In an Atmanirbhar Bharat (self-reliant India) push, the Shipping Ministry could reverse the relaxation in cabotage restrictions granted two years ago, allowing foreign flag ships to carry six cargo types along the Indian coast.
The move is being pushed by the recently re-constituted National Shipping Board (NSB), the country’s top advisory body on shipping.
The Coastal Container Transporters Association (CCTA), which has representation on the NSB, has sought amendments to the notifications issued by the Directorate General of Shipping in 2018, allowing foreign flag vessels to carry coastal cargo without a license from the DG Shipping.
“Flow of export-import (EXIM) containers to Indian coastal ships will provide filler cargo and improve the feasibility of ships currently carrying coastal cargo one way,” said Rahul Modi, a member of NSB and president of CCTA.
India’s cabotage law
Only Indian registered ships are allowed to ply on local routes for carrying cargo, according to India’s cabotage law. Foreign ships can operate along the coast only when Indian ships are not available after taking a license from the DG Shipping, according to the cabotage law.
In 2018, following strong lobbying mainly from foreign container lines, the Shipping Ministry allowed foreign flagged ships to transport export-import (EXIM) laden containers meant for transhipment, empty containers meant for re-positioning, agriculture, horticulture, fisheries, fertiliser and animal husbandry commodities on domestic routes without a license from the DG Shipping.
A decision to overturn the cabotage relaxation can be taken at the Ministry level because the 2018 decision was in the form of an office memorandum/notification without Cabinet sanction.
The re-constituted NSB is led by Malini Shankar, a former Indian Administrative Service (IAS) officer of Maharashtra cadre. As the DG Shipping at the time, Malini Shankar was the only top ranked government official to take a divergent stand after the cabotage law was relaxed in 2018.
“Almost every country in the world has cabotage law where they protect their own national ships to a much larger extent than in Asian countries. The United States, for example, does not allow coastal trade on ships unless they are built, owned and manned by the Americans. So, these are the foreign ship owners who have the benefit of having tax legislation in their favour and cabotage legislation in their favour and they also have cabotage legislation relaxation favour in a country like India. So, the cost benefit will be heavily in favour of foreign flag ships. This has to be understood by the trade and the industry at large if we are to find convergence,” Malini Shankar said on September 1,2018 at a panel discussion on cabotage relaxation that has roiled the local shipping industry.
While making out a case for providing a level-playing field to local ship owners, she had said: “The larger issue is how do we compensate the Indian ship owners to ensure that they are not having an uneven level playing field and this simply has to be distinctly addressed”.
When asked for her views now, Malini Shankar said: “The NSB is working with base documents - the draft Merchant Shipping Bill 2016 - and deliberations within the Ministry thereafter”.
Shipping industry view
Local ship owners lobby group, the Indian National Shipowners Association (also represented on the NSB) has always opposed easing cabotage restrictions.
Pitching for a strong national fleet, Bharat Sheth, Deputy Chairman and Managing Director of Great Eastern Shipping, India’s biggest private ocean carrier, told Business Line in March last year: “Every other country is tightening its regulations on foreign tonnage deployed on the coast. I can’t deploy my ships on the Chinese coast. That’s how they build fleets. India is just not bothered. It just staggers me sometimes. Everybody else is trying to bring in greater and greater restrictions. So, in a way, you fall between two stools, because we cannot go to their territory but they can freely come to our territory. That reciprocity is not there.”