Cabotage relaxation a huge opportunity to woo Indian vessels to change flag to Sri Lanka

In a rather surprising move, the Shipping Ministry in India sent out an unannounced notification that commencing late May the cabotage rule in India will be relaxed for a variety of cargo segments, opening up India’s coastal trade to foreign ships. 

This put the Indian Shipowners on the back foot as they have been in the recent years making heavy investments in expanding their fleet of vessels.

The previous rules in force were that it was only Indian flag vessels that could carry cargo along the Indian Coast for both Domestic and International cargoes. 

Statistics show that the fleet of ships under Indian flag has been expanding at a very rapid pace. In fact the cargo carrying capacity of the Indian fleet grew 22% between January 2015 and June 2018 from 7.87 million dead weight tons (dwt) to 9.58 million dead weight tons.

Whilst the Indian ship owners have been steadily increasing their fleet, they had to undergo severe hardships as ships flagged under the Indian flag were not supported and given any benefits by the government, and hence their cost of operations were very much higher than that of foreign flag vessels. Further the rules governing Indian flag vessels were very stringent. The only benefit was the Right of First Refusal (RoFR) for Indian flag vessels by which they had an advantage over foreign flag vessels which enabled them to secure the Indian cargo on the coast which kept them alive.

With the cabotage relaxation it is now a level playing field for Indian shipowners and foreign flag ships alike, and hence Indian shipowners have now commenced looking out for alternate flags of convenience. With these rapid developments, Sri Lanka is also been looked at very closely by them as an option and would be the ideal location for them to reflag to, considering its close proximity. Sri Lanka should also be proactive in attracting and inviting the Indian ship owners, which would hasten the process in reaching its dream of being the Maritime Hub in the region.