign players are somehow bringing efficiency, thus, making the exports and imports cheaper.
A few weeks ago, when India was shipping tonnes of rice and sugar to foreign countries amid the global shortage, the global players of the shipping industry created a container shortage and this forced the exporters to pay a double price to ship their goods. “Logistics in rice exporters has emerged as the biggest challenge. It seems to be going out of control but we are trying our best to fulfil the contracts signed than chasing new deals,” said BV Krishna Rao, President, The Rice Exporters Association (TREA).
Not being AtmaNirbhar in any sector comes with a price and India paid the price for not being self-dependent in the shipping industry. The country does not only lose 50 billion dollars a year in foreign exchange reserves every year due to a lack of credible shipping industry, but it also weakens our prospects as a future export powerhouse.
Therefore, the Modi government must privatise the Shipping Corporation of India as soon as possible and incentivise domestic players to take over the foreign players. As of now, Indian players carry only 10 per cent of the country’s EXIM trade and 59 per cent of domestic coastal cargo and the government must ensure that this reaches 100 per cent for domestic cargo and at least 50 per cent EXIM trade.
The country has skilled manpower and capital, all that is needed now is suitable policies for domestic players and coercive for foreign ones.