The existing cabotage law allows foreign shipping firms to easily acquire predominance in the country, thereby impeding the growth of domestic shipping firms engaged in coastal shipping
Coastal shipping, an important source of revenue generation for Indian shipping firms, is under serious threat coming from foreign-flagged vessels, thanks to the existing cabotage law, which at present is too flexible to protect the interests of domestic shipping firms engaged in coastal trade. According to a survey conducted by ShippingBiz360.com, a staggering 100% of the respondents expressed that Indian cabotage law needs to be strengthened in order to protect coastal shipping.
Need for a level playing field
The cabotage law in India states that if the difference in charter rate is less than 10% between an Indian-flagged vessel and a foreign-flagged vessel, then the former needs to lower its rates in order to get preference over the latter, or else the contract of carrying cargo will go to the foreign vessel. In this context, Vikash Singh, proprietor of Singh Shipping Services, a small-sized shipping firm in Navi Mumbai says, “A level playing field needs to be created for Indian-flagged vis-a-vis foreign-flagged vessels. We are not against competition, but it should be promoted in a healthy manner. The existing cabotage law has many loopholes, which are affecting business of domestic vessels, thereby impeding growth of domestic shipping firms.”
Industry players are of the opinion that existence of such a weak law will allow foreign vessels to acquire predominance in the country, which is likely to eat into the market share of Indian vessels. According to L Katoch, director of ASL Logistics, a small-sized logistics service provider in New Delhi, “Since coastal shipping offers multi-modal transport facilities by combining railways and sea, the demand for the same is on a rise in the country. Coastal trade is an ideal way to recover the losses suffered during global economic recession by domestic shipping firms, but for this strengthening of cabotage law is required.” It is to be noted that during 2008-09, Indian ports handled 732 million tonnes of traffic, of which almost 20% constituted coastal traffic.
Arup Choudhury |
