After the Government relaxed cabotage rules for containerised cargo for DPW’s Vallarpadam terminal in Cochin Port, the Shipping Ministry has started receiving demands for similar relaxation from ports that handle containers, such as JN Port and Visakhapatnam. Business Line learnt this from sources in the Shipping Ministry.

According to the existing cabotage policy, no foreign ship can engage in coastal trade in India (trade between ports in India) except under a licence from the DG (Shipping).

Relaxation for DPW

Earlier this year, the relaxation of cabotage laws for Vallarpadam container terminal in Kochi allows foreign vessels to operate feeder services for a period of three years. The relaxation will be reviewed after three years. The move, which is yet to be notified, is good for the Dubai-based DPW, which operates ICTT in Vallarpadam.

Domestic shippers

Such a move, which would allow foreign flagged vessels to pick and drop country’s domestic cargo between various ports along the Indian coastline without prior approval, is sure to irk Indian shipowners, who have already been fighting against this relaxation, even for DPW.

The CEO of Indian National Shipowners’ Association (INSA), Anil Devli, said that INSA had expressed similar fears to the Ministry earlier when it relaxed cabotage for DPW’s terminal. “The Government cannot favour one terminal operator,” said Devli. He refuted the perception that Indian shipowners do not deploy enough capacity for coastal cargo.

Indian vessels

“A monthly capacity of 42,900 twenty feet equivalent unit (TEU) is being provided by Indian flag vessels calling on Vallarpadam Terminal, the August data shows. This entire capacity is available for transhipment boxes for Western Coast ports, which include the port of Cochin. The total transhipment cargo carried provided by Vallarpadam Terminal to these Indian carriers is about 2,500 TEUs a month, which is a dismal six per cent of the capacity deployed,” said Devli.

He emphasised, “It would be important to note that on the East Coast of India, Indian ships are carrying transhipment volumes of about 5,000 TEU unit a month.This data shows that cabotage has nothing to do with transhipment. This needs to be considered before any decision is made in haste or on the basis of incorrect information.”

Questioning the Government move to relax rules for foreign flagged vessels, Devli cited the example of the US, which has strong cabotage laws and does not allow foreign flagged ships to move domestic cargo. “Even the US relaxed cabotage rules only for 15 days in the aftermath of hurricane Sandy,” he added.

Freight charges

Devli, however, conceded that freight charges offered by foreign vessels for domestic cargo would be lower. “Foreign flag vessels enjoy an easy taxation regime compared with Indian flag vessels,” he added.

Earlier this year, in a candid admission, the Shipping Minister, GK Vasan, stated in Parliament that there were strong interest groups in favour of and against the cabotage laws.

The Dubai-based DPW wanted cabotage rules to be relaxed to be able to meet the projected container traffic volumes of 7.75 lakh TEUs. DPW hoped that relaxation of cabotage rules would help it meet the revenue targets. Indian shipowners, however, are not in favour of this relaxation because they get assured cargo through the existing rule. But, they charge higher freight rates, which adversely impacts cargo volumes at the DPW terminal.

(This article was published on November 18, 2012)
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