Relaxed shipping laws hailed in India, become Colombo shippers' concern

The Indian government's relaxation of the Cabotage (shipping) Law is likely to impact on business at the Colombo port as the country gears up to becoming a hub in the region.

This law restricts foreign vessels from carrying cargo originating from and headed towards destinations within India. Industry specialists believe that there is a possibility it could be to some extent "retaliation" on the part of the Indian authorities over irritated with China's presence in the Colombo South Harbour development.

Currently, the Colombo South Harbour is the only one developed by a state owned enterprise of China namely the China Merchant Holdings that would handle 70% of transshipment of which 90% is Indian traffic. It was reportedly stated that India relaxed its cabotage law for a period of three years for the Vallarpadam International Container Transshipment Terminal. Indian importers and exporters have noted that these changes would enable the terminal to handle large container vessels in the port resulting in substantial savings for Indian exporters and importers in terms of lesser freight cost. In a statement to the Indian media the Hindu online newspaper reported that "despite a steady growth in Indian container traffic over the years, more than 50 per cent of containers were being transshipped via ports outside India mainly Colombo, Singapore, Salalh and Jebel Ali." Relaxing of the cabotage law is expected to facilitate the growth of the DP World Port in Vallarpadam in Kochin that accommodate ships with a capacity of 8000 plus TEUs since it was perceived to be a deterrent to its actual take-off, analysts in Colombo opined. They noted that while this would not impact on the Co- lombo port in the short term it is expected to have a medium and long term impact with a bigger impact in about 3-5 years' time. This would mainly be due to the Indian cargo amount to around 25-30% travelling via Colombo would eventually be sent through Vallarpadam.

It was reportedly stated that with India's container business at over seven million TEUs (20-foot equivalent units) a year nearly 40% of this volume is mainly transshipped through Colombo and the Indian export-import business delayed upto 10 days when they are transshipped through this port. Another question raised by shipping experts is that the ultra large containers to hit the Asia-Europe route by 2015 would have a capacity of 3.6 million TEUs.

It was likely that this would provide 90% of the capacity on this route with these type of vessels calling only at about 6-7 ports. In this respect, experts question whether the Colombo port would become a feeder port if they were not part of the schedule for these ships. Currently, it is stated that top shipping line Maersk is constructing at least 20 ultimate container vessels with a carrying capacity of 18,000 TEUs. It was noted that these would not call Colombo since it would not be able to entertain that capacity. Meanwhile, the Colombo port has seen a drop in volumes in the last two months as August recorded a total of 362, 711 TEUs compared to 375, 204 TEUs last year.

Similarly in September as well there was a drop with figures totaling 326, 199 TEUs compared to 340, 596 TEUs in 2011. However, while the months of May, June and July recorded an increase this year compared to 2011, the January to April dipped as opposed to the previous year's figures.