Anil Singh, head of global port operator DP World in India, has never been seen so cheerful ever since he took charge in 2009. The Government has finally accepted — of course, after sustained lobbying — his request for relaxing Cabotage regulation that restricted foreign ships from operating feeder services between Vallarpadam container terminal in Kochi and other ports in India.
DP World, the Dubai Government-owned company, operates the International Container Transhipment Terminal, commonly called ICTT Vallarpadam. Last week the Cabinet relaxed cabotage regulation for ICTT for three years. This will allow foreign flag vessels to operate coastal services from and to the terminal. The policy change is expected to enable Vallarpadam to attract more trans-shipment cargo.
The cabotage restriction was said to be one of the main issues that has been discouraging large vessels from calling at Vallarpadam — the trans-shipment facility created to divert Indian cargo going through the neighbouring Colombo port.
Right time
“It is a good news and the Government has taken the right decision. As you know, huge investments have gone into the project, not from us alone. The Government also invested a lot. Erosion of these investments hurt all stakeholders,” said Singh, who lobbied to convince the Government on the need to ease cabotage.
Singh thinks the announcement has come at the right time. “This will help build (business) confidence. Right now there is a confidence deficit and policy measures like this will help,” he said during a chat with Business Line , immediately after the Government announcement.
In Kerala, the State Government and the Cochin Port Trust have been very supportive of Vallarpadam. The Cabinet decision has come at a time when the State Government itself is launching a major initiative like the Emerging Kerala event to attract investors, he said.
Time to prove potential
Singh has been seeking lifting of Cabotage for at least five years but the Government has done it for three years with the option to review it thereafter. But he is happy with the relaxation for the time being.
“We have to demonstrate that we can raise volumes by then. I am confident that we can do it.”
Globally, DP World has good relations with all major shipping lines. With the Government deciding to free the market, the company is confident that large shipping lines will start calling at Vallarpadam.
“On our part, we need to step up efforts to ensure the success of Vallarpadam,” he added.
Where will the additional cargo come to Kochi? Cargo can come from Hyderabad, Nagpur and other central parts of the country, as also from down south. Containers going to Colombo from Tuticorin and other southern ports can find Kochi far economical. Kochi is well-linked by road, rail and sea. Cargo can also come from Gujarat by sea.
Economical choice
Most major Ports are facing congestion. JNPT has a capacity problem, Chennai is not any different. With good transhipment and back up facilities, Kochi will be able to attract more cargo, he felt.
It took pretty long for the Government to take the decision as domestic shipping lines were resisting any move to ease Cabotge.
Their contention is that coastal services were reserved for domestic lines to ensure growth of shipping in the country. Once the entry is allowed to foreign operators, there will be unhealthy competition. While Indian lines are subject to various taxes, regulations on manning and training, foreigners can operate without any of these restrictions. There will be huge difference in operating costs. This could slowly kill domestic shipping.
Besides, many countries have tightened coastal shipping regulations. “Without creating a level playing field, opening up of coastal trade to foreign competition is not in the interest of the Indian shipping industry,” said a leading ship-owner.
Unfounded fears
Singh thinks Indian shipping lines fear of losing cargo is far fetched. With the relaxation in Cabotage, coastal activity will rise as more local cargo will be moved by sea. This will increase demand for coastal services. There will be fair and healthy competition, which will help the trade.
Thanks to various reasons, Vallarpadam terminal has been handling very little transhipment cargo. The terminal is yet to have the promised 14.5 meter draft. Only one berth has 13.5 meters. This could be solved soon as issues related to dredging have been sorted out. Will Cabotage relaxation alone help Vallarpadam to get higher volume?
Everyone is not as optimistic as Anil Singh. Vallarpadam has other issues. Terminal handling charges are said to be higher at Vallarpadam compared to other Indian ports. Can ICTT match the service and the facility available at Colombo? At the end of the day, it is the trade which will be the beneficiary or the loser.
On a long-term basis, the port needs to spend a huge amount in maintaining the draft. It may be the responsibility of the port trust, but eventually it has to generate income to meet these recurring expenses.