What to Read in The Hindu Editorial( Topic and Syllabus wise)

Editorial 1: Some wind behind the sails of India’s shipping industry

Context

The Union Budget appears to have met most of the shipping industry’s demands; but it has missed an opportunity to address tax disparities.

 

Introduction

The government deserves credit for its commitment to develop the maritime sector, largely neglected by predecessor governments. This is reflected in the expenditure on the government’s flagship programme, Sagarmala, which, as on September 2024, had outlined 839 projects requiring an investment of ₹5.8 lakh crore by 2035. Of these, 241 projects, worth ₹1.22 lakh crore, have been completed, while 234 projects, valued at ₹1.8 lakh crore, are under implementation. Additionally, 364 projects, with an estimated investment of ₹2.78 lakh crore, are in various stages of development.

• Sagarmala Allocation Breakdown: ₹2.91 lakh crore (over 50%) is allocated for port modernisation.
  1. ₹2.06 lakh crore (more than 35%) for port connectivity
  2. ₹55.8 thousand crore (10%) for port-led industrialisation
  3. The remaining 5% distributed between coastal community development, infrastructure for coastal shipping(not ship acquisition) and inland water transport
• India’s Economic Growth: India’s economy has seen GDP rising from ₹153 trillion in 2016-17 to ₹272 trillion in 2022-23 — an increase of 43%, growing at a CAGR of 7%, despite two years of COVID-19 related setbacks
  1. The economy is projected to reach $3.7 trillion this year, $5 trillion by 2027, and $7 trillion by 2030
• EXIM Trade Growth: During this period, India’s EXIM trade has also grown from $66 billion in 2016-17 to $116 billion in 2022, a cumulative increase of over 77% and an annual growth rate of 12.83%
  1. India aims to boost exports to $2 trillion by 2030, to strengthen its global trade position

 

The indxustry continues to face stagnation

• Stagnation in Indian Shipping Industry: Despite high economic growth and increased investments in the maritime sector, the Indian shipping industryhas remained stagnant.
  1. According to statistics by the Ministry of Ports, Shipping and Waterways, the cargo handled at major portshas only marginally increased from 1,071.76 million tons in 2016-17 to 1,249.99 million tons in 2020-21 — a cumulative growth of 14.26% or an annual increase of just 2.85%.
  2. In contrast, the number of vessels handled at these ports has actually declined by 5.93%, from 21,655 vessels in 2016-17 to 20,371 in 2020-21.
• Growth in Indian-Registered Ships: In terms of Indian-registered ships, the number has increased from 1,313 in 2016-17 to 1,526 in September 2024 — a cumulative rise of 16.77% and an average annual growth of 2.4%.
  1. Over the same period, gross tonnage has grown from 11,547,576 GT in 2016-17 to 13,744,897 GT — a cumulative increase of 17.44% and an annual average growth of 2.5%.
• Aging fleet: A major concern has been the aging Indian fleet, with the average vessel age rising to 26 years in 2022-23. However, this has now improved to 21 years, with the addition of 34 relatively younger vessels (average age of 14 years) in 2024.
  1. In comparative terms, India’s global ranking in ship ownership declined from 17 to 19, highlighting the need for reforms.
• Market share loss: Clearly, the assumption that increased investment in ports would automatically drive growth in Indian shippinghas been proven wrong.
  1. In reality, Indian shipping has continued to lose market to foreign-flag vessels in carrying Indian EXIM cargoand to rail and road transport for domestic cargo.
  2. The reason is simple: the needs of shipowners and shipbuilders are vastly different from those of port and terminal operators.

 

Multiple challenges such as in shipbuilding

• Lack of capital and high borrowing costs
• Short loan tenures and rigid collateral requirements, requiring shipowners to provide additional security instead of using ships as collateral
• Limited understanding of the industry’s cyclical nature, leading to inflexible loan restructuring policies
• Unfavourable taxation laws, often favouring foreign-flag vessels over Indian vessels even within Indian waters
• Delays in repatriating funds for ship acquisitions
• Stringent regulatory requirements, and additional financial burdens on mandatory training of Indian seafarersand higher port charges, further eroding competitiveness

 

Advantages of Foreign-Flagged Vessels

• Ships registered in tax havens or flags of convenience benefit from:
  1. Easier access to capital and lower borrowing costs
  2. Lenient regulatory standards
  3. Concealed ownership structures and minimal regulatory oversight
• This makes Indian-flagged vessels significantly less competitive in global shipping markets.

