Bangalore: An effort to hire a foreign-registered ship to carry cargo along the coast has been blocked by local ship owners using a rule that protects them from overseas competition.
The matter will now be decided in the Mumbai high court.
Chennai-based Caravel Shipping Services Pvt. Ltd decided in June last year to hire a foreign-registered ship with a capacity to load 400 standard containers.
Coastal trade between two Indian ports is reserved for India-registered ships, and foreign ships can be hired only when Indian ships are unavailable.
Ahead of submitting an application to the director general of shipping, India’s maritime regulator, asking for a license to hire and operate the foreign ship along the coast, Caravel approached the Indian National Shipowners Association (INSA), the local industry body, to find out whether any of its members had a similar ship to offer.
A no-objection certificate (NOC) from the INSA is necessary before seeking the regulator’s permission to hire a foreign ship to operate along the coast. INSA granted a NOC but withdrew it a few days later after a member, Shreyas Shipping and Logistics Ltd, said that it had a vessel similar to the one Caravel was looking for, a person familiar with the matter said on condition of anonymity. But there was a catch.
Shreyas offered its vessel at a daily rate 20-25% more than what Caravel negotiated with a foreign owner and so rejected that offer, the person said.
Mint could not independently verify what these rates were.
INSA then asked its president, S. Hajara, to mediate. “After hearing out both parties, Hajara gave a rate that was closer to the rate that Caravel was originally looking for. Despite this, Caravel did not accept it,” claimed V. Ramnarayan, executive director, Shreyas Shipping.
Caravel, on its part, has offered to hire Shreyas’ ship only at the market rate and approached the Mumbai high court to settle the issue.
“The matter is sub-judice. I would not like to comment on it,” Caravel’s managing director Saju Chacko said by phone from Chennai.
INSA wants newcomers such as Caravel to use Indian ships to help local ship owners, who are reeling under the global meltdown. “Indian ships are available in the market and they should be utilized to the maximum so that everybody benefits,” said an INSA representative who didn’t want to be named.
Industry experts, however, said that Shreyas should match the rate offered by the foreign ship owner, particularly when ship rentals have collapsed in recent times. “Protectionism should not be at the expense of customers,” a Mumbai-based industry expert said, requesting anonymity. If Caravel hires the ship from Shreyas at a higher daily rate, the cost of transporting containers will go up. “Ultimately, the customer suffers,” he said.
Another expert said that local ship owners are discouraging newcomers in a bid to scuttle competition to carry cargo along the country’s coast. He, too, spoke on condition of anonymity.