The perfect storm

To those who refused to see the writing on the wall, the perfect storm that has hit the Indian economy seems to have come from nowhere. To others it was inevitable- high inflation, slowing GDP growth, an out of control fiscal deficit, expensive populist government schemes and an almost complete paralysis of governance were all thunderous clouds clearly seen for long on the horizon. The rising US dollar today is a symptom of the disease that is probably going to get worse before it gets any better.

The maritime sector in India will continue to struggle for some time more, I think. Shipowners are in the doldrums already; the biggest, SCI, has been losing increasing amounts of taxpayer money, with numbers plummeting over the last four quarters. The company has reportedly generated a negative return of 44.45% on a YTD basis and may lose its ‘Navratna’ status, if media reports are to be believed. The offshore sector has been doing better than mainstream shipping in recent times; it may well continue to do so, but if it does, it will be the exception, not the rule.

Trade will slow down further, at least until the general elections are over. The numbers are worrisome already: the Indian Ports Association says that total cargo traffic at major ports in India rose by just 4.8% YOY and that too mainly because of a 6.7% rise in imports. Transhipment cargo is falling, and export of iron ore has plummeted, thanks to the ban on mining- it is down a whopping 70%. Increased export taxes are a smaller reason for this. To add to the misery of the mining companies and the ports that were set up to service them, ore production has inevitably fallen too.

Obviously coal and oil will continue to be imported in an energy starved country, but any further skewing of the import-export imbalance will have even greater repercussions on the Indian economy and its currency- and on inflation. I see the government doing more knee jerk or populist stuff in an election year to keep this under control. There are already stories going around about measures to ‘curb imports’; oil marketing companies with their mounting losses are screaming for a hefty rise in diesel and petroleum products. Ministers are busy telling everyone that there is no need to panic, and the blinkered are happy that the new central bank governor’s utterances after his appointment have seen stock markets shooting up in the last week or so. But one man, like one swallow, cannot make a summer.

I tend to agree- with one gigantic caveat- with those optimists who think that clarity will emerge after the general elections, when we hopefully get a functioning government that takes the decisions that need to be taken.

My caveat is this: provided the big C- corruption- is miraculously minimised.

Corruption has eaten away everything in India; the cancer ensures that the majority of Indians remain poor- and worse, without hope. It ensures that all our best laid plans come to naught. It has compromised the majority of Indians, including most of those of us who scream obscenely at it but who are secretly envious that somebody else has the opportunity to put his hand in the till. Many of us would do the exact same thing if we were in his place.

And so I cannot, for the life of me, see this country on a sustained economic growth path unless corruption is massively reduced from Indian public life. It is a herculean ask, sure, but, if this is not done, then we are doomed. We can have a few years of lopsided growth once in a while, but the chickens will come home to roost soon enough, as they have done today.

Unless corruption reduces, my only call on India- warts, ports, shipping and all- would be a sell.

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Inside Indian shipping: No return of the native

The last time I sailed on an Indian registered ship was almost three and a half decades ago; the experience left me so underwhelmed that I never thought of sailing on another one for thirty years. When I did think about coming back to the Indian fleet, a few years ago, some friends who know better dissuaded me. Fortunately. One Chief Engineer, in particular- we have sailed together often and are friends, so he knows me both as a person and as a Master- was categorical. "Captain Saab," he told me more than once in his typical, deceptively mild, way of talking, "Don't join an Indian company. Either you will quit or you will be kicked out".

Of course, he was referring to ships on short sea routes around India or on the coast. He had tried out some and walked away from most, including a couple of times when he refused to take over after he stepped on board for one reason or another. He knew what he was talking about; he also knew that the attraction of domestic shipping- for me and for many others I have spoken to since- is short contracts, being close to home and not being subjected to numbing levels of paperwork, accounting, inspections and regulations that are the bane of Captains and crews sailing on foreign ships on long international routes today.

Those advantages are known and are largely intact; unfortunately, the disadvantages overwhelm Indian sailors who have worked in foreign companies of even foreign standard. The result is that most experienced senior officers choose not to sail for domestic shipping- at least coastal and short sea shipping. Things may be better on longer routes mainly because those ships are exposed to greater international regulations and scrutiny, but many accounts tell me that they are not all that much better. 

The popular think is that it is the difference in wages that keeps Indian sailors abroad, as does the fact that salaries are tax-free on foreign ships. Perhaps this is why the Indian government periodically promises to waive the income tax liability that Indians on domestic ships suffer. A substantial wage differential will still exist even if the tax-free salary thing goes through, but I guess something is better than nothing.

In any case, they miss the point. The money is actually the smaller reason - or just one reason- why Indians do not return to domestic shipping. One of the many bigger reasons has to do with the often abysmal level of maintenance- especially maintenance of machinery- that so much of domestic shipping is plagued with.

Many senior officers - who are more responsible for safety- choose to walk away from a setup that does not supply even minimum spares or stores. My Chief Engineer friend is one of them. Domestic shipping seems to specialise in such setups; a short walk around the engine room is all the indication one needs to determine the state of affairs. Mindless cost cutting in domestic shipping impact safety in many ways- from machinery to safety equipment to cargo gear to paint. More than a few of these ships are little better than floating rust buckets. 

Quality of crews and the dreadful on-board work ethic is another reason. This is a vicious circle- substandard ships end up with low calibre officers and crews that cannot get better jobs, or want to just sit out their contracts. These unmotivated crews simply do not work to any acceptable level- the system seems to have decided that they are paid for holding STCW or competency certificates and not for the actual work that they do. Stories abound of how officers will simply not do anything except very basic watch keeping and how crews won't do even do any cleaning without haggling beforehand over how much overtime they will be paid. 

Add to this the fact that owners do not supply adequate spares and the result is a downward spiral in maintenance and safety- the ship will become substandard very soon. No self respecting Master or Chief Engineer of any decent calibre- especially one that has come from better managed ships- will want to work there. It is simpler for him to quit rather than bang his head against a wall to try to change this loser's paradise.  It is easier for him to work for a month or two on a foreign ship- even paying his fare to return-than to work for three months here.

Then, too many Indian ships have threadbare, broken and dirty accommodation. Cabins and mess rooms are ill maintained, poorly lit and ventilated- sometimes even cockroach and bedbug infested. Some coastal or short sea ships have illegal labour sailing aboard- in addition to the crew- doing assorted repair or cleaning jobs while sleeping in alleyways and eating gruel for food. Some companies and Masters seem to disregard even basics like lifeboat capacities, by some accounts. Too many cut corners. Too poor quality of food. Too much corruption in everything from stores to cargo to dealings with port officials or regulators. Too much sleaze for people like me who have better options.

The final nail in the coffin is the fact that shoddy organisations always treat their employees badly, and so do too many Indian companies. Sometimes two contracts are signed- we all know why. Living and working conditions are often terrible. HRD is unknown. Communication is rude, derogatory- sometimes even abusive. The 'take it or leave it' culture of some of these companies is actually not that different from that found in many foreign companies, it is true; the difference is that these firms and their ships are unacceptable to begin with, and they only get progressively worse. 

Income tax waivers will get Indian shipping near-nowhere; at best, they will attract a few more sailors for a while on the relatively better managed ships. However, Indian shipping will remain a poor second choice unless large parts of domestic shipping overhauls itself completely and addresses these other issues. I am afraid it will never get many officers of decent calibre back into its cheap fold under present circumstances. They don't need this kind of nonsense.

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