The Cabotage law is a marine tool to protect and promote domestic shipping and in countries like US, UK,Japan, Australia ,China and India, it is strictly followed. Of India’s total port traffic, it is estimated that the share of container traffic handled at Indian ports stands at 14% and further analysis showed that out of this 14%, the transshipment trade comes up to about 5% only. It means that the relaxation in the cabotage law will affect only 5% of India’s total port. There is another angle to the matter. According to the Indian National Shipowners’ Association, there are only 15 feeder container ships with the Indian flags and their total carrying capacity is 15,000 TEU. It is very insufficient and inadequate to be able to provide service to the Indian shippers effectively and, more importantly, cost effectively. Naturally, the domestic container lines must keep freight rates high without any option. Reforms in cabotage law are not new. China did it in 2003 by permitting the foreign vessels to carry empty containers to domestic ports. The amendments, of course, were applicable to those countries which had already signed relevant bilateral agreements with China. The recent relaxation announced by the Indian Government will definitely benefit the Vallarpadam terminal; but, the relaxation is subject to a review after three years. It implies that the relaxation is performance-linked.
Sunday, 9 September 2012
Relaxation in cabotage law will lead to reduction in freight rates and a boost to shipping
The Cabotage law is a marine tool to protect and promote domestic shipping and in countries like US, UK,Japan, Australia ,China and India, it is strictly followed. Of India’s total port traffic, it is estimated that the share of container traffic handled at Indian ports stands at 14% and further analysis showed that out of this 14%, the transshipment trade comes up to about 5% only. It means that the relaxation in the cabotage law will affect only 5% of India’s total port. There is another angle to the matter. According to the Indian National Shipowners’ Association, there are only 15 feeder container ships with the Indian flags and their total carrying capacity is 15,000 TEU. It is very insufficient and inadequate to be able to provide service to the Indian shippers effectively and, more importantly, cost effectively. Naturally, the domestic container lines must keep freight rates high without any option. Reforms in cabotage law are not new. China did it in 2003 by permitting the foreign vessels to carry empty containers to domestic ports. The amendments, of course, were applicable to those countries which had already signed relevant bilateral agreements with China. The recent relaxation announced by the Indian Government will definitely benefit the Vallarpadam terminal; but, the relaxation is subject to a review after three years. It implies that the relaxation is performance-linked.
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