Cabotage Law relaxed for Vallarpadam in South India

Sep 10, 2012, 2:58PM EST
Now that the Cabotage law for the DP World’s transshipment hub at Vallarpadam, Kochi has been relaxed, the container throughput of the hub is likely to skyrocket

The Indian government has finally relaxed the Cabotage law for the Dubai Port World (DP World) operated International Container Transshipment Terminal (ICTT) at Vallarpadam, Kochi in South India despite the spirited opposition by the Indian ship owners lobby. This decision to relax for a period of three years was taken by the cabinet last Thursday. It could be extended after that on reviewing the situation. The Cabotage policy does not allow foreign ships to engage in coastal trade in India. With the relaxation foreign flag vessels can carry EXIM containers in domestic waters if shipped through the ICTT. 

According to the statement issued by the government the objective for the relaxation is to attract cargo destined for Indian ports, which are currently being transshipped in Colombo and other foreign ports. The initiative is expected to promote transshipment of Indian cargo from ICTT, Vallarpadam and reduce the dependence on nearby foreign ports.

It is nearly two years since DP World’s ICTT was inaugurated as a transshipment hub by the Prime Minister Manmohan Singh. But the container throughput failed to take off as expected, the reason being given is that there is almost total lack of feeder services. The Indian National shipowners’ Association (INSA) had opposed any relaxation of the Cabotage law even though they have only 15 feeder container ships under the Indian flag with a total carrying capacity of 15,000 TEUs. Besides, Indian ship owners have little interest in the Indian trade as they carry only 8 per cent of the India’s International trade. 

An expert on Indian shipping commented, “The Indian container fleet is woefully inadequate to service the requirement of Indian shippers efficiently and cost effectively. So long as the cargo reservation remains in force, domestic container lines will try to keep freight rates high.”  

With the relaxation of the Cabotage, various container shipping lines plan to get into the Indian coastal trade including MSC Mediterranean Shipping Company informed Capt D K Tewari, Chief Executive Officer of MSC Mediterranean Shipping Company S.A. and Chairman of Container Shipping Lines Association (CSLA). “The CSLA members are waiting for the issuance of the Customs Notification and the guidelines from the Director General of Shipping, to see what regulations will be imposed. Some have indicated their definite interest in operating feeder service.”

Once it picks up pace, the ICTT will revolutionize India’s international trade as nearly 2 to 3 million TEUs which get transshipped through Colombo, Jebel Ali and Salalah, Singapore and Malaysian ports would come directly to India through ICTT. The Indian goods will greatly benefit from this as it will help lower the cost of transportation making them lot more competitive overseas.

The monopoly hitherto enjoyed by domestic container lines will go and both the foreign and domestic container shipping lines will canvass for cargo for movement along the East and West coasts of India. As the fresh air of competition enters this sector, the quality, frequency, service reliability and speed of delivery will improve significantly resulting in a substantial reduction in freight rates.


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