India’s stationary course in the shipping value chain
News Excerpt:
India's position in the shipping value chain remains static.
Case study of Yangtze river: The Yangtze River holds immense significance in China's history, embodying tradition, commerce, and cultural heritage.
- Despite its modernization, the river retains its ancient charm, amplified by the Three Gorges project. It has a strong presence of numerous merchant ships navigating in and out, sometimes in pairs or trios which stands apart from the usual procession of ships seen in the Suez or Panama canals.
- Unlike these canals, the Yangtze often witnesses multiple convoys traveling side by side. Meanwhile, smaller barges criss-cross the river akin to Indian auto rickshaws on roads. To seafarers, it's a remarkable display of skilled seamanship, logistical expertise, and adept piloting.
- These ships transport raw materials from worldwide locations, including distant Chinese-owned mines in Peru and Africa, or export finished products globally. Some vessels are newly constructed in shipyards lining the river's bends, while many undergo repairs in these same yards and dry docks.
- The Yangtze epitomizes the oft-repeated narrative of China's exponential growth compared to India's stagnation. This narrative contrasts both countries' trajectories since the late 1980s, highlighting China's substantial progress, leaving India significantly behind.
Story of India: The narrative of India versus China in the shipping industry is intriguing. Until the late 1980s, India held an advantageous position compared to China. While China had minimal presence in global merchant shipping, India had already established foundational elements.
- India had a strong tradition in modern ship ownership, exemplified by a remarkable case involving a daring former Indian Navy officer who commissioned and owned colossal oil tankers—still the largest merchant ships ever built. India's association with the International Maritime Organization was notable.
- Private players ventured into a domain dominated by large public sector entities, fostering hope that Indian shipyards might competitively construct ships for the global market. Labor arbitrage preceded shipping by at least two decades before it became prevalent in the IT sector. English-speaking Indian seafarers became commonplace globally, replacing qualified eastern Europeans whose English proficiency was lacking—a crucial requirement for safety in shipping.
- Similar to other sectors, India's primary source of growth and foreign exchange earnings revolved around labor supply. In shipping, successive governments emphasized expanding the seafarer population. Previously, Mumbai and Kolkata were major hubs for seafarer training and employment.
- The United Progressive Alliance (UPA) government decentralized maritime training, allowing private players to participate. Today, institutions nationwide produce seafarers of diverse grades and competencies. Indian seafarers make up a significant portion of crews on ships worldwide.
- Across the world, from the Arctic ice class merchant ship to the ore carrier calling on Chilean ports, if there are 20 seafarers on board a ship, it is likely four or five will be Indian.
- Parallel to the growth in the seafaring population, Indians excelled in ship management due to their expertise in value engineering. Proficient in bargaining, Indian professionals efficiently manage ships, overseeing numerous ship management companies, some responsible for hundreds of vessels.
- According to an estimate, Indian seafarers and their management companies contribute roughly $6 billion annually in foreign exchange—an impressive figure compared to China's $50 billion foreign remittances, as reported by Sanjaya Baru in The Wire.
Impact of low reach: However, despite these strengths, ship owning, chartering, financing, and building remain largely unexplored territories for Indians. India hasn't ascended the shipping value chain significantly.
- State-owned entities like the Shipping Corporation of India suffered under successive governments, impacting Indian shipyards' order books. New private shipowners catering to India's trade growth often prefer purchasing second-hand ships, aligning with short-term market forecasts—the only reliable prediction allowed in the Indian market, according to Hrishikesh Narasimhan, a general manager at L&T Shipping.
- This stagnation stands in stark contrast to China's progress. Empowered by a dedicated government initiative to expand shipbuilding and ownership, China became responsible for half of the world's ships by 2020.
- Notably, Chinese shipowners predominantly constructed their ships at state-owned government yards, reminiscent of Japan and Korea's prior leadership in shipbuilding, as highlighted by Mr. Narasimhan.
- India's involvement in global shipbuilding has faced significant setbacks despite governmental aspirations for growth. Under the UPA government, the Maritime Agenda 2020 aimed to elevate India's share in global shipbuilding from below 2% to a modest 5% within a decade, with proposed strategies to achieve this goal.
- However, by 2020, India's share in global shipbuilding plummeted nearly to zero, rather than showing any improvement.
- Subsequently, the Bharatiya Janata Party (BJP) government presented Maritime India Vision 2030, highlighting key themes such as logistics, environmental concerns, port infrastructure, and the expansion of seafarer growth and training.
- Surprisingly, this vision did not encompass any specific plans for shipbuilding and ownership. While the Sagarmala initiative has been discussed, shipyards have primarily received orders for naval ships.
Conclusion:
For India, possessing an extensive coastline and a strategically vital geographic position in global shipping, fostering shipbuilding capabilities would be a crucial component in enhancing manufacturing capacity and bolstering strategic influence. Engaging in shipbuilding and ownership would not only grant India a prominent role in the global maritime industry but also fortify its presence in international trade. Similar to the correlation between industrial might and military strength, shipbuilding holds intrinsic significance in establishing a robust naval foundation. An illustrative example from the movie Oppenheimer sheds light on the selection of Japanese cities for atomic bombings. Nagasaki was targeted not only due to its civilian quarters but also because its naval shipyard was actively producing naval vessels and needed to be eliminated. Although the bomb missed the shipyard, Nagasaki's shipbuilding facility thrived and evolved into an advanced merchant shipyard, continuing its operations to this day.
Mains PYQ
Q. With respect to the South China sea, maritime territorial disputes and rising tension affaire the need for safeguarding maritime security to ensure freedom of navigation and ever flight throughout the region. In this context, discuss the bilateral issues between India and China. (UPSC 2014)
