Cabotage relaxation gathers steam after NDA government takes over 

Shipping ministry has started talks with stake holders about easing a law for transshipped export-import containers and empty containers on Indian water

Dr.Rakesh Mohan

Bangalore, June 16, 2014: The possibility of relaxing a shipping law that reserves transporting cargo on domestic routes to local ships has gathered steam after the National Democratic Alliance (NDA) came to power. The shipping ministry has started talks with stake holders about easing a cabotage law for transshipped export-import containers and empty containers on Indian waters, a spokesman said. 

The plan is to allow foreign-registered ship to undertake business on local routes. The cabotage law mandates using Indian ships for transporting cargo among ports along the country’s coast. Foreign ships are allowed to operate only when Indian ships are not available; this requires a licence from India’s maritime regulator. 

An exception was relaxing the cabotage for the international container transshipment terminal (ICTT) at Vallarpadam in Cochin port during the United Progressive Alliance (UPA) regime. The relaxation (for three years beginning September 2012) applies only to foreign-registered vessels that ships export and import containers out or in through ICTT at Vallarpadam. The Dubai-based DP World Ltd runs the ICTT. 

Vallarpadam was designed to cut India’s dependence on neighbouring hub ports such as Colombo in Sri Lanka; Singapore; Salalah and Jebel Ali in Dubai; Tanjung Pelepas and Port Klang in Malaysia to send and receive container cargo—and save time and cost. About two million containers originating in and destined for India are transshipped at Colombo alone. The shipping ministry had resisted demands so far from at least four more ports for easing cabotage. 

Now, all eyes are on the Narendra Modi government. Modi’s views on the issue are well-documented. Under his stewardship, Gujarat had repeatedly sought relaxation in cabotage for Mundra and Pipavav ports run by private firms. “Various representations have been made to the union shipping ministry during Modi’s tenure seeking a relaxation in cabotage law so that coastal shipping can get a boost, and congestion in container terminals can be eased,” said a spokesman for the Gujarat Maritime Board (GMB), the entity tasked with regulating ports owned by the Gujarat government. “We are requesting a relaxation in line with the one given to the ICTT at Vallarpadam.” 

Shipping industry executives say a relaxation has become necessary for a new container terminal, the third, that has started operations at Mundra port through a venture between Adani Ports & Special Economic Zone (APSEZ) and Geneva-based Mediterranean Shipping Co. S.A. (MSC). “MSC wants to run the new terminal as a transshipment facility,” said a shipping industry executive on the condition of anonymity. “This can succeed only if the cabotage is relaxed.” MSC, the world’s third-biggest container shipping line, confirmed the plan. 

The planned container transshipment terminal at Vizhinjam port in Kerala and a container terminal run by a joint venture of United Liner Agencies of India Pvt. Ltd at Vizag port in Andhra Pradesh have also sought easing of cabotage. However, local ship owners are against the plan. “We are opposed to relaxation in cabotage,” said Umesh Grover, chief executive officer of Indian National Shipowners Association (INSA), the local fleet owners lobby. “There is no connection between transshipment and cabotage relaxation,” he said, adding transshipment is dependent on geographical location—the proximity of the facility to the main trade lanes—and port charges which are high in India. “The relaxation in cabotage given to Vallarpadam ICTT is coming up for review in 2015. The review should explore whether the relaxation has benefited the country and trade ahead of a decision on relaxing the law for more ports,” Grover said. 

If the primary objective is to increase coastal shipping and make coastal tonnage competitive, it might be desirable to allow foreign vessels to compete for coastal cargo, the national transport development policy committee headed by Rakesh Mohan, a former deputy governor at India’s central bank, wrote in its report finalized in February. 

Courtesy: Live Mint