Colombo's near-monopoly continues despite proposed tariff hike
THE recent proposal of the Sri Lankan Port Authority to raise the port charges at Colombo has further underlined the near-monopoly and confidence of retaining the port's superiority in the Indian Ocean, according to industry officials
THE recent proposal of the Sri Lankan Port Authority to raise the port charges at Colombo has further underlined the near-monopoly and confidence of retaining the port's superiority in the Indian Ocean, according to industry officials.
They said at the heart of the problem are 'sky-high' port tariffs of Indian ports. The average call cost for 3,000-TEU vessels in India works out to US$32,000, compared with $7,000 in Colombo, $8,000 in Singapore and $12,000 in Hong Kong, according to the UK's Port Strategy.
Meanwhile, India's triad of three deep-sea ports' - Vizhinjam, Enayam and Vallarpadam - planned cumulative capacity is twice the capacity of Sri Lanka ports put together, reports Chennai's New Indian Express.
They say India's ports remain under utilised despite inherent advantages. For example, the Vallarpadam port is running at less than half capacity, according to the Indian Container Market Report 2017.
But ironically, the Colombo port still handles 48 per cent of India's international cargo despite the government's policy declaration of curtailing the transhipments from India.
'As the volume of Indian cargo getting transhipped at Colombo increases, and with Colombo hiking port charges, it is Indian trade that is getting impacted with high freight costs. Insofar as Indian flagships, we are staring at a grim future, especially without the availability of institutional financing and the burden of multiple and regressive taxes,' said Indian National Ship Owner's Association CEO Anil Devil.
In its latest policy revision, the Union Government has revised the cabotage policy, allowing foreign players to bid for domestic container shipping, without paying income tax, GST and abiding by any local labour laws.
This has tilted the competition 'decisively' in favour of the foreigners and Colombo, he said. Sabyasachi Hajara, former chairman and managing director of state-owned Shipping Corporation of India (SCI), said the cargo-related charges at the Indian ports are completely out of sync.
'Unfortunately, our neighbouring ports in Sri Lanka and Singapore are in an extremely advantageous position vis-a-vis Indian ports due to the low rates. Our EXIM trade is diverting to those ports due to this,' he said, adding that the Union Shipping Ministry seems to be having a death wish for the Indian shipping and the ports sector. 'We don't have a facilitating regime,' Mr Hajara said.
While connectivity to the Vizhinjam port will be a big issue, Mr Hajara said Vallarpadom is handicapped by its shallow draft. This is vividly reflected by the impressive growth of traffic in the Colombo port.
In the first nine months of 2018, transshipment volumes grew 19.4 per cent to 4.2 million TEU.
Meanwhile, the global container lines also continue to favour Sri Lanka as they chose to transship Indian cargo at Colombo and not at an alternate Indian port despite being permitted tax-free access to Indian cargo for coastal carriage to do the same.