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The first cruise service: Mumbai Letter

October 10, 2005

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AFFLUENT Indians have in recent years discovered a new way of travelling to exotic locales in South East Asia, the Caribbean isles and even in distant Alaska — cruising. As a growing number of Indians travel abroad, many have opted for international cruises, especially those taking off from South-East Asian hubs like Singapore and Hong Kong.

Not surprisingly, Asia’s largest cruise operator, Star Cruises, has launched the country’s first cruise service, homeporting a vessel at Mumbai, and operating three weekly services to destinations such as Lakshadweep and Goa.

The company has based its 42,000-gwt vessel, the SuperStar Libra, in Mumbai, and inaugurated its first service last week. The response from middle-class and affluent Indians has been excellent, as the new service coincides with the start of the festive season.

According to Chong Chee-Tut, the firm’s CEO, the service, besides targeting resident Indians, also hopes to attract a substantial chunk of expatriate Indians and even foreigners from around the region.

The company expects Mumbai to emerge as a regional cruise destination and an important air-sea cruise hub in South Asia. According its marketing head (India), an increasing number of Indians have been travelling on the company’s cruises in South East Asia over the past five years.

This has emboldened the company to base its huge vessel – with a capacity of nearly 1,500 passengers – in Mumbai and operate services for almost 40 weeks a year. The Indian government has also realised the importance of cruise tourism, and has provided a slew of incentives to operators.

Shipping Minister T.R. Baalu, who is keen to promote cruise tourism, has already relaxed port charges and cabotage for international cruise carriers operating out of India. Rani Jadhav, chairperson, Mumbai Port Trust, points out that the federal government plans to promote six major cruise terminals along the country’s 7,500-km-long coast, straddling both the western and eastern coasts.

State governments, including those in Maharashtra, Goa and Andhra Pradesh, are keen to develop and upgrade existing ports so that they can receive large international vessels. The government is also likely to allow international cruise services to operate both domestically and to international destinations.

Operators have transformed the sedate cruise industry in recent years. In the past, elderly tourists usually travelled on cruise lines. A majority of their customers today are honeymooners, young professionals and executives.

The inaugural service from Mumbai, which sailed to Lakshadweep – a union territory comprising a group of islands about 500 nautical miles west of Kerala – last week was packed with young couples and their children. Most of them were busy rocking away in the discotheques and restaurants till the early morning, or gambling in the vessel’s casino.

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WHEN satellite television came to India in the 1990s, governments – both at the federal and state levels – were ill-prepared for the revolutionary changes in technology. But landmark technological changes are no respecters of petty laws.

While the authorities were clueless about the unfolding technology, the breach in the last-mile link between the consumer’s home and the receiving unit was filled by mostly illiterate – though enterprising – businessmen, who wired up cities and towns, providing satellite channels to millions of Indians.

It took governments a while to realise the income potential in cable television. So, over the past few years taxes were hastily slapped on cable operators. Many of the smaller operators had in the meantime been acquired by larger ones, yet their practices (and ethics) remained unchanged.

In Maharashtra, for instance, cable operators have been depriving the government of huge revenues by under-reporting connections. According to Vilasrao Deshmukh, the state chief minister, cable operators give ‘ridiculously low’ figures of 2.3 million cable homes (Maharashtra has a population of nearly 100 million). Deputy chief minister R.R. Patil claims that tax evasion is huge, almost 60 to 70 per cent. Patil, who is also in charge of the police, backs allegations that criminals have taken over control of many of the cable operations.

The government now wants to almost decimate cable operators, by encouraging direct-to-home (DTH) services. State-owned Doordarshan is also providing DTH services, so too are many of the private (including international) satellite networks.

Deshmukh last week unveiled a new policy, providing hefty concessions to consumers opting for DTH service. Entertainment tax rates have been slashed for DTH services. Consumers in Mumbai will pay a mere Rs30 a month, as against Rs90 in the past. The move is expected to give a boost to the DTH sector, encouraging many organized players to enter the fray.

The move will not necessarily wipe out cable operators, as they will continue to be patronized by slum-dwellers (60 per cent of Mumbai’s 15-million-odd residents live in slums). But middle-class residents in the state can be expected to link to DTH service providers, hoping for better quality services.

Many residents have been battling cable operators, who have been hiking rents in recent months. But there is another motive for the state government – which is an alliance between the Congress and the Nationalist Congress Party (NCP) – to encourage DTH. Most cable operators are aligned with the opposition Shiv Sena, and the government wants to break the party’s hold over the business.

The Congress recently successfully wooed a powerful Sena politician – former chief minister Narayan Rane – and made him a revenue minister. Rane is now involved in a bitter fight with his former boss, Balasaheb Thackeray, the mercurial Shiv Sena founder, and his son, Uddhav.

Television viewers in Maharashtra appear to have emerged victorious in the first round of this battle between the Congress and the Shiv Sena. The second round will be held a few weeks later, when Rane and other colleagues, expelled from the Sena, contest by-elections to the state legislature.

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INTERNATIONAL gold prices are ruling at record but demand for the yellow metal in India continues to soar. It is being quoted in the $460 to $470 range for an announce but Indian consumers have been frenetically stocking up on the precious metal.

According to the World Gold Council (WGC), Indian consumers bought a whopping 277 metric tons of gold in the second quarter of the current year, up by nearly 50 per cent over the previous quarter’s figures. India accounts for about 800 tons of gold consumption every year, and about 70 per cent of this is imported. India is also an important exporter of jewellery.

Trade sources say many high net worth investors – who have made hefty profits on the stock markets – have been buying up gold, expecting the price to rise even further. Gold prices have jumped by about 25 per cent over the past 12 months, and are expected to climb further.

The Indian stock markets have been ablaze this year, with the Sensex, the benchmark index on the Bombay Stock Exchange, even piercing the 8600-mark. Foreign institutional investors have injected a hefty $8 billion into the markets over the past nine months, and are not showing signs of slowing down.

The abundant rains this monsoon season is expected to boost agricultural production, lifting the rural economy. While farmers and agricultural workers splurge on consumer goods in the post-monsoon festive season, they also happen to be major buyers of gold. A good monsoon inevitably results in demand heading northwards.

India’s gross domestic product (GDP) is expected to grow by over 7.0 per cent this year on the back of excellent performance by the industrial and services sectors. If the farm sector too performs well, demand for the yellow metal will soar, fuelling speculative demand.

The Reserve Bank of India (RBI), the country’s central bank, has also relaxed the rules relating to gold loans. Fourteen banks that are authorized to import gold can now extend these loans to jewellers at low interest rates, slicing off almost 6.0 to 7.0 per cent from normal market borrowing rates.

In the past, just one international bank was allowed to provide such loans, and that too only for jewellery exporters. The relaxation of rules would boost the prospects for the jewellery trade in India, resulting in lower costs to the consumers.

Not surprisingly, the jewellery retail trade is also on an upswing, especially in major cities like Mumbai, Delhi and Bangalore. Retailers are investing millions in upgrading their showrooms, buying up prime property in commercial complexes. Gold sale outlets are coming up across several cities, as the hunger for the yellow metal appears to be insatiable in India.

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