relax the policy for special vessels would allow operators to bring foreign-flagged vessels of this category to ply the country’s coastal routes. With the relaxation, the government hopes to transfer road and rail cargo movement of cargoes to coastal shipping – thus decongesting those other modes. Special vessels include roll-on, roll-off, hybrid ro-ro, ro-ro/passenger ships, pure car carriers, pure car and truck carriers, liquefied natural gas vessels and over-dimensional/project cargo carriers. Prior to the policy change, Indiaflagged ships had first preference for moving over-dimensional and project cargoes, and when they were not available foreign ships were allowed to move in. In effect, foreign-flagged vessels were already filling the gap in the project cargo and over-dimensional coastal cargo trades. The relaxation of the cabotage laws could see national operators of these so-called “special vessels” dropped completely in favor of foreign tonnage. The government claims that for ports like Cochin, which is trying to start a ro-ro service for transporting cars from Japan and Europe, the cabotage relaxation will support its efforts. But shipping companies, particularly those engaged in moving project cargo, are less enthused. They say that suitable tweaking of tax and other policies would work better than a blanket cabotage relaxation.
SECOND TIME LUCKY
This is not the first time the government has relaxed the policy. From 1992 to 1997, cabotage laws were relaxed for container vessels and LASH barges to attract foreign mainline vessels to the Indian ports. But despite this relaxation, only 78 million tonnes of cargo were transported by coastal shipping in India compared with 870 million tonnes by China and 133 million tonnes by Indonesia from 1990 to 2000. In 1997, the government decided to remove the relaxation as the benefits were not as great as anticipated. Ravi Kumar, J M Baxi Group’s senior vice president, argued that there was no justification for relaxing cabotage restrictions for over-dimensional/project cargo carriers. He believed that the decision worked against national shipping interests because India’s project cargo volumes were limited and there
was already sufficient domestic tonnage available to move them. “There are at least five vessels owned by Indian ship owners, including by JM Baxi, which are capable of carrying project cargo. Over and above these vessels, there are close to 20 flat top ro-ro barges which are carrying project cargo continuously within the Indian coast,” he said. Kumar said that relaxation of cabotage laws was welcome in areas that lacked domestic expertise or sufficient vessel-carrying capacity. Where sufficient domestic expertise and capacity are available, it could adversely affect those existing players, impede their growth, and expose them to the risk of unfair competition from foreign players. He added that the move was unwarranted because the cabotage regime India practiced is not absolute compared with other countries. “The chartering guidelines provide for granting of licenses to charter in a foreign-flag vessel if an Indian vessel is not available. All licenses are granted within three days of an enquiry being raised by the charterer,” he said. Shashank Kulkarni, former secretary general of Indian National Shipping Association and Indian Private Ports and Terminals Association, said that the government’s objective to relax the provision stemmed from the fact that it wanted to make more ships available to carry all goods from port to port in India irrespective of the flag. “The government also feels that policy is hindering the growth of coastal shipping in India and wants to ease the situation in a phased manner by making it easier for foreign ships to operate in Indian waters in certain trades,” Kulkarni said.
PROJECT CARGO IMPACT
However, it appears they have failed to properly consider the impact on the niche over-dimensional and project cargo trades. Since there are very few India-flagged vessels to carry overdimensional/project cargo, it has long been acknowledged as futile to reserve those cargoes for Indian ships. As per the licensing records of DGS, permissions were liberally given to foreign-flag vessels to operate on the Indian coast specifically to cater for the over-dimen-
Ravi Kumar J M Baxi Group
Hemant B Bhattbhatt Hmsa Consultancy Services
sional trade despite the cabotage law. The relaxation of the legislation will allow more foreign ships to do business in India without registering their ships and approaching the DGS again and again for licenses, a negative for the national project cargo operators. Hemant B Bhattbhatt, managing partner and CEO of the Mumbai-based Hmsa Consultancy Services, pointed out that the movement of project cargo in India requires complicated route and time planning for transportation between the port and hinterland. Land-based transportation has its limitations – road traffic, road capacity, on route inspections, potential for accidents – while coastal shipping offers cost- and time-effective solutions for movement of project cargoes. As such, increased coastal transport capacity reduces these challenges to a certain extent. “However, the current change is unlikely to benefit the over-dimensional and project cargo shippers unless there is an overall augmentation in the coastal shipping capacity and capability of the country. If the policy succeeds, some over-dimensional cargo which moves while lashed and choked on flat racks or open-top containers may benefit,” Bhattbhatt added. BB V L Srinivasan is a senior journalist based in Hyderabad, India, covering finance, infrastructure, energy, shipping, transportation, IT, environment and political and regional developments in India and the Gulf Cooperation Council region. www.breakbulk.com BREAKBULK MAGAZINE 53