In­dian govt fum­bles on eas­ing key ship­ping rule

The Pak Banker - - 6BUSINESS -

The govern­ment's de­ci­sion to ease a so-called cab­o­tage rule for ports that tran­ship at least half of their con­tainer vol­umes han­dled in a year to cre­ate hubs within In­dia and cut de­pen­dence on neigh­bour­ing hub ports is flawed, say ports and ship­ping lines.

Only In­dia-reg­is­tered ships are al­lowed to ply on lo­cal routes for car­ry­ing cargo, ac­cord­ing to In­dia's cab­o­tage law. A tran­ship­ment con­tainer is one that ar­rives in a port, for in­stance Chen­nai, on a ship, and is un­loaded and then reloaded onto an­other ship and taken out of Chen­nai to its desti­na­tion ei­ther in In­dia or abroad. Many such ser­vices to­gether con­sti­tute tran­ship­ment.

Con­tainer ship­ping lines typ­i­cally look at a pe­riod of at least five years be­fore work­ing out tran­ship­ment route net­works. Cab­o­tage re­lax­ation should match this long-term plan­ning of lines, say in­dus­try ex­perts.

Global con­tainer car­ri­ers have been lob­by­ing with the govern­ment for re­lax­ing the cab­o­tage law ar­gu­ing that lack of ad­e­quate In­dian ships was hin­der­ing the growth of tran­ship­ment ports that re­quire large vol­umes to at­tract main­line con­tainer ships with big­ger ca­pac­i­ties to call.

"In the ab­sence of cab­o­tage re­lax­ation, for­eign con­tainer lines will not do trial runs for a year to con­vert a port into a tran­ship­ment hub. Lines will not come with­out a long-term per­spec­tive; no­body will even think of do­ing it," said the chief ex­ec­u­tive of­fi­cer of a con­tainer ter­mi­nal lo­cated in south­ern In­dia.

"Tran­ship­ment in­volves many ser­vices. The ship­ping min­istry de­ci­sion in­di­cates that it was taken with­out any ap­pli­ca­tion of mind and writ­ten by some­one who has no idea about ship­ping," he said, ask­ing not to be named be­cause of com­pany pol­icy on speak­ing to the me­dia. Tran­ship­ment ports that are el­i­gi­ble for cab­o­tage re­lax­ation will en­able for­eign con­tainer lines to carry ex­port-im­port (Exim) laden and empty con­tain­ers be­tween that port and other In­dian ports, ac­cord­ing to a 7 March cir­cu­lar is­sued by the min­istry.

For eval­u­at­ing the vol­umes han­dled by a tran­ship­ment port for grant­ing cab­o­tage re­lax­ation, only Exim con­tain­ers (over­seas loaded and un­loaded), con­tain- er tran­ship­ment of Exim and empty con­tain­ers han­dled by all the ter­mi­nals of that port will be in­cluded, the min­istry wrote. New or ex­ist­ing con­tainer ports han­dling tran­ship­ment traf­fic can ap­ply for cab­o­tage re­lax­ation to the di­rec­torate gen­eral of ship­ping (DGS) which shall grant re­lax­ation for a pe­riod of one year for ex­ist­ing ports and two years for a new port (in­clud­ing a ges­ta­tion pe­riod of one year).

An ex­ist­ing con­tainer han­dling port should tran­ship 50% or more of the con­tain­ers han­dled dur­ing the first year while a new port will have to achieve this level in the se­cond year. Oth­er­wise, the re­lax­ation will be re­voked.

The con­tainer han­dling port whose re­lax­ation is re­voked shall not be con­sid­ered for cab­o­tage re­lax­ation for the next three years, ac­cord­ing to the cir­cu­lar.

"The govern­ment has put the cart be­fore the horse," said a Chen­nai-based ex­ec­u­tive of a Euro­pean con­tainer ship­ping com­pany.

"No In­dian port is cur­rently han­dling 50% of their busi­ness as tran­ship­ment. The whole idea to get the cab­o­tage re­laxed is to con­vert one or two ideally lo­cated ports to han­dle tran­ship­ment. If ports al­ready tran­ship 50% of their con­tainer vol­umes, then what is the need to re­lax cab­o­tage," he asked. "It looks weird and im­prac­ti­cal," he added.

"The first thing that hits me straight in the face is that for cab­o­tage re­lax­ation it is up to the port to ap­ply. Sup­pose a port does not wish to ap­ply for cab­o­tage re­lax­ation, there will be no tran­ship­ment from that port," said the In­dia head at one of the top three global con­tainer ship­ping firms based in Europe.

"If my line wants to do 200,000 con­tain­ers in tran­ship­ment from Mun­dra port in a year, Mun­dra port can­not go to the DGS for cab­o­tage re­lax­ation un­til Mun­dra port is sure that it can do at least 1.36 mil­lion con­tain­ers in a year," he said. "Why? Be­cause Mun­dra port is al­ready han­dling 2.72 mil­lion con­tain­ers (in 2014-15). It means that if Mun­dra is do­ing 2.72 mil­lion con­tain­ers and if it goes to the DGS seek­ing cab­o­tage re­lax­ation, it will have to en­sure that 1.36 mil­lion con­tain­ers (half of 2.72 mil­lion con­tain­ers) will be tran­ship­ment con­tain­ers. Those tran­ship­ment con­tain­ers can come from any­where," he ex­plained.

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