by Radhika Rani G.
As the United States grapples with a difficult recovery and its infrastructure runs out of capacity, think tanks say it’s time to boost public investment in highway, bridge, rail, and air projects to help the country out of the worst recession in 70 years.
“Intelligent investment in infrastructure projects could literally pave the way for a sustained economic rebound as the country seeks efficiencies from its transportation network to compete in the global economy,” sums up US Chamber of Commerce CEO Thomas Donohue.
The insight holds good for India too as the country is forced to put up with lack of adequate infrastructure even as huge capital investments made in several projects are yet to showcase the capacity and efficiency of logistics highways.
Given the fact that India’s logistics costs are around 13 per cent of the GDP, the country could promote coastal shipping as a viable mode of transportation, both in fiscal and environment terms. As experts point out, coastal shipping could also drive transshipment at Indian ports which could in turn enhance the price competitiveness of Indian exports and help reduce carbon emissions.
However, shippers need to be persuaded about the benefits of coastal shipping, and the reasons why they prefer road need to be properly assessed, opines Lakshmi Venkatachalam, former director-general of shipping. An overhaul of the Multimodal Transportation of Goods (MMTG) Act could facilitate coastal shipping becoming part of an integrated transport system, she opines.
Growing numbers
Coastal shipping vessels operating in India have grown from 458 on March 31, 2005 to 658 as on December 1, 2009 with gross registered tonnage (GRT) growing from 8,10,591 to 9,75,507. During the same period, the number of overseas vessels increased from 228 to 308 with the GRT growing from 72,02,364 to 84,12,226.
While the share of coastal shipping vessels operating in India has hovered between 60 and 68 per cent during the last five years, the GRT has been almost stagnant at around 10 per cent. Currently, around 7 per cent of domestic cargo is transported through coastal shipping.
The movement of cargo is predominant in the south-bound stretch from Pipavav and Mundra in Gujarat to Kochi in Kerala and other ports and back, from Chennai to Chittagong/Yangon
through Haldia /Kolkata and the Inland and coastal movement in and around Goa.
While petroleum, oil and lubricants (POL), thermal coal and crude account for around 80 per cent of total coastal traffic, food grains, cement and containerised cargo including cotton yarn, automobiles, automotive spare parts and steel are the other key commodities. A small portion of general cargo and finished products are also transported through the coastal corridor.
It may be noted that the Indian coastal trade hinterland comprises 40 districts spread across five states on the West and four in the East, plus Puducherry, all covering an area of over 380,000 sq km. Added to this is another 8,300 sq km of coastal hinterland covered by Lakshadweep in the Arabian Sea and the Andaman and Nicobar in the Bay of Bengal. These islands, for obvious reasons, depend on shipping for cargo and passenger movement to and from the mainland and for inter-island movement.
Coastal shipping in the country is used for:
• Cargo movement (dry, wet, container) • Self-propelled • Non-propelled vessels, barges • Passenger transportation • Between coastal towns • Island to mainland service • Oil field services | • Drilling rigs • Support vessels/Ships • Offshore construction and maintenance support crafts • Port flotillas • Dredgers • Harbour tugs, pilot vessels, mooring vessels |
Describing the sector as being in a challenged state, B Sridhar, member of the CII National Logistics Council and director of Bengal Tiger Line, calls upon stakeholders to come together and develop a common understanding on the challenges and opportunities and take the initiative forward. As part of his call, the CII had recently convened a day’s conference to focus on coastal shipping as an integrated, multimodal transport chain.
Experts pointed out that coastal shipping, despite the inherent advantages and the promise of commercial viability, could not take off owing to regulatory, fiscal and infrastructure hurdles coming in the way.
Coast-to-coast transportation of goods is no doubt less expensive. For instance, it costs around Rs 0.25 per tonne km by a coastal shipping carriage as against Rs 1.20 by road and Rs 0.60 by rail. However, as experts point out, cost-efficiency is not being realised because of insignificant volumes and the inefficiency of first/last mile connectivity.
