The Government's move to relax cabotage restrictions which will create a level-playing field for foreign-flagged ships is a long-term positive for ports, domestic ratings agency Icra said today.
The relaxations are positive from a transhipment perspective for the Indian ports, it said.
"The move to relax cabotage law will improve Indian ports potential to be a transhipment hub," it said in a note.
In May, the shipping ministry announced relaxation in the cabotage law, which restricts operations of foreign-flagged vessels to operate domestically within the coasts of India.
Under the relaxations, they will be able to transport agriculture, horticulture, fisheries and animal husbandry commodities between Indian ports without a license, Icra said.
"The change will have a positive impact on the competitiveness of the Indian traders and manufacturers by reducing the supply-chain lag time and transhipment cost at a foreign port," Icra's senior vice-president and group head K Ravichandran said.
More From This Section
It also addresses the problem of empty containers getting accumulated at some Indian ports, while other ports are facing a shortage of empty containers, he said.
"As a result, the additional cost of repositioning of these empty containers to deficit port(s) across the Indian coast would be reduced substantially with foreign vessels now being allowed to pick up such containers," he said, adding that empty containers was an outcome of uneven growth.
On the overall traffic handled by the ports in FY19, the agency said issues on coal, related to expected lower demand on account of better demand-supply position domestically going forward, remain.
Overall weakness in coal cargo is a long-term concern as many ports and terminals have significant dependence on coal imports, its co-head for corporate ratings Ankit Patel said.
A prolonged slackness in coal import requirement in the absence of diversification into other cargo categories can impact the returns for such port sector players, he said.
Diversified port sector players will continue to experience moderate growth in cargo in the near-term supported by the continuing growth in POL (petroleum, oil, liquid) volumes, growing container volumes as well as the impetus for coastal shipping, it said.
High proportion of debt for some private players and the issues on returns will result in more consolidation in the sector, it said, adding ports' credit profiles would come under pressure if debt increases for acquisition.
The credit profiles would also come under pressure on cargo-related setbacks or adversities in tarriff-related litigations, it said.