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A storm is brewing for India’s domestic shipping industry

A storm is brewing for India’s domestic shipping industry
18 Oct 2018

India’s domestic shipping industry is considering its options after the central government relaxed cabotage rules. It now looks set to do away with a ‘right of first refusal’ that gives Indian shippers a chance to match the lowest rate offered by foreign ships. But what are the potential implications of this, Joe Baker asks?

With a vast coastline

spanning 7,500km and a strategic location nearby major shipping lanes, India has always been well-placed to enjoy the benefits of a burgeoning maritime sector. According to the country’s Ministry of Shipping, maritime transport accounts for around 95% of India’s trade by volume. Over the course of this year, nearly 680 million tonnes of cargo traffic passed through the country’s twelve major ports.

In 2014, Prime Minister Narendra Modi launched ‘Make in India’, an initiative designed to enhance infrastructure and transform the country into a global hub for goods manufacturing. Numerous sectors, maritime included, have seen bolstered investment as a result; under its Sagarmarlar Programme, for instance, the Indian Government envisions a total of 189 port modernisation projects, involving Rs1.42tn (US$22bn) in investment by 2035.

And yet, ongoing developments in India’s maritime regulations have caused a stir among participants in its domestic shipping industry. In particular, the Indian Ministry of Shipping has relaxed rules surrounding cabotage – the movement of goods between two ports in the same country – to make it easier for foreign shippers to move cargo and carry out coastal shipping activities in the region.

According to the Indian Government, opening up to foreign carriers will lead to much-needed competition between shipping lines, as well as boost profits at local ports. However, many Indian shipping companies and organisations believe the move is accommodating foreign interests at the expense of the domestic shipping industry, and could lead to dire consequences for India’s economy.