Seven months after India’s first international container transhipment terminal (ICTT) opened off the coast of Kochi in Kerala, many foreign shipping lines are staying away, thanks to rules which limit their freedom in moving domestic cargo.
Transhipment terminals receive, stock and move containers from ship to ship before they head for their final destination. As per India’s cabotage rules, foreign vessels are free to handle export-import cargo; however, before moving containers from one domestic port to another (coastal shipping), they must get a no-objection certificate from the directorate general of shipping, which is given only with the consent of domestic ship-owners. With domestic lines unwilling to let foreign ships into coastal shipping, foreign lines say they lose $20,000 a week on every service to India, since they cannot fill empty space with domestic cargo while moving between ports.
It may be noted that similar rules exist in developed countries like the US as well. In the last few years, the Centre has been toying with the idea of shutting coastal shipping to foreign vessels. The Cochin Port, foreign shipping lines and traders want easier rules, but domestic shippers claim any easing would damage them. In the absence of a meeting ground, a final decision is still hanging fire.
?Our view is that cabotage has to be tightened in the interests of Indian shipping. But as far as coastal container movement for import and export is concerned, there has to be a system where it is exempt from the rule. However, we are yet to take a final stand,? shipping secretary K Mohandas told FE. With its first phase built at R1,600 crore, the ICTT at Vallarpadam island was aimed to attract global traffic, which currently goes to neighbouring international ports for transshipment. The terminal was built by Dubai’s DP World, which will operate it for 30 years.
Shipping ministry data show over 45% Indian container trade makes its way through transhipment in Singapore, Malaysia, Colombo, Jebel Ali and Salalah. Colombo alone handles near 70% of India?s transhipment cargo. The terminal triggered other investments including the R1,600-crore LNG terminal, R315-crore ship repair complex and R720-crore single buoy moorings for Kochi Refineries.
?None of these benefits can be achieved without ICTT being able to truly function as a transshipment gateway,? DP World subcontinent senior vice president and managing director Anil Singh said.
The delay endangers the ICTT investment and other terminals coming up at Cochin Port in anticipation of greater business. Kerala chief minister Oommen Chandy wrote to the shipping ministry early this month requesting that rules be relaxed.
?The first phase of ICTT was built with a capacity of 1 million TEUs annually. The hinterland around Kochi contributes approximately 3,00,000 TEUs of import-export containers annually. Hence, capacity is being grossly underutilised,? said K Krishnadas, CEO of DP World Cochin. The delay causes revenue loss to Cochin Port Trust as well, which gets 33% of money earned by the terminal operator. ?Last year, we got 3.12 lakh TEUs. With sufficient feeder service (facilitated by relaxing cabotage), we could take it to 7.75 lakh TEUs,? a person in the Port Trust management said.
?It is okay to implement cabotage when domestic vessels have sufficient capacity and efficiency, but Indian lines don’t have the required tonnage,? said Captain Dinesh Gautama, vice chairman of Container Shipping Line Association that represents foreign shipping lines bringing cargo to India.
However, Indian shipowners deny this. Indian National Shipowners’ Association CEO Anil Devli said: ?Existing container capacity of Indian lines is 42,000 TEUs a week whereas the cargo coming for transshipment is just 9,000 TEUs a week. The capacity is expanding by at least 25% y-o-y. How much more capacity do you need??