In a much-publicised policy reform, in May 2018 the Indian government
removed cabotage barriers that had previously prevented foreign tonnage
participation in transportation of containers between Indian ports. The move
was then hailed as a game changer for Indian containerised trade, opening a
window for more capacity and direct port calls amid greater export growth
signs.
Taking stock of developments
over the last six years, the Indian maritime regulator, Directorate General of
Shipping (DG Shipping), has now proposed reinstating cabotage regulations for
foreign lines in the interest of local ship owners.
“Following the introduction of government orders (in 2018), the Indian
container shipping entered a phase of stagnation and decline,” DG Shipping said
in a public notice, circulated among industry stakeholders for comments. DG Shipping noted that the cabotage waiver
for foreign container tonnage cost the Indian shipping industry dearly as
investment interests rapidly eroded amid growth concerns.
“It appears that the regulatory framework established by these
government orders may have contributed to creating an uncompetitive and
unfavourable operating environment for Indian shipping companies,” said the
authority.
According to statistics provided by DG Shipping, there are now only 30
containerships registered under the Indian flag, making up some 56,000 teu of
capacity during the last fiscal year (2023-24), following sequential slides
over recent years. Explaining this
downward trend, the regulator said the market had become increasingly
challenging for Indian ship owners to expand tonnage due to high operational
and capital costs in new supply-demand dynamics. “It seems Indian operators
have gradually lost market share, leading to a growing reliance on foreign
vessels for the transport of goods.”
For foreign operators, however, it is believed that coastal shipping has
been a boon, offering regular calls at Indian ports to drive volumes, now even
more significant as mega lines consolidate their integrated logistics
strategies, rather than being port-to-port shipping service providers.
For Indian shippers, more than 95% of containerised ocean capacity comes
from foreign-flagged carriers, reflecting the characteristics of an “oligopoly”
in which a few alliances could potentially control pricing and capacity.
DG Shipping believes supporting
smaller players in markets dominated by a handful of large companies is
critical to building a more competitive environment and resilient supply
conditions. The authority has asked stakeholders to file their
responses by 28 October, before announcing a final revised cabotage policy. With
depleted fleets, national carrier Shipping Corporation of India (SCI) has had
no significant presence in the container segment in recent years, barring a
consortium deal with MSC on India-Europe trade. SCI recently added a vessel to
this network, upgrading itself from a slot charterer on the weekly loop, which
it calls IPAK. “This addition of MV
SCI Delhi to our in-chartered fleet signifies our commitment to
support Indian exporters and strengthen global trade networks,” the carrier
said in a statement.
The vessel acquisition on time charter and its deployment followed fresh
directives from the government, after pro-exporter groups raised concerns over
soaring freight charges and vessel space shortages. The public carrier has
further vessel acquisition plans to raise its market profile, but it has a long way to go to catch up
with foreign rivals on capacity strengths.