Mumbai: The shipping ministry will review the cabotage policy next year and introduce changes if Indian shipping lines have been adversely affected in the intervening period, Nitin Gadkari, the union minister for road transport, highways and shipping, said at an event in Mumbai on Monday. He was responding to concerns raised by Indian shippers about losing business after the cabotage rules had been relaxed.
In May, a shipping ministry order eased the so-called cabotage rule, which allows only Indian shipping lines to carry export-import containers for trans-shipment on local routes. Now, foreign-flagged ships are also allowed to pick up containers along the Indian coast to a trans-shipment hubs such as Singapore or return empty containers to these ports without any restrictions.
According to Gadkari, the cabotage rules were eased by the government because local shipping lines were unable to create a major trans-shipment hub in India, despite enjoying cabotage benefits that kept foreign liners out of the market.
“This lack of capacity meant that cotton produced in Gujarat has to be transported by road to Tamil Nadu even when empty shipping containers are moving from Kandla port (in Gujarat) to the trans-shipment hub in Colombo," Gadkari said. This was not only a waste of resources but increased traffic on Indian roads and provided global trans-shipment hubs like Colombo over 70% of India’s trans-shipment business, the minister added.
Gadkari pulled up local shipping lines for failing to build a successful trans-shipment business in India, despite it being until recently protected by the cabotage rules. “But we are hearing your views," Gadkari said. “We will review the effects of the policy in a year’s time."
Mint reported in July that the shipping industry had been informed by the ministry that it also intended to scrap the right of first refusal (RoFR) that is provided to domestic fleet owners that ensured a supply of local export-import oil and bulk cargo to them at the lowest bid price.
On Monday, representatives of domestic shipping lines complained to the minister about the business they were losing to foreign competitors because of the change in law.
According to industry estimates, operating costs for Indian lines are about 20% higher than for foreign lines because of the higher cost of financing, bunker fuel, training costs, tax on seafarers’ wages, GST etc. Ships that are flagged abroad but operate in Indian waters benefit from lower costs in the country of registration, allowing them to offer voyage rates lower than their Indian counterparts. Gadkari said he would try to convince the ministry of finance to bring down tax rates on Indian-flagged vessels.