Tariffs for the Major Ports are currently set by TAMP (the Tariff Authority for Major Ports) China is already offering subsidies to shipping companies to scrap vessels before their operational expiry date and to replace them with new ships which are CEO-friendly. The Government has directed state-run Gail India to use Indian ships for importing gas worth $2. 5 billion annually from the US, a model that is practiced by Chinese oil firms to encourage domestic shipping industry. Ships older than 20 years require more frequent and extensive repair and maintenance.
Majority of Indian ships are less competitive as costly younger vessels that are less than 15 years old are preferred in international trade. India has a total of 1,122 shipping vessels in its shipping fleet and 41 per cent of these I. E. About 466 vessels fall in the age group of 20 years and more. Considering that average life of a shipping vessel is about 26 years, most of the existing Indian vessels need to be replaced, it said. Advantages and Disadvantages Advantages Cheap Means of Transport. Transport of Heavy Goods. The way’ is free, and gives access to most parts of the world.
Does not require any special infrastructure like roads, rails and airports. Disadvantages Slow in speed. Risk on weather change. The government has decided to exempt vessel sharing pacts among shipping companies from the purview of fair trade regulator Competition Commission of India (CLC). Five Force Model Analysis It’s a framework for analysis of industry and development of business strategy, it also determines the competitive intensity attractiveness of a market. Attractiveness is referred to overall profitability of industry while unattractiveness drives down profitability.
Treat of new entry is HIGH Treat of substitute is HIGH Bargaining power of supplier is LOW Bargaining power of buyer is HIGH Rivalry among existing competitors is LOW Treats To New Entry Every person would love to do business in India especially in shipping industry due to large profits involved. Foreign players or Mac’s having their business arms extended in India. Treats Of Substitute Substitution threat is the result of change in buyer behavior towards competitor or against company. Substitution may also result because of change in quality of service, increase in freight rates and increase in transit time.
From view point of switching costs, buyers are not affected at all due to higher number of suppliers and freight forwarders available in market. Bargaining Power of Supplier Suppliers barely make any difference to companies involved in shipping line business in India, especially who are leading players in this business while it may affect to certain extent to small players who are struggling to establish with in the industry. Bargaining Power of Buyer Buyer is one the strongest factor in shipping line business.
Buyers may be in form of importer or exporter, clearing agent, freight forwarder or manufacturer of goods. Sometimes manufacturer himself acts as an exporter or importer, if not than trader acts on behalf of manufacturer of goods. Rivalry Among Existing Competitors actually speaking it is part and parcel of day to day businesses. It is sometimes bad because companies have to share hard earned profits with competitors and sometimes good because it gives opportunities to one company to stand in line with another in terms of quality of service, business strategy, Job satisfaction etc.
Considering the rivalry in shipping industry in India, will be held valid due to enormous margins of available profits combined with continuous growth of around 14% since last couple of years. SOOT ANALYSIS Strength More than 7500 km coastline including the island territories Widespread ports and erasable merchant fleet Fleet expansion by major domestic shipping companies Sustained rise in the volume of exports with revival growth in the manufacturing sector Large number of Indian sea farers More than 1 billion citizens to drive the import demand Weakness Bank finance is not easily available now.
Most of the banks closed their windows for shipping company. Foreign competition Change in technology Rising fuel prices and other unexpected expenses may adversely affect profitability The underinvestment in the Indian’s maritime sector has affected the development of ports in the country. Inefficient Judiciary system slow development of new port infrastructure . High levels of bureaucracy prevents the government funding from developing new port projects in the country. Tax structure not allowing the Indian manufacturers to be competitive.
Though India allows 100 per cent FDA in shipping, foreign lines are not keen to set up shop here as they will be subject to local levies, said a delegate at the conference. Opportunity Indian shipping companies having acquisitions with foreign shipping companies More than USED $ban is expected to be invested in Indian’s port sector. New major entertainer terminals being developed at the port of Achaean and Iambi Cargo volumes are expected to grow with an average of 16. 5% year on year in the coming 5-10 years.
Treat Economic slowdown. Changes in regulations of various countries. Rising cost of business Major developments taking place in Sir Land’s port sector may reduce demand for transshipment services at Southern Indian ports. A government tax on iron ore exports may lead to a fall in bulk shipments at major export terminals. Indian’s ports have suffered from congestion during 2011, potentially slowing the country’s growth trajectory. Piracy has emerged as a significant threat to world shipping in Gulf of Aden and Arabian Sea. Indian’s top mining, moving away from their core business, whose viability is threatened by rising fuel prices and volatility in freight rates. Tax burden is Just 1-2 per cent of their income, compared with the corporate tax rate 30 per cent or higher. But subsequently, shipping lines were subject to several other taxes, including service tax, minimum alternative tax, sales tax, which nullified the benefits of tonnage tax. The weak rupee added to its woes as it will have to pay more for its orders for new hips placed during the boom.
