‘First priority is to implement coastal shipping policy'

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Dr S. B. Agnihotri, DG, Shipping
Dr S. B. Agnihotri, DG, Shipping

As containerised cargo is still very low, it could be exempted from cabotage for the next two-three years. Once it goes up to, say, 30 per cent you can bring back cabotage.

N. K. Kurup

I was to meet Dr S. B. Agnihotri, Director-General of Shipping, for an interview in the last week of December, but he had called up to postpone it to the first week of January. His office told me that he had been busy throughout the week.

At first I thought it was the usual excuse from a bureaucrat who wanted to avoid the media. But, later, when a shipping company official told me that the DG had to submit the draft coastal shipping policy before the December 31 deadline, I realised how busy he must have been.

When I met him on the second working day of the New Year at his office at Jahaz Bhavan, at Ballad Pier, close to Mumbai harbour, he appeared quite relaxed.

My first question to him obviously should have been on the draft coastal shipping policy, but thinking that he might be reluctant to talk about that, I asked instead what his priorities were.

To my surprise, his reply was: “My first priority is to see that the coastal shipping policy is implemented.”

The shipping industry has been eagerly awaiting the coastal shipping policy. The draft note on the policy circulated by the DG Shipping earlier had suggested opening up of the coastal container shipping services to foreign competition. This had generated a lot of interest among the shipping community in the proposed policy.

Currently, under the Cabotage Law, coastal shipping services are reserved for Indian ships. Foreign carriers are allowed only when Indian vessels of the required size are not available. Domestic shipping lines have been opposing the move to relax cabotage, fearing that it would affect the growth of domestic shipping.

But shippers and port lobbies have been seeking amendments to cabotage laws, stating that the arcane law restricts supply of shipping tonnage, pushing up transport costs.

Coastal shipping

Are you free to talk on the coastal shipping policy, I asked. “I have no hesitation in talking on whatever I can,” said Mr Agnihotri.

I asked him what his recommendations on the Cabotage Law were. He explained a bit of the background to it. In India, cabotage is governed by Sections 406 and 407 of the Merchant Shipping Act and the 2002 guidelines of the Directorate-General. Indian ships were given preference for carrying coastal cargo. One issue that is coming up relates to containerisation. Neither the MS Act nor the subsequent guidelines took into account the impact of containerisation, he said.

The debate currently is how far the container trade can be freed from cabotage. One way of looking at it is that containerisation of cargo is at a very low level. To increase this, it could be exempted from cabotage for, say, the next two-three years. Right now, 10 per cent of the total cargo is containerised. Once it goes up to, say, 30 per cent you can bring back cabotage, added Mr Agnihotri.

The second option is to grant the cabotage exemption in the case of transhipment, where Indian tonnage is not adequately available, he said.

Container trade

So, would the container trade be exempted? “We have given our inputs. It is for the government to take a final view,” he said “But I see no justification in granting cabotage relaxation to any segment other than container trade,” he said.

Would the Vallarpadam terminal, near Kochi, be a beneficiary, I asked. “Why only Vallarpadam, any transhipment port should be eligible. Such relaxation should not be port-specific. But it should be for a specific period,” he clarified.

The first port to benefit from the policy could be the Vallarpadam container terminal, which is expected to open next month. AMTOI, the association of Indian coastal shipping operators, had suggested that movement of empty containers should not be allowed along the coast.

“Yes, I think that is an innovative suggestion. Carrying empties is a huge waste. But then, we have to take a view.”

In the past, several reports were prepared on coastal shipping, but most of them were put on the backburner. The beauty of the draft-policy submitted by the DG Shipping is that it has given a time-frame for implementation of each recommendation and also clearly spelt out who will be responsible for what.

“I don't want to beat around the bush, the recommendations should be practical. We have given details such as what the Shipping Ministry should do and what the Finance Ministry and other ministries are expected to do to ensure full implementation of the policy,” he said.

Cargo diversion

Mr Agnihotri says: “We should seriously try to divert cargo from road to the sea for two reasons. One, shipping is the most eco-friendly mode. Two, now that we have taken a stand on emission norms in Cancun, coastal shipping will be the lowest-hanging fruit for the Environment Ministry. In my own view, the Environment Ministry, rather than the Shipping Ministry, should be pushing for diverting cargo from road to sea.”

But Mr Agnihotri feels that as far as incentives are concerned, there is no level playing field. “What is happening today is that if you are going by road or rail you get 75 per cent abatement in Service Tax. Why not give the same concession to shipping? We have made this recommendation, now it is for the Finance Ministry to take a decision. We are not asking anything extra, only for what is given to road and railways.

I also would like to ask the Environment Ministry to contribute the remaining 25 per cent (in tax abatement), because we will be doing a service to India's commitment to reduce emissions.”

But you need much more to develop this eco-friendly mode of transport. “You cannot see coastal shipping in isolation. It should be seen as part of the logistics chain. We have even suggested that a “Logistics Corporation of India, as an integrated entity, could be set up with the three pubic sector corporations — SCI, Concor and the Central Warehousing Corporation — as partners.”

Such an entity should be able to resolve the problems now being faced in ensuring seamless movement of cargo. The idea is to provide an “end-to-end transport solution”. Such services can also be provided by the private sector, but our suggestion is that the public sector should take the lead.

Related Stories:
Govt notifies new coastal regulation zone
Coastal shipping may be thrown open to foreign lines

(This article was published in the Business Line print edition dated January 10, 2011)
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