To solve this long pending issue, the director-general of shipping convened the first stakeholders meeting on December 11, 2014 wherein Indian National Shipowners’ Association (INSA), SIMA, CITI, TEXPROCIL, Cotton Association of India (CAI) and the Textile Commissioner participated.
At this meeting, it was decided to have mutual discussions between SIMA and INSA to come to an understanding to make domestic coastal shipping cost effective, as relaxation of Cabotage Rule would affect the Indian shipping industry.
The cabotage law makes it mandatory to use Indian ships for transporting cargo between different ports along the country’s coast. Foreign ships can be allowed to operate only when Indian ships are not available after taking a licence from India’s maritime regulator, according to the cabotage law.
The government is considering to grant relaxation as an effective trade strategy to minimize, if not totally eliminate, India’s dependence on neighbouring hub ports, Colombo for instance, to send and receive transshipment containers which will prove cost effective to exporters and importers. With this goal, the govt is likely to grant cabotage relaxation for some ports which include Mundra, Pipavav, Vizhinjam and Vizag.
Following this meeting, further meetings between SIMA and INSA representatives revealed that Indian shippers have to pay duty on bunkers consumed and other taxes which are not applicable on a foreign shipping company and other issues which were the root causes for higher rates charged by Indian shippers. A joint memorandum was sent to the Ministry of Shipping and also to Ministry of Textiles in February seeking certain concessions and relaxations in the forthcoming budget for the Indian shippers so as to bring down the cost of cotton transport on par with foreign shippers.
The joint memorandum also appealed to the Ministry’s to provide duty free bunkers for Indian flag vessels for carrying cotton and textile products on Indian coasts and also resolve issues pertaining to restriction of number of moves in the ports.
For the last four years, SIMA has been urging the Union Government directly and also through Confederation of Indian Textile Industry (CITI) and Cotton Textiles Export Promotion Council (TEXPROCIL) to relax Cabotage rule and permit foreign flag vessels to transport cotton. It is expected that INSA’s offer of lower freight rates and assurance of deployment of more vessels to fully cater to the demand for cotton transportation from SIMA members and other cotton buyers.
It is estimated that around 1mn tonnes of cotton is moved from Gujarat & Maharashtra to textile mills in Tamil Nadu by road. “Textile industry is expected to get a big boost in profits from lower transport costs and the Indian shipping industry will benefit from greater business opportunities, while the country will benefit by way of reduced fuel consumption.