| Subject: |
APSEZ bid for Vizhinjam port set to define India’s cabotage policy |
|
The lone bid submitted by Adani Ports and Special Economic Zone Ltd (APSEZ) to build a new port at Vizhinjam in India’s southern state of Kerala, apart from getting a serious port developer for the much tendered project, is sure to impact the ongoing debate on opening up the country’s coastal shipping business to foreign ships.
The Kerala government, which is implementing the project, has requested India’s shipping ministry to ease a so-called cabotage law to help the planned port achieve its full potential, thus making it attractive for the private investor.
The cabotage law allows only Indian registered ships to operate along India’s coast for carrying cargo; foreign ships can be hired only when Indian ships are not available, subject to a permit granted by the country’s maritime regulator.
India has so far relaxed the cabotage law only for the container trans-shipment terminal run by DP World Ltd at Vallarpadam in Kochi port and that, too, for a three-year period beginning September 2012. Since then, demands for easing the law have been made by more container terminal operators, foreign container shipping lines and even state governments such as Gujarat, Andhra Pradesh and Kerala.
The local shipowners’ lobby has been resisting moves to ease the law for container carriers for more ports fearing that it could open the gates for other cargo carriers and services to get a similar dispensation.
After the issue grabbed the attention of the Prime Minister’s Office (PMO), the government last year exempted customs and excise duty collected on specified bunker fuels used in Indian flag vessels for transportation of export-import and empty containers between two or more ports in India. The thinking behind the decision was to nudge foreign container carriers to register their ships in India, thereby obviating the need for any specific relaxation in cabotage rules.
The government reckoned that this would, in turn, boost India’s national fleet and help promote tans-shipment hubs in India. The Indian port terminals will handle more cargo—thereby bringing more revenue—resulting in tax benefits to the country, according to the shipping ministry.
The fact that the decision did not have any noticeable impact on the objective can be seen from the stagnant fleet of Indian registered container ships, which remained at 20—a number that existed before the duty exemption was granted about 10 months ago.
Forget about foreign owners registering their container ships in India, even an intent to consider this is nowhere to be seen. This makes it amply clear that there are other considerations at play that decide registering ships in India by foreign fleet owners and not just a duty relaxation that saves about 14% on customs and excise duty.
India has itself allowed local fleet owners to register their ships in tax-friendly overseas jurisdictions to overcome local tax hurdles from hurting their operating environment.
India has always relied on neighbouring hub ports to send and receive cargo shipped in steel containers. This entails extra time and costs, hurting India’s competitiveness in the global market.
Some 72.6% of containers are transported from an Indian port to their destination port abroad, while 27.4% containers are trans-shipped through either Colombo, Singapore or other international ports every year, according to the shipping ministry. Shipping lines decide to use a port for trans-shipment depending upon several factors such as availability of vessels, availability of adequate depth for larger vessels to dock, availability of cargo, cost of trans-shipment at the port, location of the port and access to major trading centres.
The bid placed by APSEZ for the Vizhinjam port project should be seen in this context, given the standing and clout of India’s biggest private port operating firm.
In April, China allowed foreign flag ships to ply on local routes, linking five more container terminals to the one facility already permitted in 2013.
Global container carriers have for years been calling for the opening up of Chinese cabotage trades (shipping cargo on local routes), a plea that is backed by China’s port operators.
A similar scenario is being played out in India.
Indian cabotage restrictions may discourage the growth of coastal shipping as Indian tonnage (capacity) is not adequate, the national transport development policy committee led by Rakesh Mohan, a former deputy governor at India’s central bank and an expert on transport infrastructure, wrote in its report submitted to the government last year.
“India should enforce absolute cabotage (total protection to Indian ships) for import and export of crude, critical energy cargo and defence equipment and parts. Cabotage should be relaxed to allow foreign vessels to carry bulk, general cargo and trans-shipped export-import containers, including empty containers in Indian waters,” the committee recommended. This could facilitate efficient movement of containers and ease congestion at ports and port storage, given the current inadequacy of India’s coastal fleet and the need to introduce competition and growth in containerization.
If the primary objective is to increase coastal shipping and make coastal tonnage competitive, it might be desirable to allow foreign vessels to compete for coastal cargo, the committee concluded.
Source : livemint.com
|