Also, a sum of Rs 20 billion can be saved and harmful chemicals and pollutants can be reduced by diverting 5 per cent of cargo through sea-borne transport.
The key shortcomings in policy formulation and implementation are the lack of a cohesive implementation framework and advocacy support. In this context, S K Shahi, president of All India Barge Owners Association and managing director of SKS Logistics, recommends some measures: “Strict implementation of cabotage, tax holiday for the first 10 years, 30 per cent subsidy for shipowners, soft loan financing, reduced duties on bunkers and spares, 10 per cent of window/berth space to coastal vessels at ports, simpler manning scales, diversion of government cargo to coastal shipping up to the level possible, and a separate Indian Coastal Register for coastal shipping vessels.”
His views are endorsed by Sanjay Shroff, Director, Ernst & Young. “Infrastructure status for coastal shipping can open the doors to easy funding and government subsidy. And coastal shipping needs an integrated policy for its development,” he adds.
According to a recent report on coastal shipping by Ernst and Young, the key trends that are going to drive coastal shipping in India are:
Rising containerisation: The share of container freight in total sea freight has increased from 13.9 per cent in FY03 to 17.5 per cent in FY09. Containerisation is expected to boost the volumes shipped through coastal cargo. Due to the consolidation of large volumes, container cargo is suitable for transportation through coastal shipping.
Development of transshipment terminals: The location of transshipment terminals makes them ideal for the inter-coastal movement of domestic Indian containers through coastal shipping. The successful implementation of container transshipment projects in Vallarpadam and Vizhinjam ports is likely to drive Indian coastal shipping, since container volumes are likely to flow to all the ports more rapidly than before.
Atul Srivastava, head-commercial, Gati Coast to Coast, agrees. “Improved coastal shipping,” he says, “can boost transshipment at ports and give them the competitive edge, as well as act as a catalyst for the development of an efficient and integrated transport system.”
The Vallarpadam International Container Transhipment Terminal (ICTT), which is scheduled for a soft opening in June, would have all the requisites to attract mega international shipping lines and vessels, says Anil Singh, Senior Vice-President and Managing Director of DP World.
Development of port-based SEZs: Port-based SEZ projects depend on coastal shipping for their logistical requirements as it is the least expensive and the most viable form of transportation for SEZ developers.
- Many port-based SEZ projects are being developed in Mundra, Rewas and other ports.
- The proposed petroleum, chemical and petrochemical investment regions (PCPIRs) in Gujarat, Karnataka and Andhra Pradesh are also expected to drive the demand for coastal shipping.
- Port-based power projects rely on coastal shipping for the transportation of coal.
Development of minor ports: According to the NMDP, investments worth US$ 7.7 billion are being made in minor ports in the Eleventh Five Year Plan. Keeping in view the importance of minor ports, Ashwani Kumar, CEO of Maharashtra Maritime Board (MMB), says MMB will gear up to increase the handling capacity of its ports from the present 11 million tonnes to 300 million tonnes through the BOOST model in the next few years. “Rewas-Aware, Dighi, Sindhudurg, Jaigad and Redi were some of the ports for which the concessions had been signed and the facilities were in different stages of development and operations,” he adds. Sridhar of BTL too opines that the development of non-major ports would give an impetus to coastal shipping.
The latest River-Sea Vessels Notification of the Directorate General of Shipping is hailed as a big boost to coastal shipping activities in general and building of vessels suited to coastal business in particular. The notification, say experts, is likely to facilitate upgrading of vessels registered under the IV Act to make them suitable for sailing out into the seas within the 12-mile Indian territorial waters.
According to Lakshmi Venkatachalam, the new guidelines, formulated towards the end of 2008, have the potential to give a great thrust to the shipping segment.
