Indian Govt eases cabotage law to cut rates and boost shipping
Protection to national shipping under the cabotage law is designed to promote and protect domestic shipping. Countries such as India, US, UK, Japan, Australia and China maintain strict reservation of their coastal shipping to domestic services.
Share of container trade in India's total port traffic: The total traffic handled by all the major and non-major ports in India in 2011-12 stood at around 930 million tonnes. All the major and non-major ports seem to have handled a total container traffic of about 9.9 million TEUs to about 125 million tonnes, Daily Shipping Times reports.
Therefore, the share of container traffic in the total cargo handled at Indian ports comes to only about 14%. Further analysis will show that only less than 30% of this cargo traffic will constitute the transshipment trade and, therefore, in actual practice, if relaxation of cabotage law is cleared by the Government, it will affect only less than 5% of India's total port.
According to the updated database of the Indian National Shipowners' Association, only 15 feeder container ships with a total carrying capacity of about 15,000 TEU are available under the Indian flag. India has a coastline of about 7,500 kilometer with 12 major ports and at least about 20 commercially-significant non-major ports. Those familiar with shipping would know that the Indian container ship fleet is awfully inadequate to service the requirement of
Indian shippers efficiently and cost effectively. So long as this cargo reservation remains in force, domestic container lines would try to keep freight rates high.
One reliable source has pointed out that domestic container lines would charge about USD 1,000 per TEUs for moving a container from Kandla (Gujarat) to Kochi whereas a liberalised market environment with international operators would contribute to a substantial reduction in freight rate to as low as about USD 300 per TEUs. In view of the restrictions placed on the movement of containerised cargo along the Indian coast on foreign shipping lines, they are now compelled to make use of foreign ports, namely Colombo, Singapore, Salalah and Dubai, for transshipping India's foreign trade.
Reforms in cabotage law: In 2003, China eased cabotage regulations to permit foreign lines to ship empty containers between domestic ports. Empty containers were considered 'domestic cargo' before and subjected to cabotage regulations. The amendments apply only to shipping companies of countries that have signed relevant bilateral agreements with China.