Change in coastal rules could affect Kochi shipping hub

The Indian shipping industry’s demand for reserving coastal waters for the domestic companies could impact the business of the country’s first-ever transhipment hub, being set up in Kochi.

The Indian National Shipowners Association has written to the shipping ministry, seeking stricter cabotage rules so that only Indian flag vessels are allowed on the country’s coasts.

The government, on the other hand, says this would defy the sole purpose of a transhipment port — which is to have foreign vessels upload and off-load cargo in India instead of Colombo or Singapore. “Our main goal is not to lose business to the Colombo port where all the transhipment takes place at present. It depends upon the foreign vessels to decide which carrier they want to use for taking the cargo from one port to the other — Indian or foreign,” Shipping Secretary K Mohandas said.

Countries like the US, China, Indonesia and Malaysia have strict cabotage rules that do no allow foreign shipping companies in their coastal waters though there is a move in the US to relax the norms.

The Kochi transhipment hub, being built and operated by Dubai Port World, is expected to cater to shipment between Europe and Asia-Pacific. The port will allow bigger container ships to dock in India. From there, cargo would be carried in smaller vessels to respective destinations. With only vessels registered or hired by Indian companies in coastal waters, the shipping rates are high making transhipment unattractive. “Transhipment is basically a foreign activity and it will not survive alongside cabotage,” Dubai Port World Managing Director Anil Singh told Business Standard.

Indian ship liners rue the fact that they are subject to various conditions like employing Indian seafarers and paying service taxes, which make them costlier. “Earlier, to make us competitive the government had introduced the tonnage tax. Later it added a lot of service taxes which increased the burden on Indian shipping companies,” said Ajit Khot, regional director, Indian National Shipowners Association.

According to Section 407 of the Merchant Shipping Act, 1958, no ship other than an Indian vessel or a ship chartered by a citizen of India shall engage in the coasting trade of India, except under a licence granted by the Directorate General of Shipping. Shipping companies are seeking a clearer interpretation of this section.