With Odisha all set to receive benefit from Coastal Shipping, the Union Government has urged the State Government to exempt Value Added Tax (VAT) on bunker fuel used by the Indian flag vessels operating along the coast and the vessels on inland waterways.
The Union Ministry of Shipping (MoS) has written to the State Government to take such a step to boost coastal shipping.
Union Minister of Shipping, Road Transport & Highways Nitin Gadkari has written to Chief Minister Naveen Patnaik urging him to consider the proposal to exempt VAT.
Gadkari has said that the MoS is actively considering various measures to promote modal shift of cargo from rail, road to coastal shipping not only to decongest roads and rails but also to harness the higher fuel efficiency of coastal m ovements.
This would also reduce carbon footprints and lessen environmental pollution, said he. Union Shipping Secretary Rajive Kumar has also written to Chief Secretary AP Padhi impressing upon him the urgency to exempt VAT on bunker fuel. As the bunker fuel expense is around 30 per cent of the operational cost of a vessel, exempting VAT would help a vessel cut its operational cost substantially.
The Union Finance Ministry has already exempted Central Excise and Customs duty on bunker fuel.
Odisha, being a coastal State, would have the facilities of coastal shipping, and the Fifth National Inland Waterways would be passing through the State.
While coastal shipping is not receiving any subsidy from the Government on bunker fuel, rail and road transport have been beneficiaries for several years of cheap and subsidised diesel. So, coastal shipping has not been able to compete with them in absence of any subsidy, said Kumar.
Exemption of VAT on bunker fuel would increase maritime activities in the State and bring growth of the region, and the port hinterlands would experience economic spin off to the coastal economy of the State, he said.
After receiving the letter, the State Government has started examining the proposal, said sources in the Department of Finance.