Cab­o­tage Re­lax­ation: Re­al­ity Check

A bal­anced panel of ser­vice providers de­bated on the ef­fects of the lift­ing of Cab­o­tage and how best can the in­dus­try ben­e­fit from this new reg­u­la­tory change

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A bal­anced panel of ser­vice providers de­bated on the ef­fects of the lift­ing of Cab­o­tage and how best can the in­dus­try ben­e­fit from this new reg­u­la­tory change.

Be­fore get­ting into the dis­cus­sions of the ses­sion, Mod­er­a­tor Michael Pinto, For­mer Ship­ping Sec­re­tary, set the di­rec­tion for the de­bate to fo­cus on the ef­fects of lift­ing of Cab­o­tage and how the ship­pers and ser­vice providers can ben­e­fit from it. The first ques­tion was posed to Capt. Deepak Te­wari, Chair­man, CSLA.

Q. What did we re­ally hope to achieve by lift­ing Cab­o­tage? A prob­a­ble rea­son could be to in­crease tran­ship­ment at In­dian ports, sav­ing time and money for the trade, while bring­ing more busi­ness to In­dian ports which would have oth­er­wise gone to tran­ship­ment hubs abroad. If this is the ob­jec­tive will Cab­o­tage alone achieve this or is there some­thing more to be done?

Capt. Deepak Te­wari: Cab­o­tage was one of the main is­sues which has now been re­solved. But its not the “end all and be all” in terms of pro­mot­ing tran­ship­ment in In­dia. There are few other is­sues that need to be tack­led. The ship­ping line has to have op­tions both on the east and west coast for choos­ing ports that are con­ducive for tran­ship­ment. These par­tic­u­lar ports should be in a po­si­tion to han­dle not only the larger ships but also a stream of feeder ves­sels for the ag­gre­ga­tion of cargo. They must have the phys­i­cal in­fra­struc­ture, pro­duc­tiv­ity norms and they should be able to do this on a 24X7 ba­sis through the con­tract a ship­ping com­pany en­ters into.

The next im­por­tant thing is the Cus­toms reg­u­la­tions and pa­per­work. If it is sim­pli­fied to be done elec­tron­i­cally then tran­ship­ment works ex­tremely well. The Cus­toms will have to keep up with the gen­eral or­der is­sued on May 21. The Cus­toms are still not ready with the elec­tronic plat­form as far as tran­ship­ment is con­cerned.

Ju­lian Michael Be­vis: This is a very pos­i­tive de­ci­sion in two re­spects: first, it re­moves a ma­jor ob­struc­ter and the se­condly, it sends a very strong sig­nal that the gov­ern­ment is very keen to un­der­take re­forms in the lo­gis­tics sec­tor. One area where the costs in In­dia are very high as com­pared to other tran­ship­ment hubs is ves­sel re­lated costs, ma­rine charges and nav­i­ga­tional costs, which needs to be dealt with. It’s not just Cus­toms but cer­tain other reg­u­la­tory bod­ies re­lated to tran­ship­ment as well who have to fa­cil­i­tate move­ment of boxes across quays. For ex­am­ple, at Colombo you can send one email and tran­ship your boxes. We have to be able to do the same thing in In­dia. What­ever reg­u­la­tory change is im­ple­mented it has to be done na­tion­wide and not at select ports.

Q. Af­ter Cab­o­tage re­lax­ation, if reg­u­la­tory bod­ies align their op­er­a­tions ac­cord­ingly, will mother ves­sels start mak­ing a bee­line to In­dian ports?

Ugo Vin­cent: Cab­o­tage has def­i­nitely im­proved the move­ment of

cargo across In­dia. It will def­i­nitely im­prove the vol­umes at ports for those who al­low. Call­ing of ves­sels will de­pend on lines bring­ing im­ports into In­dia. The vol­umes of im­ports will be more guided by the sched­ule of ev­ery liner. The pol­icy change will def­i­nitely bring in more ships. In the month of May we were han­dling 3000 teus and by the end of Au­gust we have al­ready reached 30,000 teus. The move­ment of empty and laden con­tain­ers is get­ting more bal­anced. The ship­ping com­mu­nity has well un­der­stood the ben­e­fits of us­ing this Cab­o­tage op­por­tu­nity and vol­umes will def­i­nitely grow in the days to come.

