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India contains cargo diversion to foreign ports for transshipment, says official

India contains cargo diversion to foreign ports for transshipment, says official

Government’s relaxing of norms for transshipment has not only helped India arrest a sizeable chunk of its container cargo going to ports like Colombo, Singapore and Jebel Ali but also forced a few foreign ports to cut rates, according to a top official.

India has been trying hard to arrest diversion of container cargo to transshipment hubs at foreign ports. In May, the Centre relaxed cabotage norms allowing foreign ships, chartered by Indian citizens or companies, to ply on local routes for transshipment purposes. After the relaxation, India is witnessing an upswing in transshipment volumes and if the trend continues it would emerge as a transshipment hub, Shipping Secretary Gopal Krishna told PTI.

“Diversion of Indian cargo for transshipment to neighbouring foreign ports has definitely come down and its impact will be visible by the end of the fiscal and it is bound to substantially come down in the next fiscal,” he said. The figure is likely to reach 2 million tonne, from about 0.8 MT and the trends have started showing, he said. “The transshipment volumes in India has risen to 16,543 TEUs (twenty foot equivalent unit) in July from 11,589 TEUs in June. This is a 43 per cent jump in a month,” said Container Shipping Lines Association (CSLA) that represents 31 container shiplines.

CSLA Chairman Deepak Tewari told PTI: “The policy reform has been very encouraging for container shiplines and we are confident to take the 16,543 TEU volumes recorded in July to 200,000 TEUs within six to eight months time.” The figures of transshipment within India are as low as 3,583 TEUs. Had there been no cabotage relaxation, of the 16,543 TEUs, India would have lost 41 per cent to Colombo, 22 per cent to Singapore, 11 per cent to Port Klang and 26 per cent to others, CSLA estimates. Various shipping lines are in the process of repositioning their routes which is decided annually, Krishna said, adding that once it is done the major impact will be visible.

A Shipping Association official said Colombo port was forced to cut transhipment rates by 9.5 per cent post India doing away with cabotage restrictions in May. Credit rating agency ICRA has said that the government move to relax cabotage restrictions will create a level-playing field for foreign-flagged ships and is a long-term positive for ports. The relaxations are positive from a transhipment perspective for the Indian ports, it said. The government move was aimed at not only arresting diversion of Indian container cargo to foreign ports but to create entrepreneurship in shipping operations while unfurling opportunities for citizens including former army and navy personnel with desired silks and knowledge to charter smaller feeder vessels and participate in the fast growing container trade. At present transhipment hubs at Singapore, Malaysia, Colombo and Jebel Ali near Indian coastline get about 33 per cent of Indian container cargo which is aggregated there before being shipped to final destinations.

Transshipment of Indian cargo at foreign transshipment ports leads to traffic growth there and job creation in other countries, loss of revenue from Indian shippers in terms of port and logistic charges and loss of foreign exchange to foreign ports as the transhipment revenues and charges are collected from Indian exporters/importers by foreign ports. Krishna said the policy in the first year, as per conservative approach, will result in at least 10 per cent reduction of the Indian container cargo transshipment to foreign ports. Ports like Vishakhapatnam, Kandla, Cochin, Tuticorin, Ennore and Chennai are likely to benefit most initially. As per estimates Indian ports are likely to get an additional income of about Rs 200 crore on account of this.

Source: Financial Express