Indian shipping lines will have to face competition from foreign-flagged vessels with the government dropping the long-standing proposal to impose a complete ban on the entry of foreign ships for coastal shipping. The Centre thinks that foreign firms cannot be stopped from coastal shipping in India given the limited capacity of domestic firms, which could increase cost for end-customers.
Coastal shipping is the transport of goods from one domestic port to another.
The Centre?s decision follows a fierce pitch made by the Cochin Port Trust, which is building India?s first international trans-shipment terminal at Rs 2,000 crore. The Trust wants a sufficient number of foreign vessels in coastal shipping to attract profitable business. The first phase named the International Container Trans-shipment Terminal will be operational in November.
Cochin Port Trust wants to attract trans-shipment traffic to its terminal, but fears that Colombo Port which is a trans-shipment hub for Indian cargo may continue attracting traffic due to capacity constraints in India. Colombo Port has engaged China Merchants Holdings International to build a new terminal to expand its already-larger capacity.
?Under Section 407 and 408 of Merchant Shipping Act 1958, Indian shipping lines are given priority for coastal shipping. The directorate-general (DG) of shipping, however grants licences to foreign companies to start such operations in the country. This situation would remain and no change needs to be made,? shipping secretary K Mohandas told FE.
A senior official in the DG?s office said: ?Foreign vessels can never be barred from entering India, given the limited capacity of domestic shippers.?
However, the Indian National Shipowners Association, the lobby group of shipowners in the country which pitched for the ban on foreign vessels in coastal shipping stuck to its stance. Anil Devli, CEO of INSA pleaded ignorance about the government?s move. INSA?s former secretary general SS Kulkarni said: ?Since there is a difference of opinion between the stakeholders, an independent authority should be appointed to look at the benefits and drawbacks of the proposal.?
Shipping ministry data show India had 682 vessels for coastal shipping with a total capacity of one million deadweight tonne (DWT) on June 30, 2010. At the same, 325 overseas vessels were present in the country with a total cargo carrying strength of 14.81 million DWT.
Meanwhile, confusion prevails on the nature of shipping exim cargo between Indian ports. Sometimes, due to connectivity issues, exim cargo has to be brought to a port other than the one where the customer wants it, from where it is later taken to the final destination. The domestic industry wants this kind of shipping under coastal shipping, but foreign firms that bring exim cargo to Indian coasts say export or import is not complete until the cargo has reached its final destination. Foreign firms have asked the shipping ministry to allow them to transport exim cargo to the final destination.
Mohandas had held an inter-ministerial meeting a few months ago to decide on the subject, but the matter is still subject to discussion. ?There was ambiguity on the issue of import-export cargo and it continues,? he said.