Shipping companies to seek legal opinion on relaxation of Cabotage regulations

Our Bureau Mumbai | Updated on August 30, 2011


Indian shipping companies are understood to be seeking legal opinion to challenge any relaxation in Cabotage regulations.

This follows reports that the Shipping Ministry is considering granting Cabotage exemption to Vallarpadam container terminal in Kochi, it is learnt.

Relaxations in Cabotage will allow foreign lines to operate container service between Vallarpadam and other Indian ports.

DP World, the Dubai government-owned company, which is operating the Vallarpadam terminal and the Cochin Port Trust, have been seeking cabotage exemption.

Domino effect

According to Indian shipping lines, a specific exemption to one port will likely lead to a domino effect with other ports demanding equal treatment leading to a fundamental change in the country's maritime law.

Such changes need to be discussed and debated in public, considering that there are numerous security and economic issues are involved factors in play, said a shipping company official.

Mr Anil Devli, Chief Executive Officer, Indian National Shipowners Association (INSA), said that the shipping industry's views on the issue have already been made clear to the Government.

Impact on domestic cos

Any change in cabotage is not in the interest of the shipping industry, he said. It will have serious impact on domestic companies operating container lines, he said.

“We hope the Government will understand our concern.”

Cabotage provisions in Sections 406 and 407, under the Merchant Shipping Act reserve India's coastal trade for Indian flagged vessels.

Chartering of foreign lines for coastal operation is allowed only if Indian vessel of required size is not available.

Given the present global security climate, it is risky to allow unregulated ships to move along the coast of India, it is pointed out.

On flagged vessels

“We are not against competition. Foreign lines are allowed to comer under Indian flag. Hundred per cent foreign equity is allowed in shipping. Even now permissions are granted to charter foreign vessel if Indian ships are not available.”

Foreign flag vessels pay no taxes in India; they do not employ Indian crew and need not be built in India. Relaxation of cabotage will lead to a direct loss the national exchequer and a loss of job opportunities for Indian nationals, it is pointed out.

Due to higher taxes, operating costs for an Indian flag vessel are 35 per cent higher than those for a foreign flag vessel, which is why companies are averse to flag their ships in India.

Countries such as the United States, China, Malaysia, Brazil, and Indonesia, all major maritime nations, do not allow foreign flag vessels to conduct coastal trade.

The laws in the United States are even stricter, requiring that the vessels be owned by Americans and built in America.

Published on August 30, 2011

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