Q. How do port op­er­a­tors see Cab­o­tage re­lax­ation as an op­por­tu­nity? What will they do to en­cour­age more mother ves­sels to come in?

Anil Yend­luri: Our goal was not waiver of Cab­o­tage, but it is to make In­dian ports as tran­ship­ment hubs, so that our cargo moves through our ports to var­i­ous parts of the world. This will re­duce cost and time mak­ing our ex­porters more com­pet­i­tive and sup­ply chain more ef­fec­tive. While talk­ing about tran­ship­ment we found one ma­jor ob­sta­cle which is Cab­o­tage law that is now re­moved. But there are sev­eral other things to be at­tended for im­prov­ing tran­ship­ment. Our cus­tomers al­ways look for sav­ing on time, cost and ease of do­ing busi­ness. Cab­o­tage re­lax­ation will re­duce cost and time fac­tor for trade, but the reg­u­la­tory bod­ies such as Cus­toms need to pick up speed which is yet to hap­pen.

Kr­ish­na­p­at­nam Port has been do­ing tran­ship­ment vol­umes in a big way. Of the to­tal vol­umes han­dled at the port, 50 per cent are tran­ship­ment vol­umes which is 25000 boxes per month. We are ready to han­dle both mother and feeder ves­sels. Our ves­sel re­lated charges are min­i­mal and wait­ing time at the port is neg­li­gi­ble. But reg­u­la­tory agen­cies should also un­der­stand and come on-board so that we can im­prove tran­ship­ment vol­umes at In­dian ports.

Q. Ship­ping lines may find it dif­fi­cult to call at a port far away and make it a hub port. Do you see this prob­lem at Kr­ish­na­p­at­nam Port?

Anil Yend­luri: Not ex­actly, be­cause when there are ad­e­quate vol­umes es­pe­cially with In­dia be­ing a big coun­try with ori­gin and des­ti­na­tion cargo vol­umes be­ing huge and if we un­der­stand the value of time and money of the lin­ers, I am sure they will call and take the boxes from In­dian ports and that is what we are notic­ing at Kr­ish­na­p­at­nam.

Q. For ag­gre­gat­ing feeder cargo what will be the hin­ter­land for Kr­ish­na­p­at­nam Port?

Anil Yend­luri: We are get­ting a lot of vol­umes from Kolkata and Hal­dia by tran­ship­ment to Kr­ish­na­p­at­nam and mov­ing out. Cer­tain vol­umes also come from Paradip and Vizag ports.

Q. Cab­o­tage was lifted al­most 4 years ago for Val­larpadam ter­mi­nal at Cochin Port but still it has not taken the lead. What ails the ter­mi­nal?

Jibu Kurien Itty: Cochin Port had the priv­i­lege of Cab­o­tage re­lax­ation but we can­not see it in iso­la­tion as there were is­sues with op­er­a­tions of Cus­toms. We had chal­lenges when con­tain­ers started com­ing from Chen­nai be­cause the Chen­nai Cus­toms was not aware that Cochin Port has got Cab­o­tage re­lax­ation and so they fol­lowed the nor­mal ex­port/ im­port process. Now Cab­o­tage is re­laxed across In­dia, but ma­jor hin­drance we faced at that time was due to the lack of knowl­edge at other Cus­toms houses.

An­other is­sue is, for ex­am­ple, if you want to send an ex­port con­tainer from Chen­nai to Europe, if it goes to Colombo you get the duty draw­back soon af­ter you load on to ship from Chen­nai. Cochin is ac­tu­ally an SEZ port and if we go by the logic it doesn’t even come un­der the In­dian Ter­ri­tory as far as Cus­toms are con­cerned. But ship­per gets the duty draw­back only af­ter the con­tainer gets on-board in Cochin. All these hin­drances make it dif­fi­cult for the port to at­tract ship­pers.

