Coastal freight rates may drop 15%

Freight rates for shipping containers along the nation’s coast are expected to drop 12-15 per cent, according to the Indian National Shipowners Association (INSA).

This follows the Centre’s decision to exempt domestic cargo on Indian flagged ships along the coast from customs and excise duty. The Centre has also decided to extend the period of such exemption, offered only to export-import and empty containers along the coast.

“The drop in bunker prices will allow firms to utilise their ships better,” Anil Devli, Chief Executive Officer, INSA, told

BusinessLine . “They will be able to optimise the cargo flow along the coast and have two-way movement. This will also help feeder vessels. We can expect freight costs to drop 12-15 per cent.” The improvement in cargo movement along the coast is also expected to enhance the utilisation of container ships connecting India. “The ship utilisation can improve from, say, 60 per cent levels to 80-90 per cent,” said Devli.

According to a government statement, the exemption of customs and excise duty on bunker fuel has been extended to Indian flag ships carrying a mix of export-import, empty and domestic containers.

With the government removing the duty on bunkers for export-import cargo along the Indian coast last year, freight rates are already down 30 per cent, said another shipping sector official. Now, even for pure domestic container movement, there will be a drop in freight rates.

Ships moving along the Indian coast vary from 300 TEU to 2,000 TEU. (TEU, or 20-foot equivalent unit, is a unit of cargo capacity).

Companies with coastal ships include Shreyas Shipping, Allcargo Logistics, Gati and Transport Corporation of India. The government move is expected to catalyse other firms also to invest in small ships on routes such as Nhava Sheva-Kochi.

Shipping Corporation of India does not have coastal ships, though it has foreign-cum-coastal ships, such as those whose ports of call include Dubai-Mundra-Kochi-Dubai.