Domestic tankers, coastal trade to benefit from new cabotage policy  

December 23, 2009

The Indian ministry of shipping is believed to have completed the draft note on the cabotage policy for the country. Cabotage is carriage of cargo between two points within a country by a vessel registered in another country. In general, permission to engage in cabotage is restricted in many countries. According to industry experts, the move by the Indian government will benefit the domestic tanker and coastal shipping segment.

“It is going to benefit (India) as it is going to save the costal trade for domestic shipping companies. Indian costal shipping will be benefited across all sections. Especially those segments where there is already Indian tonnage lying idle. For example, in both crude and product tankers, there is adequate shipping tonnage available with Indian shipping companies. Both these segments are completely capable of catering to domestic tonnage requirements,” said S Hajara, chairman and managing director, Shipping Corporation of India (SCI). State-run SCI is amongst the strongest players in the Indian oil tanker segment.

SS Kulkarni, secretary, Indian National Shipowners Association (INSA), also believes that the policy will help the oil and petroleum segment. “In segments like petroleum and gas we have 100% capacity, then why allow foreign vessels to operate, when Indian vessels can do the job,” he said.

The cabotage policy—if implemented—will bar foreign ships and ships operated by foreigners from costal trade in India. The ban will apply on transport of goods and passengers between two ports on the Indian mainland. The cabotage policy is followed in most maritime nations to develop indigenous tonnage and provide cargo support to domestic players. During the economic slowdown, Indian flagship offshore vessels have been denied trade on the Brazilian and Nigerian coasts, in a move by these countries to provide cargo support to their domestic players.

There have been discussions going on the cabotage policy from quite a long time. According to a recent PTI report, the ministry of shipping has finalised a draft note for stringent cabotage law to prohibit foreign ships and those manned by foreigners from doing coastal trade in view of the highly porous coastline and rising security threats.

Though the policy is being introduced in line with security issues, it is surely a beneficial move for the Indian shipping industry. Justifying the policy, Mr Hajara said, “After all, shipping is a mode of transport, not different from any other form of transport. I don’t have the opportunity of travelling by international carriers on domestic routes, or no foreign player is allowed in the road transport or aviation. If allowing foreign players (in the coastal trade) will boost competition, then why not do the same in aviation and road transport as well?”

“Other than security issues, the new policy will allow cargo support to domestic players. It will also help curb the outgo of money as far as costal shipping is concerned. To have an indigenous tonnage is also helpful during emergencies like war,” added Mr Kulkarni.

Speaking on the Indian tonnage available presently for costal trade, Mr Kulkarni said, “The cabotage policy was intended from the time India won Independence, but we never implemented it as we did not have enough tonnage. However, there needs to be a beginning. Initially, we may face a problem with adequate Indian flagships being made available for costal trade. Thus, we may need to allow foreign flagship vessels to operate against a license. However, over a period of time, costal shipping will be taken care of with the available tonnage of Indian flagships.”

Out of the 55 shipping companies in India, 19 exclusively deal in costal trade and another seven deal in both costal as well as overseas trades. At present, the Indian shipping industry comprises 510 ships, of which 240 are overseas fleet and 270 are coastal ships, including 70 offshore support vessels, about 25 supply vessels for offshore services and 12 dredgers. Figures for foreign share in the Indian costal trade are not available.
— Amritha Pillay