Chennai Port slashes shortsea and transshipment rates

Chennai Port slashes shortsea and transshipment rates

Chennai Port DP World terminal.

In a trade advisory, the port trust announced substantial tariff reductions for domestic and foreign ocean carriers handling export-import containers for transshipment. (Above: DP World's terminal at Chennai Port.) Photo credit: DP World Subcontinent.

The Chennai Port, India’s busiest east coast public gateway, has taken a major step to attract transshipment cargo, after the government called on all regional port leaders to prepare for a freer, more favorable market environment via ending cabotage rules.

In a trade advisory, the port trust this week announced substantial tariff reductions for domestic and foreign ocean carriers handling export-import containers for transshipment. 

Under the discount program, shortsea carriers, operating exclusively on coastal routes and carrying a minimum volume of 100 TEU of transshipment cargo per voyage, will receive a 70 percent discount on vessel-related charges for up to 25 calls a year and an 80 percent concession beyond that number during the year.

Similarly, mainline foreign carriers, who are able to fulfill those criteria, will be allowed a 5 percent additional, upfront discount on the current 15 percent slab enjoyed by them regarding vessel-related charges.

Increases feeder market competition

“Cabotage relaxation is expected to bring greater competition to the feeder market and reduce feedering rates, thus encouraging the use of domestic ports and terminals for aggregation and transshipment purposes,” a port statement said. “This is expected to benefit local importers and exporters as their cost of handling may come down.”

“With these measures, it is expected that transshipment of Indian containers, which, at present, is happening through neighboring international ports like Colombo and Singapore, will take place through Chennai Port,” the statement said.

With the cabotage law change, implemented May 21, foreign ocean carriers can transport laden export-import containers for transshipment and empty containers for repositioning between Indian ports without any specific permission or license — a market that long remained a fiefdom of Indian-registered cargo ships, as the government sought to protect domestic ship operators, especially state-owned Shipping Corporation of India.

Amid rising container trade and stronger GDP growth forecasts, the government concluded that transshipment operations were causing heavy, extra logistics costs and, in turn, adversely impacting the competitiveness of Indian goods in international markets, besides enormous revenue loss for domestic gateway ports.

Official and general industry studies have found that many Indian major ports, particularly on the east coast, primarily operate as feeder points — which typically involves sending and receiving domestic cargo routed via other hub ports in the region. That’s due to their infrastructure inadequacy and limited gateway cargo potential to support regular long-haul calls.

Liberalized cabotage — part of India’s trade cultivation plan

As a result, the majority of Indian east coast cargo is transshipped via foreign hub ports — such as Colombo, Sri Lanka; Singapore; Port Klang, Malaysia; and Jebel Ali, United Arab Emirates. Attracting more direct mainline calls, which Indian authorities believe will occur with the liberalized cabotage regime and ongoing infrastructure upgrades, is widely seen as an effective way to recapture those volumes.

Further, the government earlier implemented a slew of other incentives, including lower port tariffs and dedicated berthing infrastructure for coastal vessel handling, as part of a larger program to encourage a modal shift from congested roads to the more cost-effective and environment-friendly sea route.

Chennai encompasses two container facilities — DP World-operated Chennai Container Terminal and PSA International’s Chennai International Terminals — with a combined annual capacity of more than 3 million TEU.

Chennai handled about 1.5 million TEU in fiscal 2017-2018, with April-to-June volume at 412,000 TEU, according to statistics compiled by




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