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Transshipment Opportunities looking up in Indian Ports following relaxation of Cabotage Laws says Maersk Line Chief

India’s abolition of restrictive cabotage rules for foreign-flag carriers a year ago has reinvigorated intra-country containerized transportation and scaled down foreign transshipment, according to Maersk Line, which commands approximately 20 percent of India’s emerging container market. 

“Meteoric” increase in transshipment handling at Indian ports in the past year 

In an interview with a shipping website JOC.com, Steve Felder, Maersk’s managing director for South Asia, said there has been a “meteoric” increase in transshipment handling at Indian ports in the past year and that Maersk has positioned itself to seize the opportunity the resurgent market presents.

 “We are using this opportunity to increase transshipment at ports in India, position empty containers in deficit locations, and optimize the ease of doing business for importers and exporters,” Felder said. 

Spike in transshipment movement: additional container-related earnings for Indian ports 

He said besides meeting the broader goal of encouraging direct shipping, the spike in transshipment movement is driving additional container-related earnings for Indian ports. 

Port charges remain the crux of carrier concerns 

Maresk vessels have already started using ports both on the east and west coasts for transshipment of empty and laden containers.” While government efforts on supply chain improvements have accelerated in recent years, much more needs to be done to transform Indian ports into regional hubs, where port charges remain the crux of carrier concerns, according to Felder. 

We find the Indian port charges to be an additional burden for India’s export-import trade, as they are high relative to many countries, which is not conducive to promoting a healthy competitive environment,” Felder said. 

 India must compete with foreign hub ports 

To create and sustain a competitive environment and to develop hub ports, India must compete with foreign hub ports in terms of cost, productivity, and service levels.” He said high port charges generally deter mainline carriers from upsizing their port calls, which means hub development efforts without tariff changes are unlikely to see traction.

 To cite an example, if we look at Colombo in Sri Lanka, the number of sailings is far greater than warranted by the domestic market,” Felder said. “This frequency is generated by transshipment volumes, and hence, local import-export trade is promoted and enabled.” 

 Lower port costs critical to developing coastal shipping 

Further, according to Maersk, lower port costs are also critical to developing coastal shipping as a competitive alternative to inland rail and road

Networks. “The development of regional sea trade is also affected in the same manner [because of uncompetitive port pricing],” 

Felder said. “For instance, regional trade in South Asia is very small as compared to other regions such as Asia, the Caribbean, and the Mediterranean.” 

The world’s largest container carrier, however, highlighted that it remains committed to working with the Indian government to further improve supply chain fluidity, for which it said greater emphasis on hinterland connectivity and digitization is vital. 

With the cabotage relaxation, foreign ship operators are now free to transport laden export-import containers for transshipment and empty containers for repositioning between Indian ports without any specific permission or license, unlike in the past when domestic ship operators had a virtual monopoly over the coastal or intra-India transportation. 

Statistics from CSLA shows improving transshipment demand at domestic ports 

Statistics produced by the Container Shipping Lines Association (CSLA), the umbrella body of foreign shipping lines in India, support the industry view of improving transshipment demand at domestic ports. 

The latest data pegs such incremental gains for Indian ports at 100,395 TEU in May 2019, up from 93,646 in January. The group argues those volumes would have otherwise gone through international transshipment ports, particularly Colombo.

  Bharatmala fand the Sagarmala lauded 

The carrier lauded the Indian government’s fiscal 2019-20 budgetary statement, outlining a huge spending plan for infrastructure development in the country via the two national flagship programs — the Bharatmala for highway upgrades and the Sagarmala for maritime improvements.

He said micro small-to-medium enterprises (MSMEs) can play a pivotal role in that effort. “The proposed investment of Rs.100 lakh crore [about $1.5 trillion] in infrastructure over the next five years recognizes the importance of the private sector and the need for innovative financing models,” 

Maersk said in a separate statement. “We recognize the potential of MSMEs in the hinterlands and have been investing in building in-country warehousing and container depot facilities and providing credit access to grow their business.” Maersk has been extremely bullish on India’s containerized trade outlook. 

In a recent regional analysis, the carrier said the buoyant economy can buck the downward demand trend in larger global markets. Data collected by the shipping website JOC.com for the first quarter of the current fiscal year somewhat backs that optimism.

 The country’s major public ports saw combined throughput increase to 2.6 million TEUs during the first three months of the current financial year, up 7 percent from 2.4 million TEUs achieved during April-June 2018.


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