Cabotage law: Level-playing field sought for Indian, foreign ship owners

      09/01/2018

Malini Shankar, India’s director general of shipping, has made out a case for providing a level-playing field to local ship owners in the context of the recent relaxation in cabotage law for certain cargo segments granted by the government which pits the local fleet owners against their foreign rivals.

“The larger issue is how do we compensate the Indian ship owners to ensure that they are not having an uneven level-playing field and this simply has to be distinctly addressed,” Shankar said on Friday at a panel discussion on cabotage relaxation that has roiled the local shipping industry.

“I think it will be to the benefit of Indian and foreign ship owners, the ports and the trade. This is what we should be working at rather than one versus the other,” Shankar said.

Shankar, a secretary-level officer of the Indian Administrative Service (IAS), has become the lone ranger in the government lending a supporting shoulder to the beleaguered local shipping industry.

The DGS reckons there are no “two opinions” that container transhipment has to move from Singapore and Colombo and populate Indian ports, increase the number of ships visiting the ports, reduce the imbalance in the movement of empty containers along the coast etc.

“The trade will always be wanting more and more (cabotage relaxation on other cargo) but how do we balance the interests of two different segments within the industry, which are the Indian ship owners and the foreign ship owners. The trade has to be benefited, but at whose cost”, she asked.

“Almost every country in the world has cabotage law where they protect their own national ships to a much larger extent than in Asian countries. The United States, for example, does not allow coastal trade on ships unless they are built, owned and manned by the Americans. So, these are the foreign ship owners who have the benefit of having tax legislation in their favour and cabotage legislation in their favour and they also have cabotage legislation relaxation favour in a country like India. So, the cost benefit will be heavily in favour of foreign flag ships. This has to be understood by the trade and the industry at large if we are to find convergence,” Shankar said.

Shankar’s bold views on a controversial policy change on cabotage law announced by the government - of which she is an integral part – in May and June this year, found an unlikely supporter in Deepak Tiwari, the Chairman of the Container Shipping Lines Association (CSLA), a group of foreign box lines that has been lobbying for cabotage relaxation for many years.

The difference in cost between a foreign flag container vessel and an Indian flag container vessel operating along the Indian coast was 41 per cent in favour of a foreign flag in 2015. “That’s not a level- laying field at all,” Tiwari who is also the managing director of MSC Agency India Pvt Ltd, which represents Mediterranean Shipping Co S A , the world’s second biggest container line in India, said.

“The ball is distinctly in the hands of the government. Primarily, the government has to bring in a level-playing field not by stealing from Peter and giving it to Paul but by making Paul and Peter compete on a level-playing field. The Indian flag ships needs the support of the government of India and now more than ever. The government has to look into this,” he said.

Questioning the logic behind the government’s decision to ease cabotage, K M Sheth, Chairman of Great Eastern Shipping Company Ltd said: “they (government) don’t realise that the country will be the loser due to this”.

“By law, Indian flag ships have to hire only Indian nationals as crew. For Indian ships trading on the coast, there is a tax deducted at source (TDS) on crew salary. But, for the same seamen working on a foreign ship trading on the coast, there is no tax. So, it’s a revenue loss to the exchequer. How do you justify the huge cost differential between an Indian ship and a foreign ship trading along the coast. The government ties our hands and legs and then expect us to run Olympic Games,” Sheth said.