Is Cabotage law relaxation for Vallarpadam International Transhipment Terminal is required ?

In most of the countries Cabotage law restricts movement of coastal cargo by their own flag vessels. In India too Merchant shipping Act does not permit foreign bottom to carry cargo between the Indian ports . However , permission is granted to foreign flag vessels to ply between Indian ports , incase Indian flag ships are not available. This law said to have given a certain level of stability to Indian bottoms.

Cabotage law is provisioned in section 407 part XIV of Merchant Shipping Act,1958 . According to this law, only Indian flag vessels can carry cargo originating in one Indian port to be another Indian port. In view of commissioning of VICTT in Aug/Sept, MoS is reported to have taken a decision in principle to relax cabotage law atleast for a year or so with respect to transshipment cargo passing through VICTT.

The Indian National Ship Owners’ association strongly oppose this move arguing that relaxing the cabotage law will not give a level playing ground for Indian bottoms. According to them this move will adversely affect the growth of Indian coastal shipping. They also argue that the foreign liners have only short term interest and the Indian shipping companies are equipped enough to cater to the expected increase in demand for more feeders .

However , the statistics released by DG Shipping in 2009 shows that the total number of vessels registered under Indian flag is only 664 and out of which dedicated cargo carriers(tankers + bulk + break bulk + Ro-Ro+silo+ container carriers) are very small. Most of the coastal container ships which is plying between Cochin and other Indian ports are very old and they are not in good condition. The ground reality is that the dedicated coastal shipping lines are unable to provide sufficient ships at present to cater to the limited transshipment requirements at RGCT Cochin.

Cochin Port Trust and other supporters of VICTT argues that the containers originating in other Indian ports destined to overseas ports, and containers originating abroad and destined to other Indian ports, which are getting transshipped at VICTT , should not be treated as coastal cargo, within the meaning of Cabotage law. VICTT is located within a Special Economic Zone and customs clearance will not happen there. Customs clearance formalities will have to be completed only at the respective origin / destination ports only.

Moreover, VICTT will have to compete with neighboring ,well established ,International transshipment terminals like Colombo, Singapore , Port Kelang , Jebel Ali etc. It is estimated that about 1.2 million Indian cargo is getting transshipped at Colombo and If these containers are transshipped at VICTT there would be substantial savings in the cost as well as transit time .
From Colombo all liners are free to take cargo to any Indian ports without any difficulty. Though ,CoPT and DPW offered a very competitive tariff to liners calling VICTT, which is at par with Colombo , the hub port also require sufficient feeder services to pool cargo from other Indian ports/ overseas and to deliver the cargo to final destinations. Which , under the present conditions, I feel, Indian feeder operators do not have the capacity to provide required services and the foreign lines, mother and feeder vessels, should be allowed to carry cargo between the Indian ports.

If the primary objective of the MoS is to promote coastal traffic and in turn to promote VICTT , the law should be relaxed for transshipment containers. Also understand that the 10th five year plan recommend relaxation of cabotage law to promote gateway ports and to prevent transshipment at Colombo. It is expected that the presence of foreign liners will bring new technologies , efficiency and cost reduction, which is a major constraint for the growth of coastal shipping.

Though it is argued that the relaxation would hurt the growth of Indian tonnage, in long run ,by creating demand for the coastal shipping, it would be beneficial. The law can be reintroduced once VICTT is up and running and there is sustained growth for coastal cargo.