In a significant move to enhance the competitiveness of coastal and inland shipping, the Indian government is exploring options to reduce the tax on marine diesel oil (MDO) by bringing it under the Goods and Services Tax (GST). This initiative aims to lower operational costs for shipping companies, thereby attracting more cargo to this environmentally friendly transport mode. The Ministry of Ports, Shipping, and Waterways (MOPSW) is set to engage with the Ministry of Finance and various state governments to build consensus around this proposal, which may also include additional incentives for the developing sector.
Sources familiar with the discussions indicate that the revenue loss from this initiative would be minimal, given that marine fuel constitutes only about 1% of India’s overall fuel consumption. Currently, India’s petroleum demand is projected to reach a record 238.95 million tonnes in the current fiscal year, with marine oil consumption estimated at around 2.4 million tonnes. Even if states experience a slight revenue dip, they can expect compensation through the GST framework, alleviating concerns about potential financial impacts.
This strategic push not only underscores the government’s commitment to sustainable transport but also seeks to position India’s shipping industry favourably in a competitive global market. By reducing costs associated with MDO, the government aims to incentivise a modal shift towards less polluting transportation methods, thereby supporting both environmental goals and economic growth.
