High Taxes Stall Indian Vessels

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Good morning. In today’s edition — how high taxes are proving to be a hurdle for Indian-flagged vessels; D’Mart’s rough year in the markets; Adani Group under Department of Telecommunications (DoT) lens.

DECODE THE NEWS

Taxation Hurdles Are Making Indian Ship Makers Register Abroad

In December 2024, the government proposed a new Coastal Shipping Bill in the Lok Sabha, a separate law for coastal shipping that was previously governed under Chapter 14 of the Merchant Shipping Act of 1958. 

The bill aims to boost coastal shipping development by making processes easier. If passed, the Merchant Shipping Act 1958 will be split into two laws. Among other changes, Indian-flagged vessels in coastal waters won’t need general trading licenses. The bill may be a step in the right direction, but there is a bigger problem for the Indian shipping industry — that of high taxes. 

“We understand that the government is of the view that once they remove the taxes for ships, this will lead to a cascading demand from other industries. This time, we have given them a table showing that amongst the top 10 ship-owning nations in the world, none impose this kind of GST/VAT,” Anil Devli, chief executive officer at the Indian National Shipowners Association told The Core.

Thus the high taxes are driving Indian shipowners to register and operate their vessels abroad, where regulations are simpler and taxes lower. 

Unless the government steps in with tax relief and reforms, Indian shipping will continue to be outpaced by foreign competitors. There is growth potential—but only if the tax burden is lifted.

The industry and the government understand the tax burden challenge. But what is stopping the government from easing taxes?

PODCAST

On Episode 481 of The Core Report, financial journalist Govindraj Ethiraj talks to Ajay Shah, well known economist and columnist as well as Vandana Hari, Founder and CEO of Vanda Insights.

• Markets fight to end in the positive.

• The policy flip flop on the rupee and its implications.

• Decoding the sanctions bombshell on Russian oil and impact on India.

• Car sales slow down, more so in the small car segment.

• And the world’s busiest airport in 2024 is…

• Who does the word schezwan chutney belong to?

CORE NUMBER

4.3 Million Units

This is the number of passenger vehicles (PVs), marking a record 4.2% sales growth in 2024, including cars, utility vehicles and vans. According to Business Standard, utility vehicle sales surged 17% to 2.7 million units, while passenger cars dropped 14.4% to 1.37 million units. December saw 10% PV growth due to discounts and inventory clearance. Strong consumer sentiment and a stable economy pushed overall growth, with record-high sales in passenger and three-wheelers. Q3 delivered the highest-ever sales for PVs, CVs, and three-wheelers, though two-wheeler sales slid 8.8% in December due to a 15% fall in motorcycles.

FROM THE PERIPHERY

—📈 India’s Wholesale Price Index (WPI) rose to 2.37% (provisional) for the month of December 2024, as compared to 1.89% in the previous month. According to the Ministry of Commerce & Industry, this rise was fuelled by an “increase in prices of food articles, manufacture of food products”. The manufacturing of textiles and non-food articles also contributed to this. WPI inflation was at 0.73% in December 2023. 

—🔎 The Adani Group is under examination by the DoT due to delays in deploying 5G services, despite acquiring the necessary spectrum and licences over two years ago, Business Standard reported on Tuesday. In July 2022, Adani Data Networks, a subsidiary of the conglomerate purchased 400 MHz in the 26 GHz band for Rs 212 crore. The subsidiary has not announced a timeline for launching 5G services. Reports suggest the company is considering surrendering the acquired spectrum, citing commercial unviability in deploying private networks across its diverse business operations, which include ports, airports, power generation, and logistics.

—🏦 Indian banks are engaged in a competitive battle to attract deposits, leading to a continuous increase in fixed deposit (FD) interest rates. Fixed deposit rates have risen, with several banks offering rates up to 8.05% or more for specific tenures for senior citizens. This trend is driven by the need to meet rising credit demand and manage liquidity constraints, according to The Economic Times. Data from the Reserve Bank of India RBI as of December 27, 2024, showed that bank credit grew 11.16% year-on-year (YoY), outpacing deposits which grew by 9.8% YoY.  In absolute numbers, the total value of bank deposits stood at Rs 220.6 lakh crore as of December, while bank credit stood at Rs 177.43 lakh crore. 

—⚠️ India’s youngest airline Akasa Air is in trouble again. Business Standard reported on Tuesday that aviation regulator Directorate General of Civil Aviation (DGCA) has warned the airline over carrying lithium batteries, which comes under the category of dangerous goods, in its cargo. The DGCA during its annual surveillance of the airline on December 12 had reportedly found the airline not complying with safety standards. Reports said the DGCA letter as saying that the airline was admitting electronic devices without checking for lithium batteries.

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