Cabotage: Meaning and Cabotage Policy

Cabotage basically means reserving the coastal trade for movement if domestic cargo or in other words we can say the restrictions applied by a country to protect and assist the domestic shipping industry from foreign competitors. It is a sovereign right of each country and plays an essential role in promoting domestic traders and protect the national security interests of a country.

Cabotage has some ill effects on the trade and business if the country imposing cabotage laws has a dwindling fleet of ships and if it decides to impose cabotage laws then there will be very few carriers of the goods as foreign country ships will have to obtain special permission to operate in the waters. Also, if the country has low trade potential and it imposes cabotage laws then it will be difficult to find enough carries to fulfil its requirements as the foreign traders will not be affected much even if they do not operate in that country.

Laws for Cabotage in India

The policy of cabotage in India is defined in the Merchant Shipping Act, 1958. As per Indian policy, there is no complete cabotage for operating ships in Indian coastal territory. The Merchant Shipping Act is amended from time to time to adjust to the ever-changing scenario of the economy and global conditions.

The Director General of Shipping (DGS) is empowered to issue a license to ships for using Indian flag for a specific period as per its terms and conditions.

Recent Changes in the Cabotage Policy

After increasing demands by various sections of the society the government recently in 2016 modified the Cabotage rules in India and now it is easier for foreign vessels to operate in Indian coastal territory. This also plugs in the gaps in some ways which the Indian Shipping Industry failed to do.

  • The cabotage relaxation will now depend on the capacity of the port in question.
  • Only the shipments from one port to another which have at least half the cargo they can carry will be eligible for cabotage relaxation
  • Once the relaxation is removed then that port will not be eligible for any cabotage relaxation for the next 3 years
  • Another condition when the relaxation can be revoked is when the port is not able to achieve the target of at least 50% contains traffic handling in a year.
  • The port which has been granted a relaxation has to provide monthly data to the Directorate General of Shipping and The Ministry of Shipping for assessment and monitoring.
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