Karan Adani, Managing Director of Adani Ports and Special Economic Zone Ltd (APSEZ), has urged Pinarayi Vijayan, Chief Minister of Kerala, to press the Centre to continue the easing of cabotage rules, warning that the rollback could adversely impact the prospects of the Vizhinjam International Deepwater Multipurpose Seaport.
The Ministry of Ports, Shipping and Waterways on January 21 scrapped three general orders issued in 2018 that had permitted foreign-flag vessels to carry export-import (EXIM) containers meant for transshipment, empty containers for repositioning, and select commodities on coastal routes without obtaining a licence from the Directorate General of Shipping. The withdrawal will take effect three months from the date of the order to allow stakeholders to transition to the revised regulatory framework.
Invoking Article 6 of the 2015 concession agreement signed between Adani Vizhinjam Port Pvt Ltd, a wholly owned subsidiary of APSEZ, and the Kerala government, Adani requested the state to provide “reasonable support and assistance” in securing an exemption under Section 407(3) of the Merchant Shipping Act, 1958. The provision allows the Centre to exempt certain operations from cabotage restrictions.
India’s cabotage rules reserve coastal trade for Indian-flag vessels, allowing foreign-flag ships to operate only when Indian ships are unavailable.
A Kerala government official said that when the concession agreement was signed in August 2015, there was no cabotage relaxation. The state had incorporated a clause agreeing to assist the concessionaire in taking up the matter with the Centre on a best-effort basis. However, by the time Vizhinjam commenced operations in December 2024, cabotage relaxation was already in place, and the clause was not invoked.
Following Adani’s letter, Chief Minister Vijayan has written to the Centre highlighting the strategic importance of continued cabotage relaxation for Vizhinjam’s growth.
Industry Concerns
Shipping industry sources cautioned that the rollback could significantly reduce container volumes at Vizhinjam, potentially benefiting competing regional hubs such as Colombo.
They indicated that Mediterranean Shipping Company (MSC), the world’s largest container line, may shift transshipment operations from Vizhinjam to Colombo if cabotage restrictions are reinstated. More than 95 per cent of the 1.575 million TEUs handled at Vizhinjam since commercial operations began in December 2024 were carried on MSC-operated vessels. Of the 741 vessel calls recorded so far, over 70 were MSC ultra-large container ships with capacities of around 24,000 TEUs.
Vizhinjam became the fastest new Indian port to cross the one-million TEU milestone, largely driven by MSC designating it as a transshipment hub.
Policy Rationale
The 2018 relaxation of cabotage rules was introduced to reduce the transshipment of Indian cargo through foreign ports, lower freight costs, improve container availability, and create a competitive logistics ecosystem.
However, following a review and stakeholder consultations, the Ministry concluded that transshipment of Indian containerised cargo through foreign ports had not declined significantly, nor had freight costs reduced meaningfully. It also noted that anticipated growth in feeder capacity and the Indian container fleet had not materialised.
According to the Ministry, Indian trade remains heavily reliant on foreign-flag vessels, exposing exporters to external market risks and limiting foreign exchange retention. The withdrawal of the 2018 orders is among measures aimed at promoting Indian shipping, including plans for a proposed Bharat Container Shipping Line.
The Centre has emphasised that strengthening Indian shipping tonnage and ensuring seamless coastal and international cargo movement are critical to achieving India’s $1 trillion goods export target by 2030.
