Anchoring cabotage laws in India

The biggest reason for retaining cabotage laws reserving coastal Indian domestic trade for Indian flag shipping is simply this—given a level playing field, nobody else can do it cheaper or better, anywhere in the world, than Indians

Imagine a scenario where a trucking company from, say, Mongolia, was allowed to operate trucks for domestic business in India, in direct competition with Indian truckers. Fair enough, some proponents of liberalisation and free trade may argue, after all it is all about market forces. To some extent, they may be correct, if it provides better competitiveness to the customer—then why not? It is assumed, of course, that the operators will abide by the laws and rules of India, while in India. Sounds fair, doesn’t it?

Now take another scenario—this Mongolian truck operator is exempted from all taxes, permit fees, insurance rules, labour rules, safety mandates, tolls, national security considerations, environmental adherences, maintenance schedules, and so on and so forth. In addition, they are not to be fined for overloading or speeding, and they will, in addition, get preferential treatment for everything else, will not be subject to Indian laws in case of mishaps, and will instead get all benefits including subsidies from their own government.

Great for a small segment of people, maybe, but a disaster for the rest of us in India. And next, imagine all this in the hands of trucks and truck drivers from an enemy country? The Union Carbide mishap in Bhopal would be nothing in front of such a scenario. And for absolutely no tangible benefit to anybody. Other than the select few who push this ridiculous proposition forward.

Something like that describes the real scenario behind demands by sections of the government—including the shipping ministry—and some shippers in India, in context with shrill cries asking for change of cabotage laws to favour foreign shipping lines to get free run of coastal shipping trade between Indian ports and removal of ‘cabotage’ laws traditionally protecting all coastal and inland shipping for Indian flag vessels. Hang national security, ignore the fact that countries like the USA and China also use cabotage and do not permit foreign flag ships to carry coastal cargo—here in India the reality that there is even debate on the subject is enough. To get those who would sell the country for a few coins to jump on to the bandwagon again.

And it is not only about national pride and self-respect —next we may see demands for the Indian Navy and Coast Guard ships to be farmed out to the lowest bidder—it is also about the simple fact that worldwide elements from Indian shipping are proving without doubt that Indians are at the top of providing efficient shipping solutions. But here in India, it is our own shipping ministry which chooses to propose and then bulldoze this change in cabotage laws, regardless.

Coastal shipping in India has been the neglected stepchild for far too long—mainly because there weren’t enough ports, and likewise, there wasn’t too much cargo generated. Now that both these issues are resolved—it is not just about the demands that are being made to let outsiders into the party. It is more about simply making things fair for Indian shipping on the Indian coast. It is also about increasing competition in coastal shipping, sure, but by letting in more Indian flag ships.

Currently, the difficulties faced by Indian flag ships on India’s coast are probably worse than even the worst that could have been thought of by the British when they were trying to destroy India’s trade. Taxes, customs duties and regulations which are not imposed on foreign ships visiting Indian ports are routinely imposed on Indian flag ships, by the same entities who wish to promote foreign flag ships along India's coast, needless to state— without the benefit of pari-passu benefits to Indian ships visiting the countries to which the foreign flag ships belong—because those foreign flag ships are largely from ‘Flag of Convenience’ tax shelters with hardly any trade, like Liberia, Panama, Sierra Leone, Mongolia, Marshall Islands and others.

The biggest reason, however, for retaining cabotage laws reserving coastal Indian domestic trade for Indian flag shipping is simply this—given a level playing field, nobody else can do it cheaper or better, anywhere in the world, than Indians. That, however, does not seem to impress those in the Indian shipping ministry.

1 decade ago
I endorse your views fully.Transport of cargo by ship within India has to be treated in same manner in which Road or Rail is treated. Thus if a ship has to carry cargo within india it has to be an Indian registered tonnage.
Also with coast being so sensitive there can be any concession at all.
We can not call it protection but it is conditions for operating within India..
Sukerna Amirapu
1 decade ago
Let us look at the 'role model' for this spirit of free enterprise - U.S. of A. Have a look at their protectionism on the coast with strong cabotage laws. India needs this kind of protection but it does not need the bottle-necks outlined in your article.
V Malik
Replied to Sukerna Amirapu comment 1 decade ago
Thank you for writing in. USA's position on cabotage is well spelt out here:-
To some extent, a paralel can be drawn with the automobile industry, given a free rein in India with controlled imports - and see where the automobile industry in India is today?
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