Cabotage rules relaxed for Global Shipping Lines to operate along Country's coast

  • 24-May-2018
  • Cabotage rules relaxed for Global Shipping Lines to operate along Country's coast

In the biggest policy reform yet in the shipping sector, the Centre has allowed foreign-flagged container ships to carry export-import laden containers for transhipment and empty containers for re-positioning on local routes without a licence or conditions.

A Shipping Ministry order, issued recently, follows intense lobbying by Global Container Lines to ease the cabotage rule and allow them to operate along the Country’s coast. This, according to the lines, was essential with India seeking to set up transhipment hubs to reduce dependence on neighbouring foreign hubs to send and receive containers.

Reducing foreign-hub use

The reliance on foreign hubs such as Colombo, Singapore, Port Klang and Jebel Ali entails extra time and costs for exporters and importers.

Some 33 per cent of India’s container cargo is transhipped through foreign hubs, up from 26 per cent in FY2008, hurting the competitiveness of Indian manufacturers in the global market, according to the Shipping Ministry.

The beneficiaries

Global container lines such as Maersk Line, MSC and CMA-CGM will benefit from the decision. The container transhipment terminals run by DP World at Cochin Port Trust; Mundra Port run by Adani Ports and Special Economic Zone Ltd (APSEZ); Krishnapatnam Port run by the CVR Group; and the container transhipment facility being built by APSEZ at Vizhinjam in Kerala, among others, will gain from the new policy.

It will also help reduce the cost of re-positioning of empty containers within India.

Only Indian registered ships are allowed to ply on local routes to carry cargo, including containers, from one Indian Port to another, according to India’s cabotage law.

Earlier order scrapped

The Ministry has also scrapped its earlier order of March 7, 2016 on easing cabotage by allowing foreign-flagged container ships to transport export-import  laden and empty containers along the coast to facilitate transhipment. That policy failed due to “stringent and unrealistic conditions”, according to the Indian Private Ports and Terminals Association.

The main opposition to the 2016 rule stemmed from a stipulation that once cabotage relaxation is granted to an existing container handling port, it should be able to tranship at least 50 per cent 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 would not be considered again for such relaxation for the next three years.

New or existing container ports handling transhipment traffic had to apply for a cabotage relaxation to the Directorate General of Shipping under the 2016 policy.

The new policy does not incorporate any such conditions.

Pat from Global Lines

Global container lines were swift in praising the new policy. “It does two very good things. One, it will bring competition within the export-import feedering trade around the Indian coast. Secondly, this will encourage use of Indian Ports and terminals for aggregation and transhipment,” said Capt. Deepak Tewari, Chairman of Container Shipping Lines Association (CSLA) & MD of MSC Agency (India) Pvt Ltd, which represents Mediterranean Shipping Co SA, the world’s second-biggest container line, in India.

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