According to a 1976 agreement, it seems Indian fishermen are not allowed to fish near kachatheevu. But there seems to be some confusion on the very matter of ceding of kachetheevu from India to Lanka in 1974.
They are allowed to fish.
But the fishing was temporarily suspended in the years from late 80s to mid 2000 in a bid to prevent smuggling to LTTE. Other than that Katchatheevu was transferred to Lanka on three conditions
1) Tamil fishermen would be allowed to fish, in what was their traditional fishing grounds.
2) they would be allowed to use the island to dry their nets and mend it.
3)they would be allowed for pilgrimage.
And this is not considering the fact the transfer itself is illegal as our constitution makes it abundantly clear that no part of sovereign territory of India can be transferred to other countries.
Read this
http://ilantamilar.org/wp-content/uploads/2012/01/Final-book.pdf for indepth analysis of the issue.
If you can transfer Katchatheevu to Lanka why not formally transfer Aksai Chin to China and end the dispute with China ? Why double standards ?