 

Challenges in India’s Shipbuilding Industry

• Inadequate infrastructure for constructing large vessels
• High input costs, particularly on steel
• A weak ancillary industry, leading to dependency on imports
• Customs duties on imported machinery and spare parts, increasing production costs
• Skill gaps that limit workforce efficiency
• Funding challenges for shipowners and delays in new-build vessel deliveries deter potential buyers from investing in Indian shipyards, further weakening the domestic shipbuilding sector.

 

Indian National Shipowners Association’s Advocacy

• The Indian National Shipowners Association has long advocated measures to ease capital constraints and eliminate discriminatory tax policies.
• Two key recommendations were incorporated into the Maritime India Vision 2030:
  1. Creation of a Maritime Development Fund (MDF)
  2. Granting infrastructure status to ships
• Additionally, the industry has pushed for:
  1. Removal of the 5% IGST on ship capital costs
  2. Exemption of Indian seafarers from TDS requirements
• Union Budget Measures: The government has announced:
  1. A ₹25,000 crore MDF
  2. Infrastructure status for large vessels
  3. Facilitation of shipbuilding clusters
  4. A 10-year extension of the basic customs duty exemption on shipbuilding spares and equipment
  5. A revamped financial assistance policy for shipbuilding
  6. Credit incentives for shipbreaking in Indian yards
  7. An extension of the tonnage tax scheme to inland vessels

 

Concerns Regarding the MDF

• The government’s contribution to the MDF will only be 49%, with the remainder to come from major ports.
• It is unclear whether the ₹25,000 crore will be mobilised in a single year or over multiple years.
• Given the high capital intensity of the shipping, shipbuilding, and port sectors, this amount may still fall short of industry needs.

 

Urgent Needs for the Sector

• The aging Indian shipping fleet requires urgent replacement.
• Greenhouse gas emissions reduction targets will necessitate investments in green technology.
• The sector requires long-term financing with lower interest rates and repayment tenures of 7-10 years.
• India needs new shipyards to build large vessels and the expansion and modernisation of existing ones.
• Although Sagarmala has infused funds in ports, additional funds may still be necessary for modernisation, despite transitioning to a landlord model.
• Utilising the MDF Strategically: If the MDF is strategically utilised to attract external commercial borrowings (ECBs) at lower interest rates, it could help bridge the funding gap across the maritime sector.

 

Conclusion: Glaring tax disparities

The Budget appears to have missed a crucial opportunity to address the tax disparities that put Indian ships at a comparative disadvantage to foreign ships, even when operating along the Indian coast. Indian-flagged vessels are subject to a 5% IGST on purchase price, a levy not imposed on foreign-flagged ships. Additionally, Indian shipping companies must deduct tax at source (TDS) on seafarers’ salaries, whereas foreign vessels employing Indian seafarers face no such obligation. The Budget 2025 is a promising step but must not become another half-measure in the name of shipping reforms. The industry needs decisive action, not just incremental progress.

Editorial 2: The kind of jobs needed for the ‘Viksit Bharat’ goal

Context

Long-term structural reforms must result in climate-resilient, AI-resilient and aspiration-centric jobs.

 

Introduction

The Union Budget has been presented, and this is the right time to outline the three kinds of jobs this writer believes India must create. Beyond reviving private consumption in urban areas, we must continue to strengthen long-term job creation and real wage growth across India. The 2024 Budget had introduced Employment Linked Incentives (ELI) under the Prime Minister’s five-scheme initiative, designed to create over four crore jobs over five years with a central outlay of ₹2 lakh crore. The Prime Minister’s internship scheme saw significant traction in 2024, with 6.21 lakh applications for 1.27 lakh opportunities. The outcomes on the rest four — beyond a draft Cabinet note on ELI and meetings by DPIIT with the Ministry of Labour and CII, remain to be seen. But there must be more deliberation on the kind of jobs we wish to create for a Viksit Bharat.

