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India's shipowners fear that coastal freight rates will fall 12-15pc

THE Indian National Shipowners Association (INSA) is predicting that coastal freight rates will fall 12-15 per cent as a result of the decision to exempt domestic cargo on Indian-flagged ships along the coast from customs and excise duty.

The exemption period offered only to export-import and empty containers along the coast has been extended.

"The drop in bunker prices will allow firms to utilise their ships better," INSA chief executive Anil Devli told The Hindu of Chennai.

"They will be able to optimise the cargo flow along the coast and have two-way movement. This will also help feeder vessels. We can expect freight costs to drop 12-15 per cent."

The improvement in cargo movement along the coast is also expected to enhance the utilisation of container ships connecting India. "The ship utilisation can improve from, say, 60 per cent levels to 80-90 per cent," he said.

According to a government statement, the exemption of customs and excise duty on bunker fuel has been extended to Indian flag ships carrying a mix of export-import, empty and domestic containers.

With the government removing the duty on bunker for export-import cargo along the Indian coast last year, freight rates are already down 30 per cent, said another shipping sector official.

Ships moving along the Indian coast vary from 300 TEU to 2,000 TEU. Companies with coastal ships include Shreyas Shipping, Allcargo Logistics, Gati and Transport Corporation of India.