John Mathews, managing director of Master Shipyard Pvt. Ltd., is all for the new regulation as he sees it as a critical positive step for coastal shipping. “It would ease construction and operations of such vessels and, so a standard product within certain specifications, price and performance parameters needs to be developed,” he says.
Also, there is a need to focus on the specific benefits of coastal shipping to involve the policymakers too, opines D T Joseph, former secretary in the Ministry of Shipping.
Coastal shipping needs the development of a strong, integrated transportation network, stresses Dr Satish Agnihotri, Joint Director-General of Shipping. “Implementation of a carbon credit policy is necessary in coastal shipping, whereby every dollar earned in savings could earn a dollar of subsidy,” he suggests.
As per estimates, fuel consumption per tonne kilometer is 31.33 grams by road, 8.91 grams by rail and 4.82 grams by coastal shipping.
The government earmarked US$ 492 billion on infrastructure project and it plans to utilise 30 per cent of the capital for power projects, 15 per cent for roads and bridges, 13 per cent for railroads and 4 per cent for ports. As these projects require the movement of heavy equipment and material across the country, coastal shipping can be of immense help in providing project cargo services.
As the Indian wind power industry is likely to witness a growth of more than 25 per cent for the next five years, more and more global companies are motivated to set up shop in India. Experts predict that this development will create further demand for project cargo services involving movement of large windmills.
Also, India could spend around US$ 300 billion on oil exploration and production in the coming decade and this will boost the demand for project cargo services to the transportation of drilling, production and project material.
With the development of coastal infrastructure, the feasibility of roll-on/roll off (RORO) services is likely to be improved on several routes. The use of such services, say experts, could help save fossil fuel and provide manufacturers and traders with a transportation alternative.
As per the Cruise Shipping Policy in 2008, India is being promoted as a global hub for cruise tourism. Towards this end, Mormugao, Kochi and New Mangalore ports are setting up cruise facilities for ferry of passengers along the coast. Already, plans are afoot in Gujarat to start ferry services for passenger movement. Gujarat Maritime Board is planning to operate such services from Gogha near Bhavnagar to Dahej which will reduce travel time considerably. GMB is also procuring a hovercraft for the purpose.
With development plans in place, the use of larger vessels, construction of new ports, increased focus on coastal and inland transportation and government support are likely to go up and drive the demand for dredging. Of the Rs 558 billion allocated for development under NMDP, Rs 63.1 billion has been earmarked for dredging all the major ports in India, both capital and maintenance.
Policy initiatives
The India’s Merchant Shipping Act, 1957 applies equally to ocean-going and coastal vessels despite the latter being much smaller in size and scale of operation than the former. The provision related to construction, equipment, operation, certification and safety apply to both and so also the crew qualification criteria. But the irony is the income tax exemption for foreign-going ships. However, the crew on coastal trade pay income tax and their operators pay customs duty on ship fuel, spares, stores
To ease staffing requirements and help coastal vessels avail of exemption, the Directorate General of Shipping has proposed certain conditions in its draft Indian Coastal Ship Safety Code.
One of the proposals is to offer comprehensive exemption to ships less than 3,000 GRT.
Also, the Ministry of Shipping has proposed coastal shipping development fund (CSDF) of Rs 100 billion to develop coastal shipping services. It has also proposed exemption of coastal shipping from service and tax and in this regard, awaits a response from the Ministry of Finance.
Meanwhile, a concessional tariff of 40 per cent is being charged on vessel-related charges such as port dues, berth hire and pilotage and another 40 per cent discount on coastal cargo and container-related charges such as ship-shore transfer and berth to storage yard transfer.
Coastal shipping no doubt offers several advantages over other modes of transportation in terms of cost and volume but it also needs the support of rail and road services to deliver goods to customers from the destination ports. In this regard, collective efforts can only help and now is the time to explore.
Article published in Maritime Gateway, February 2010.
good write up..but if i could get this maritime gateway publication as a e-book on coastal shipping...the issues of still only 7% of coastal shipping which cannot be made into a regular transport system??
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