When we talk of bring­ing back cargo that is be­ing tran­shipped through for­eign ports, we are ac­tu­ally fight­ing against the tran­ship­ment hubs that got es­tab­lished over the past 40 years. It means you are try­ing to shift the en­tire net­work and to ac­com­plish this you need to be one step ahead of the com­pe­ti­tion. At Cochin Port all the ser­vice pa­ram­e­ters are well placed but the is­sue is Cab­o­tage was only re­laxed to Cochin and not for other places in In­dia and an­other draw­back is the pro­ce­dural bot­tle­necks. If

Cochin Port has to at­tract main­lin­ers it will have to in­crease its draft, but the port can­not af­ford the cost and this needs to be funded by the gov­ern­ment.

Q. Prima fa­cie Cab­o­tage seems to save con­tainer repo­si­tion­ing cost for ship­ping lines. Will it be passed on to cus­tomers?

Deepak Te­wari: The sav­ings in repo­si­tion­ing go to the cus­tomer ul­ti­mately as it is a mat­ter of ne­go­ti­a­tion. Cus­tomers are fully aware of what are the costs and ship­ping lines are cur­rently fac­ing a sup­ply-de­mand sit­u­a­tion wherein the cus­tomer gets the best freight rates.

Ju­lian Michael Be­vis: As a mar­ket place be­comes more ef­fec­tive and thereby op­er­a­tional costs go down then any ser­vice providers, in­clud­ing ship­ping lines, will com­pete more in­tensely and prices will go down. In this sce­nario the con­sumers will ben­e­fit when the mar­ket con­di­tions al­low it and sav­ings get passed on.

Q. How do you see Cab­o­tage Law im­pact­ing car­ri­ers? Will you change your ex­ist­ing net­work and en­ter the In­dian feeder mar­ket?

Ugo Vin­cent: first we will have to anal­yse the added value for im­port­ing and ex­port­ing from In­dian ports. At present we do not have any plans to en­ter into feeder ser­vice.

Q. If In­dian ports im­prove draft and other in­fra­struc­ture, will the ship­ping lines make a long-term com­mit­ment to In­dian Ports?

Ugo Vin­cent: We de­ploy ves­sels as per sup­ply-de­mand. We ac­tu­ally use the de­ploy­ment of exim ves­sels we have to use Cab­o­tage op­por­tu­nity.

Ju­lian Michael Be­vis: When ports add ca­pac­ity it gives us more op­tions pro­vided the eco­nomics looks sen­si­ble then there is a greater chance of the hub­ing op­er­a­tion be­ing done in In­dia.

Q. How do you see the lift­ing of Cab­o­tage ben­e­fit Bangladesh cargo?

Mah­bubul Anam: Cab­o­tage re­lax­ation does open op­por­tu­nity for the Bangladesh ship­ping in­dus­try.

Our coun­try’s growth has over-run the growth in in­fra­struc­ture. At this mo­ment the river ports that we have will be greatly ben­e­fit­ted on Cab­o­tage with­drawal. Chittagong Port which is over flooded has long de­lays on both sides and east­ern ports of In­dia could be an ally for us for ex­port and im­port freight. All we need to do is align­ing the In­dia-bangladesh coastal agree­ment with what has hap­pened now.

Q. Can Bangladesh cargo go to East Coast ports? Will it get co­op­er­a­tion from stake­hold­ers from Bangladesh?

Mah­bubul Anam: The Cus­toms has been look­ing af­ter it and I am sure the ship­ping lines know about it, but what we need to see from the ship­ping lines per­spec­tive is that we would def­i­nitely like to see a tran­ship­ment port grow in In­dia. At this point we are talk­ing about a dou­ble tran­ship­ment be­cause it has to come to an In­dian port and then get tran­shipped to a sec­ond hub for mov­ing in a mother ves­sel. We would like to see more ag­gre­ga­tion of freight in east­ern ports which can cover as a tran­ship­ment hub.

Q. From a ship­per per­spec­tive, how do you see the lift­ing of Cab­o­tage?

Dr Sid­dhartha Ra­jagopal: We are among the few peo­ple put­ting pres­sure on the gov­ern­ment to re­lax Cab­o­tage. The raw ma­te­rial for tex­tile in­dus­try is avail­able on the west coast and it gets con­verted on the east coast. Tex­tile busi­ness be­ing price sen­si­tive and sur­viv­ing on thin mar­gins should do ev­ery­thing pos­si­ble to save on cost and be­come com­pet­i­tive. Since we are com­pet­ing with Bangladesh, China and many oth­ers, so the lo­gis­tics com­po­nent of the cost is looked at and again there is the is­sue of im­bal­ance in con­tain­ers at ports. So, this step by the gov­ern­ment will to a large ex­tent ad­dress these is­sues.

