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Colombo cuts rates after India eases cabotage rules

BL03STATESSHIPColombo port, which thrives on Indian cargo containers that passes through it, has cut transshipment rates by 9.5 per cent after India lifted cabotage restrictions in May, allowing foreign ships to operate on local routes to reduce the country’s dependence on the neighbouring hub to transport cargo.

The island nation, one of the major container transshipment hubs in the region along with Singapore, Port Klang and Jebel Ali, is taking the fight for containers to the Indian shores.

Transshipping containers through Colombo entails extra time and costs, hurting India’s competitiveness in the global market.

Lankan discount

“After India relaxed cabotage, Colombo reduced the transshipment tariffs by offering a discount of 9.5 per cent,” said Deepak Tiwari, Chairman of the Container Shipping Lines Association (CSLA), adding that “shipping lines were not in love with Colombo.”

“Individual terminals must be offering volume-based rebates to shipping lines as part of their agreement, but on the general published rates, no revision was done recently. Customers bringing incremental volumes are offered volume discounts by terminals,” Upul Jayatissa, Chief Manager (Marketing and Business Development), Sri Lanka Ports Authority, told BusinessLine over phone from Colombo.

Jayatissa reckons that India’s decision to relax cabotage will have an impact on Colombo traffic. “But, it will depend on the shipping lines; they are the ones who decide the routing of services. They have to decide what they really want to do. So far, we have not felt any impact on our transshipment business, but I don’t know what will happen in the future,” he said.

The transshipment volumes of Colombo, according to Jayatissa, have grown by 20 per cent in the first half of 2018 calendar year compared to last year. Colombo port handled 4.8 million twenty-foot equivalent units (TEUs) in 2017 from four terminals. Of this, about 45 per cent was India-bound or originating containers, underlining Colombo’s dependence on Indian cargo for its sustenance.

Marine charges

The vessel-related charges or marine charges at Indian ports are four times more than in Colombo, said VK Singh, Managing Director, Shreyas Shipping & Logistics Ltd.

For instance, the marine charges for a 24-hour stay for a 5,000-TEU capacity ship is about $40,000 in India and $10,000 in Colombo. “This is a big attraction for the lines. That’s why they don’t want to stop calling Colombo,” said Suresh Amirapu, CEO, Bharat Mumbai Container Terminals Pvt Ltd, a unit of Singapore’s PSA International Pte Ltd.

The marine charges are low in Colombo because the Sri Lankan government funds basic infrastructure, including dredging, unlike in India.

“The networking is already established in Colombo,” said Jibu Kurien Itty, CEO, India Gateway Terminal Pvt Ltd, the transshipment terminal-run by DP World at Vallarpadam in Cochin Port Trust. “So, when you are looking to divert containers away from Colombo, you have to be actually two steps ahead in the game,” he said, stressing the need to “rationalise marine charges in India.”

“When you are competing with Colombo, you have to play to your strengths. India has the cargo; that’s what Colombo does not have,” Jibu added.

Courtesy – Business line

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