Has cabotage relaxation made an impact?

Foreign carriers have been moving only empty containers between Indian ports after the cabotage restriction was lifted in May, according to a local shipping group, which raised doubts of the effectiveness of the government decision aimed at boosting container transhipment and reducing logistics costs for exporters and importers.

Foreign container lines ‘transhipped’ 3,500 twenty-foot equivalent units (TEUs) for 10 days in May after the Shipping Ministry eased cabotage rules on May 21, followed by 11,5999 TEUs in June, and an estimated 16,000-17,000 TEUs in July, according to Deepak Tiwari, Chairman of the Container Shipping Lines Association (CSLA), a lobby group of foreign carriers.

The May 21 ministry order allowed foreign-flagged container ships to carry export-import (EXIM)-laden containers for transhipment and empty containers for re-positioning on local routes. “In the first six months of the order, there will be a quantum leap in containers transhipped through Indian ports,” said Tiwari, who is also the Managing Director of MSC Agency India Pvt Ltd, which represents Mediterranean Shipping Co SA, the world’s second-biggest container line.

Debunking this claim of foreign container lines, a top executive with an Indian container shipping firm, said that foreign lines have only moved empty containers along the coast for re-positioning.

“They have only moved empty containers from Jawaharlal Nehru Port Trust to Mundra and from Chennai to Vizag,” said VK Singh, Managing Director of Shreyas Shipping & Logistics Ltd.

A perusal of the container shipping data, compiled by a private firm at various ports from May 22, revealed that only empties containers were transhipped between Indian ports by foreign lines. The data, though, could not be officially verified. “Post cabotage relaxation, empty container movement has doubled at Visakhapatnam Port Trust,” its said its Deputy Chairman, PL Haranadh.

“People are taking the same set of statistics and interpreting it differently,” Malini Shankar, Director General of Shipping (DGS), said at an event organised by JNPT to discuss issues related to transhipment after the cabotage was eased.

“There is a need for a qualitative analysis of the data so that the picture is not misrepresented for the benefit of stakeholders,” said Shankar. “The CSLA can use the statistics to say, ‘look you [Indian container lines] have been holding us to ransom for 20 years’,” Shankar added.

When asked by the DGS on the veracity of a 30 per cent spike in freight rates after cabotage relaxation, CSLA’s Tiwari said “no way”.

A representation received by DGS from a local fleet owners’ lobby group had alluded to the emergency bunker surcharge and a peak season surcharge imposed by the lines from early June.

“The emergency bunker surcharge was imposed not because of cabotage relaxation, but because of a $125 rise in bunker prices globally. The lines had no option but to implement a bunker surcharge,” said Tiwari.

“A peak season surcharge may be declared, but lines don’t get any money from the trade,” he said.

“The bunker surcharge was introduced in the first week of June a few days after the cabotage was eased. I don’t know whether it was a coincidence or whether it was pre-planned. They are trying to increase the rates so that any attrition in rates is compensated through surcharges. The rates were dropping and they probably wanted to sustain it. Lines are justifying it by saying that the bunker prices have gone up, but since then the bunker prices have dropped and they have not removed the surcharge,” said Anand Dikshit, Director, Clearship Forwarders Pvt Ltd.

Critics of cabotage relaxation also say that the money saved by foreign mainline ships on carrying empties has not been passed on to the trade.