The cabotage law is a provision within the Merchant Shipping Act 1958 restricting foreign vessels from carrying cargo originating from and headed towards destinations within the country and referred to in shipping parlance as coastal cargo.

Chief Minister Oommen Chandy has said that the Union government has decided to relax the cabotage law and that Shipping Minister G.K. Vasan has assured him that a notification to this effect will be out soon.

The Chief Minister was speaking to reporters after a meeting with Mr. Vasan at his office in New Delhi on Tuesday.

The Union Ministry had been considering relaxing the cabotage law after appeals from the State government during the inauguration of the International Container Transshipment Terminal (ICTT) at Vallarpadam on February 11, 2011.

The cabotage law is a provision within the Merchant Shipping Act 1958 restricting foreign vessels from carrying cargo originating from and headed towards destinations within the country and referred to in shipping parlance as coastal cargo.

There have been calls from different quarters for relaxation of the law to allow Indian transhipment terminals to increase business and to elicit better quotes for proposed container projects such as the one at Vizhinjam.

Pressure mounted on the Union Ministry for relaxation in the law following poor performance by the transshipment terminal at Vallarpadam for nearly 18 months now.

Container movement through the terminal, the first greenfield project of its kind in India, registered a fall despite the month of July showing record handling of boxes in a single month.

Vallarpadam ICTT, though designed to handle 30 lakh containers a year, has a capacity to handle a million containers a year in the first phase. However, a year-and-a-half after it was commissioned, it has reached only 33 per cent of capacity utilisation.

Figures for the period between April 1 and July 31 this year show that container movement is down one per cent compared to the same period during the previous year.

India’s container business is well over seven million TEUs (twenty-food equivalent units) a year. About 40 per cent of this volume is transhipped at foreign ports, mainly in Colombo. Indian export-import business incurs delays ranging up to 10 days and up to Rs.10,000 a container when containers are transhipped through ports such as Colombo.

Relaxation in the cabotage law will help the ICTT attract more mainline sails out of Kochi.

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