About 120 lakh bales go to Tamil Nadu which only pro­duces 4 per cent of the cot­ton, so 2 mil­lion tonnes of cot­ton is re­ceived by Tamil Nadu alone. So tran­ship­ment can bring us a sav­ing of 5-7 per cent.

Q. Is there a big dif­fer­ence in ma­rine charges be­tween In­dian ports and for­eign ports, if so why?

Jibu Kurian Itty: Pre­dom­i­nantly if you see at all In­dian ports, the ves­sel re­lated charges are pretty high and the con­tainer re­lated charges are com­par­a­tively low com­pared to in­ter­na­tional ports. The rea­son is that ves­sel re­lated charges in­clude light house dues, GST and such other el­e­ments that in­crease the charges in In­dia.

Anil Yend­luri: We are very flex­i­ble and ne­go­ti­ate with our liner part­ners for fix­ing tar­iffs and we are com­pet­ing with Colombo on that front. We have a par­al­lel ar­range­ment made by Gov­ern­ment of In­dia with re­gard to new air­ports. To pro­mote call­ing at new air­ports the gov­ern­ment has come out with a new scheme called ‘UDAAN.’ As per the scheme if a flight lands at a par­tic­u­lar new air­port, if there are not enough pas­sen­gers, the money will be re­im­bursed by the gov­ern­ment of In­dia. If we can have sim­i­lar ar­range­ment for ship­ping lines, that can in­duce main­lines to call at In­dian ports.

Q. In In­dia con­tainer han­dling charges are com­pet­i­tive but ves­sel re­lated charges are high. Is it time for reg­u­la­tory author­i­ties to in­ter­vene and try to bring them down?

Jibu Kurian Itty: Talk­ing about exim cargo, if you re­ally want to com­pete in in­ter­na­tional mar­ket, the best thing is to have the for­eign ships call­ing our port. Here you need to of­fer at­trac­tive rates to the lines as com­pared to com­pe­ti­tion. Once this starts the exim cargo will also be able to save on freight.

Anil Yend­luri: On one side we want lat­est in­fra­struc­ture for quick turn­around time, but to main­tain it is a cost for the port. The port apart from the ter­mi­nal earns only through ves­sel re­lated charges. Be­yond a cer­tain level the ports can­not of­fer dis­counts to lin­ers and here the gov­ern­ment should step in to of­fer dis­counts.

(L to R) Jibu Kurien Itty, Chief Ex­ec­u­tive Of­fi­cer, In­dia Gate­way Ter­mi­nal Pvt. Ltd; Mah­bubul Anam, Pres­i­dent, Bangladesh Freight For­warders As­so­ci­a­tion; N Jithen­dra, COO, Kr­ish­na­p­at­nam Port Con­tainer Ter­mi­nal Pvt Ltd; Capt Deepak Te­wari, Chair­man, Con­tainer Ship­ping Lines As­so­ci­a­tion; Ugo Vin­cent, Manag­ing Di­rec­tor, CMA CGM Agen­cies (In­dia) Pvt Ltd; Michael P Pinto, IAS(RETD), For­mer Sec­re­tary, Min­istry of Ship­ping, Govt of In­dia;Dr Sid­dhartha Ra­jagopal, Ex­ec­u­tive Di­rec­tor, The Cot­ton Tex­tiles Ex­port Pro­mo­tion Coun­cil; Ju­lian Michael Be­vis, Se­nior Di­rec­tor, Group Re­la­tions, South Asia, A.P. Moller–maersk Group; Anil Yend­luri, Di­rec­tor & Chief Ex­ec­u­tive Of­fi­cer, Kr­ish­na­p­at­nam Port Com­pany Ltd

Capt Di­nesh Gau­tama, Pres­i­dent, Navkar Cor­po­ra­tion, in­ter­act­ing with the pan­elists

En­grossed au­di­ence at the ses­sion

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