Union Cabinet decision to help attract more coastal cargo to the terminal

The Union Cabinet on Thursday decided to relax the cabotage law under the Merchant Shipping Act, 1958 for transshipment of export-import containers at the Vallarpadam International Container Transshipment Terminal. A Press Information Bureau statement said the decision would be reviewed in three years.

Industry sources here say the relaxation of the cabotage law, which protects domestic shipping lines by reserving coastal cargo for Indian ships, is aimed at attracting more cargo to the Vallarpadam terminal.

Coastal cargo is the cargo that moves from ports within India to ports within the country. Every country has made provisions to protect their country-flagged vessels.

The bulk of India’s transshipment business of more than 7.5 million TEUs takes place through Colombo and Salalah causing considerable loss of time and money to the Indian export-import business. It is estimated that transshipment of each container through foreign ports costs an extra Rs.10,000 and a delay of 10 days.

Previous examples

The Central government has followed previous examples of relaxation in the cabotage law in the case of Vallarpadam. The Centre had relaxed the cabotage law in 1992 for five years for the Jawaharlal Nehru Port Trust, Mumbai. It was further relaxed for a period of one year in 2006.

“The primary objective of relaxation in cabotage policy is for ICTT, Vallarpadam, to attract cargo destined for Indian ports which are presently being transshipped at Colombo and other foreign ports. This initiative is expected to promote transshipment of Indian cargo from ICTT, Vallarpadam, and reduce dependence on nearby foreign ports,” the PIB said.

Meanwhile, business at the Vallarpadam terminal appears to have been stuck at last year’s level of 3.3 lakh TEUs going by the current trends. Industry sources say there has been no growth in container business and that negative growth was recorded early August.

The ICTT, operated by DP World, is designed to handle a million TEUs of containerised cargo in the first phase. Business is expected to pick up with the streamlining of cargo clearance procedure earlier this year and now the relaxation of the cabotage law.

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