Govt further eases cabotage rules for fertiliser cargo on foreign ships

The government has further eased the conditions for foreign flagged ships to carry fertiliser cargo along the coast by modifying the cabotage relaxation announced in June.

According to the amendments issued on September 10, the minimum movement of fertiliser to the extent of 50 per cent of the total cargo onboard a (foreign-flagged) ship is applicable only for cargo loaded at any lndian port for coastal movement, that is, at least 50 per cent of the total coastal cargo on board should be fertilizer and rest of the coastal cargo can be any other cargo. Besides, the movement of fertilizer on a foreign flagged ship can be in either bulk, break bulk or containerised form.

To cite an example, the shipping ministry said that if a foreign flag ship carrying 50,000 tonnes of export-import (EXlM) material unloads 20,000 tonnes at Deendayal Port Trust, then the vessel can load any quantity of fertilizer for coastal movement in the empty space, from Deendayal port to any other port of lndia.

However, if any cargo other than fertilizer is also loaded at Deendayal Port Trust, then the quantity of fertilizer has to be at least 50 per cent of the total coastal cargo loaded at Deendayal Port Trust. lf any EXIM cargo is loaded at the same port, it would have no linkage with the carriage of fertilizer- the restriction of 50 per cent is only on coastal cargo loaded from that particular port.

Further, if a foreign flag ship is chartered by an lndian firm, the ship can load any quantity of fertilizer for coastal movement. But, if any coastal cargo other than fertilizer is also loaded, then the quantity of fertilizer has to be at least 50 per cent of the total cargo loaded on board for coastal trade, PK Sharma, an under-secretary in the shipping ministry, wrote in the September 10 order. BusinessLine has reviewed a copy.

The June 22 order allowing foreign ships to carry fertiliser along the coast was conditional on the commodity contributing to at least 50 per cent of the total cargo on board the ship. Fertiliser firms and shipping companies had sought clarification from the ministry on the order.

The government will soon resolve the policy logjam on paying freight to incentivise and ease movement of fertiliser along the coast, shipping secretary Gopal Krishna said on 10 August.

The fertiliser ministry currently reimburses freight on the basis of railway receipts only. Hence, there is “no incentive” for a company or a ship owner to reduce costs.

“We have suggested to the fertiliser ministry not to see any bills. You just allow the shipping company or the fertiliser company to move the cargo and whatever is the rail freight, you just pay them blindly. This way, they will have the incentive to bring down costs and move cargo,” Gopal Krishna told Business Line.

To illustrate this point, he said if the rail freight is Rs 100 and if actually by coastal shipping, the freight comes to Rs 90, then they will move by coast and pocket at least Rs 10. Then, the government will not have to pay more and at the same time we are incentivising fertiliser movement. That’s how we have approached the issue,” the shipping secretary said.

By the end of the year, at least 3 mt of fertiliser will move by coastal shipping, he added.

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