Home >Politics >Policy >Ministry considering extending cabotage relaxation to DP World’s terminal in Cochin port
This restriction was one of the main factors that discouraged mainline foreign vessels from calling at Vallarpadam ICTT. Photo: Wikimedia Commons
This restriction was one of the main factors that discouraged mainline foreign vessels from calling at Vallarpadam ICTT. Photo: Wikimedia Commons

Ministry considering extending cabotage relaxation to DP World’s terminal in Cochin port

The objective is for ICTT to attract cargo destined for Indian ports which are presently being transshipped at Colombo and other foreign ports

Bangalore: The shipping ministry is weighing an option to convert India’s first international container transshipment terminal (ICTT) at Vallarpadam in Cochin port into a gateway facility after flagging off an exercise to review a three-year relaxation granted to the ICTT from a local shipping law that protects Indian fleet owners.

A container transshipment terminal such as the one developed at Vallarpadam acts like a hub, into which smaller feeder vessels bring cargo which then gets loaded onto larger ships for transportation to the final destination. Larger vessels bring about economies of scale, and lower the cost of operations for shipping lines, which then translates into lower freight rates for exporters and importers.

India’s coastal trade (shipping cargo between different local ports) is reserved for ships registered in India and foreign ships can be hired only when Indian ships are not available after taking permission from the country’s maritime regulator, according to the so-called cabotage law.

This restriction was one of the main factors that discouraged mainline foreign vessels from calling at Vallarpadam ICTT.

On 6 September 2012, the union cabinet agreed to ease cabotage policy by allowing foreign registered vessels to ship export-import (EXIM) containers out or in through the ICTT and help it emerge as an international transshipment hub.

The primary objective of relaxation in cabotage policy is for ICTT to attract cargo destined for Indian ports which are presently being transshipped at Colombo and other foreign ports. This initiative is expected to promote transshipment of Indian cargo from ICTT and reduce dependence on nearby foreign ports, a government statement said after the cabinet cleared the relaxation.

The relaxation in cabotage policy will be subject to review after three years, the cabinet agreed.

“The relaxation in cabotage has not had any impact on ICTT. In 2014-15, the ICTT Vallarpadam handled 365,000 twenty-foot equivalent units or TEUs (the standard size of a cargo container) of which the transshipment EXIM containers was only 17,000 TEUs," a spokesman for the ministry said.

“This much of transshipment EXIM containers are handled by other gateway ports (non-transshipment terminals) as well. One of the options being considered is to have the ICTT run as a gateway facility and not as a transshipment terminal. We are also examining whether the relaxation of cabotage restriction should be extended to the ICTT alone for a further period or grant it to other transshipment ports also such as the one planned at Vizhinjam in Kerala," the ministry spokesman said adding that no final decision has been taken on the matter.

DP World Pvt. Ltd, the world’s fourth biggest container port operator majority owned by the Dubai government, won the 30-year contract to build and operate the ICTT in a public auction in 2004.

Vallarpadam was designed to cut India’s dependence on neighbouring hub ports such as Colombo in Sri Lanka, Singapore, Salalah and Jebel Ali in Dubai, Tanjung Pelepas and Port Klang in Malaysia to send and receive container cargo, thus saving time and cost for exporters and importers.

About 2 million standard containers originating in and destined for India gets transshipped at Sri Lanka’s Colombo port every year.

Port industry executives tracking the development said that the relaxation approved by the cabinet did not specify a time limit. “The relaxation approved by the cabinet is an open one. Nowhere did it mention that the validity of the relaxation will be for three years. It said that the decision to relax will be reviewed after three years. During the review, if it is revoked, the relaxation ends. Otherwise, it will continue," a port industry executive said, asking not to be named.

However, the ministry said that the relaxation granted to ICTT ended on 19 September. “In government, there is no such thing as an assumption".

DP World could not be reached immediately for a comment, it being a holiday on Friday.

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