 

Impact of climate change

• India was the seventh most-affected country by climate change in 2019, suffering an income loss of $159 billionin 2021.
• According to the Reserve Bank of India, adaptation costs are projected to reach nearly $1 trillion by 2030.
• The impact on agricultural and labour productivity and livelihoods demands exponentially higher levels of funding for:
  1. Building rural and urban adaptation capabilities
  2. Rejuvenating local ecosystems to boost job creation

 

Creating "Climate-Resilient" Jobs to Meet Net-Zero Targets

• To meet net-zero targets by 2070, the Government must create and incentivise climate-resilient jobs by maximising all co-benefits (IPCC).
• Possible actions include:
  1. Providing three to four state-subsidised e-rickshaws in about 6,00,000 villages to create about two million jobs, focusing on women drivers, and improving last-mile mobility.
  2. Enabling private investment in compressed biogas plants to bridge the gap of 82 plants set up versus the target of 5,000 plants for FY23-24 (target set in 2018).
  3. Accelerating the achievement of the 500GW non-fossil energy capacity target, creating over one million jobs, with stronger support for decentralised and rooftop solar (which can be seven times more labour-intensive according to CEEW).

 

On AI resilience

• With the rise of generative AI, numerous jobs now have 50-plus% automation potential.
• Scenarios by McKinsey Global Institute suggest that 50% of automation adoption in India can happen in the next 10 years.
• India’s IT and business services, which comprised 70-plus% of services exports (Economic Survey 2021), aim to create millions of skilled talent exports. However, their employment potential may be limited in the gen AI-era as labour becomes costlier relative to capital.
• The launch of metaGPT simulating software companies, AI writing 25% of Google’s code, and layoffs due to chatbots even in India highlight the need for new jobs prioritising:
  1. Physical engagement
  2. Utilising human creativity, a concept referred to as AI-resilience.
• Addressing the AI-Resilience Challenge: To foster AI-resilience, India can focus on.
  1. Larger education and health budgets to address the deficit of millions of healthcare professionals and teachers across states.
  2. Dedicated financing for the National Rural Livelihood Mission to facilitate global and urban market linkages for local products, crafts, and knowledge from farmers and artisans in rural India.

 

Being aspiration-centric

• Despite their growing engagement with startup culture, rural youth continue to have low confidence due to deeper insecurities stemming from:
  1. Poor foundational education, including English
  2. Resource-deprived upbringing
• This situation can reinforce dependency on government jobs and coaching to crack entrance exams.
• Aspirations are shaped by socio-economic backgrounds, digital media, and the interaction of the ‘Samaaj, Sarkaar, and Bazaar’.
• The slow growth of non-farm jobs necessitates off-farm job creation that responds to these dynamic aspirations.
• Rapid infrastructure development can help address this, such as:
  1. Building around 70,000 integrated pack-houses, bridging the 95-plus% infrastructure gap, and creating over two million jobs.
  2. Boosting productivity and value-addition for high import/export-share items.
  3. Tech-enabled local manufacturing of agri-inputs.

 

Making Off-Farm Jobs Aspirational

• Greater use of tech, social media, and rebranding the ‘rural’ can make off-farm jobs more aspirational for India’s youth.
• One clear avenue is accelerating the ‘National Mission on Edible Oils – Oilseeds’ to reduce India’s 57% import-dependence on edible oils, bringing it back to pre-WTO levels.
  1. This includes revitalising rural processing of native oilseeds like soybean and sunflower (about 40% of edible-oil imports), and boosting retail of in-vogue cold-pressed oils.
• Enabling the creation of large-scale businesses through private-public partnerships and investments can address the economic aspirations of disheartened youth protesting examination leaks and low recruitment vacancies.

 

Conclusion

While tax relief may temporarily boost urban consumer demand, amidst growing household indebtedness and suboptimal private investment trends, the Centre can demonstrate greater commitment for long-term structural reforms which create these climate-resilient, AI-resilient and aspiration-centric jobs. Many opportunities exist as we embark towards our shared vision of a Viksit Bharat.