Tonnage tax soon to speed up SCI’s divestment plan

Tonnage tax has been a long-standing issue. The shipping ministry as well as industry has been seeking the shift from the present corporate tax to tonnage tax. Prime Minister Atal Behari Vajpayee is said to be favourably inclined towards tonnage tax. The shipping ministry is optimistic about adoption of the nex tax regime, especially since the Prime Minister has shown great interest in the sector as evident from his Independence Day speech.

The Rakesh Mohan committee, too, had favoured the replacement of corporate tax with tonnage tax. It had recommended the tax on the basis of net registered tonnage. This, if implemented, would considerably bring down the tax liability of shipping companies. In fact, in the absence of tonnage tax, many companies have started getting their vessels registered in tax havens abroad.

Further, the introduction of tonnage tax is likely to improve the prospects of SCI sale, which has been languishing because of the lack of interest of overseas shipping companies in SCI. In the first attempt to privatise SCI, the government failed to attract global majors because of two reasons: one, there was a 25 per cent cap on foreign direct investment (FDI), though there is no sectoral cap; and, second, the absence of tonnage tax.

In the last lap of privatisation, only two Indian parties were left. So, a few months back, the government removed the sectoral cap and decided to go for rebidding. However, the issue of tonnage tax continues to haunt SCI sale. Again there are only three Indian players — Essar Shipping, Sterlite and Videocon.

According to officials in the Ministry of Disinvestment, K Line of Japan is still interested in SCI. If the issue of tonnage tax is sorted out, K Line and other foreign shipping companies may be willing to join the race for SCI by tying up with Indian players, which is allowed, said officials.