Shipping ministry says it won’t review rules on new cabotage law


The shipping ministry has rejected calls for reviewing its rules issued in March on easing the so-called cabotage law to allow foreign container carriers to operate on local routes for promoting transhipment hubs. Earlier, container ports and terminals dubbed the plan a non-starter.

“We have tried to bring the best possible package between a need for a pure transhipment hub vis-a-vis the Indian container ship-owners. You can’t have a one-way traffic,” shipping secretary Rajive Kumar said in an interview withMint on 15 April.

Under India’s cabotage law, only Indian-registered ships are allowed to ply on local routes for carrying cargo. Foreign container carriers have been lobbying with the government to relax the law to allow them to operate along the country’s coast. This, according to shipping lines, was essential as India seeks to set up transhipment hubs to reduce dependence on neighbouring foreign hubs to send and receive containers, entailing extra time and costs for exporters and importers.

On 7 March, the shipping ministry relaxed cabotage restrictions for transportation of export-import (EXIM) loaded and empty containers on foreign container ships on local routes for aggregation of containers to facilitate transhipment.

“The purpose behind the government’s objective of cabotage relaxation is to attract Indian containers transshipped through foreign hub ports to Indian ports. However, the conditions imposed for availing cabotage relaxation are so stringent and unrealistic that none of the existing ports/terminals/new ports will be in a position to meet them. Thus, the entire move will be a non-starter,” the Indian Private Ports and Terminals Association (IPPTA), a private port lobby, wrote in a representation to the shipping ministry, seeking a review of the new rules. Mint has reviewed a copy of the representation.

“Cabotage relaxation, to be meaningful, should be applied unconditionally at all the container handling ports at least for five years,” IPPTA has suggested.

The main opposition to the new rules relates to a stipulation that once cabotage relaxation is granted to an existing container handling port, it should be able to tranship at least 50% or more of the total containers handled during the first year, while a new port will have to achieve this level in the second year after a gestation period of one year. Otherwise, the relaxation granted would be revoked and the port/s will not be considered again for such relaxation for the next three years.

A transhipment container is one that arrives in a port, for instance Chennai, on a ship, either from India or outside and is unloaded and then re-loaded on to another ship and taken out of Chennai to its destination, either in India or abroad.

IPPTA says that sufficient time should be allowed for the cabotage relaxation policy to succeed. “We therefore suggest that there should be no stipulation as to the quantum of transhipment containers to be handled by a port in the first five years in order to avail cabotage relaxation and there should be a review thereafter,” IPPTA wrote in the representation.

The shipping ministry, though, is sticking to its decision.

“There’s a domestic shipping industry. We are somehow also trying to meet their ends. And container is not a very lucrative business at this time. What we have been trying to do is to bring down their cost of operations. So, from that perspective, the government has removed customs and central excise duties on bunker (ship fuel) for Indian registered container ships. This is an area where there is a fair amount of difference in operating costs between Indian and foreign container ships. The proportion has come down a little due to the recent slide in oil prices, but it still is a significant cost element.

“Given this, what we are trying to find is a need balance. Some port tells me they want to operate essentially as a transhipment hub. Then I expect that port will tranship at least half the containers, to be fair. But, if you say, I tranship 20% and I’m a transhipment hub, then I’m saying please work out your schedules with the Indian container ship owners also so that they can carry your containers, optimize and bring down the overall cost which is the whole idea,” shipping secretary Kumar said.

“Secondly, for 95% of the containers, cabotage is not an issue. The only issue is for the 5% domestic containers. Now, I don’t understand why this is such a big issue. I think we need to find a balance by discussion between Indian ship owners and port/terminal operators. Indian container ship owners are saying that they cannot run their ships because of the tough operating conditions. The point I’m trying to make is in this environment for the small piece of 5% what is the great issue, I don’t understand. You can’t have a one-way traffic,” Kumar added.

But not everybody agrees.

“If the government is not willing to review the unrealistic conditions set in the 7 March policy, there won’t be any transhipment hubs in India and we will continue to be dependent on foreign transhipment hubs,” said an executive heading the India operations of a global container port operating firm.

“For setting up transhipment hubs, India needs to reduce its vessel-related charges/ port charges. Cabotage relaxation is not the solution,” said Ramesh Ramakrishnan, chairman and managing director of Mumbai-listed Shreyas Shipping and Logistics Ltd.

Source: Live Mint

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